Follow us on:

Facebook Twitter LinkedIn YouTube

Domestic

‘The country is receiving enough foreign exchange to sustain the economy’ – CBS governor |21 January 2022

‘The country is receiving enough foreign exchange to sustain the economy’ – CBS governor

Governor Abel speaking during the press conference yesterday (Photo: Thomas Meriton)

In her first press conference for the year 2022, held yesterday morning, Central Bank of Seychelles Governor Caroline Abel noted that despite a surge in the number of Covid cases, the economy is receiving enough foreign exchange to sustain the economy.

As at January 19, 2022, our Gross International Reserves is at US $703 million and the Net International Reserves is at US $528 million.

“This increase in our reserves has been possible by the second disbursement of US $33.56 million under the Extended Fund Facility (EFF) with the IMF on December 22, 2021 and the Budget support of US $34.91 million from World Bank on December 31, 2021.

“Increase in inflation is a worldwide concern and our concern as CBS is the inflation globally in 2022 will be higher and this will have consequences on the Seychelles economy as we are very dependent on importation. So we are conscious that inflation in Seychelles will remain relatively high despite having a stable exchange rate as we are importing the higher inflation that is coming from the international markets.

“Secondly as we have observed early this year, with the increase in cases related to the pandemic, this has affected the labour market significantly. Many individuals had to stay home and the government and businesses across the economy have been affected.

“In light of that, the Central Bank is calling to accelerate the digital economy agenda because this is going to be critical in making the economy resilient. With the health crisis, we can through technology continue business by working virtually. This should help the economy to perform better despite being in a pandemic situation. If we are listening closely to what WHO is telling us, the pandemic will be with us for a while,” Governor Abel explained.

 

Relief schemes for MSMEs and large enterprises

These schemes were made available to the economy in 2020 to help small, medium and large enterprises.

From participating institutions, total requests from MSMEs were 454 and 296 were approved and R132,165,276 were disbursed. There were 35 requests from large enterprises and 26 were approved and a total of R293,557,769 were disbursed.

From the Central Bank of Seychelles total requests received were 103 for MSMEs and all were approved with a total sum of R135,372,188 disbursed. 22 large enterprises made such requests and a total of R279,911,879 were disbursed.

Most of the requests come from the tourism industry followed by trade and transport.

 

Update on recent economic developments

Governor Abel stated that eventhough cases have intensified in the country and the world, Seychelles is still receiving enough income to sustain the economy and has stability.

“To end year 2021, the amount of forex sold was US $71.5 million and demand was at US $68.4 million. In December, the economy was able to retain US $3.1 million. When we observe the developments during the past months, December is quite significant in terms of the amount of forex entering the country. From the beginning of January to January 18, we sold US $32 million and demand was at US $31.6 million and we were able to retain US $ 0.4 million.”

Governor Abel also said that these positive signs are helping in having a stable forex with dollar at R14.69 and euro at R16.47.

“For 2021, the country received US $621 million compared to US $488 million in 2020 and the demand was at US $613 million in 2021 compared to US $519 million in 2020. This represents improvement made in the economy and mainly in the tourism sector. In 2021, total supply of foreign exchange was 27 per cent higher than 2020 and total demand for foreign exchange rose by 19 per cent in 2021 compared to 2020.”

Inflation rate in December 2021 was like this: Month-on-month inflation 0.11%; Year-on-year inflation 7.85% and 12-month average 9.77%.

 

Macroeconomic indicators

Regarding employment in the country, in Q3 2021, the average number of employed persons for all sectors was 49,634 and average earnings were R14,617.00. Governor Abel stated that this was a decrease of 1.4% in average earnings and a decline of 4.9% in employment numbers compared to Q3 2020 GDP. In Q3 2021, real GDP grew by 21.7% compared to Q3 2020 and real GDP rose by 2.6% in Q3 2021 relative to Q2 2021

 

Recent external developments

• Increased Covid-19 cases globally due to the evolution of new and more transmissible variants

• Possible downgrade in global growth projections for 2022

• Higher global inflation expected for 2022

• Central banks in advanced economies discussing reversing stimulus & relief policy measures

• Global shipping costs moderating, but pressures remain

• Food and energy prices are expected to be higher in 2022 and this definitely will put pressure on the citizens as salaries are staying the same

• Price of WTI crude oil in 2022 is forecasted to be at 71.32 dollars per barrel and brent crude oil is forecasted to be at 74.95 dollars per barrel.

 

Recent domestic developments

Governor Abel shared the recent domestic developments: “Seychelles is still having a national Covid-19 immunisation campaign with Pfizer BioNTech vaccine and booster shots. There has been a rapid increase in community transmission of Covid-19 and there is possibility of more transmissible variants. There has been change from physical to online learning in schools and reduction in shop opening hours. The labour market dynamics has changed and there has been a negative shock to labour productivity.”

 

Key messages

The evolution of more transmissible Covid-19 variants and negative impact on economic activity.
“Shifts in individual and collective behaviour are critical. We want to share a strong message to the community. We need to enhance the financial system to facilitate the evolution to a digital economy in order to minimise disruptions to services and reduce community transmission. We are asking to look at the current situation and how the pandemic is evolving and move faster on the digital economy. The CBS is also looking into unwinding relief and policy measures and will be looking on how to go forward. In December we took two decisions: first to set the limit on short-term advances that the institution can provide to the government during the year 2022 at R250 million; secondly in 2021, CBS considered the cases of people/businesses who did not have the ability to take a loan from a bank but had a bond or treasury, they could sell it and CBS reduced that sum to R50 million for 2022.”

Regarding paying of dividends, the board will be discussing on this issue at the end of January. For individual and home loans, Governor Abel noted that in 2021, the banks were considering more requests.

CBS is also monitoring receipts from other sectors, other than tourism and these figures will be shared in the next press conference. To note, in 2020, the fishery sector was our major support.

Governor Abel said that inflation is a major concern for the CBS. “In order to help those with lower income range, they can approach the Agency for Social Protection for the income support as mentioned by the Minister for Finance in its budget. This year CBS will be maintaining a relaxed monetary policy for 2022, despite the looming uncertainties presented by the ever-evolving Covid-19 pandemic. We will continue to follow how much will the inflation increase and will definitely sit with the government to try and find out solutions to ease the situations of low income earners. The pandemic is still here and CBS will evaluate the situation as we go along.”

 

Vidya Gappy

More news