Financial Stability Committee hosts third discussions for 2022 |24 November 2022
The Financial Stability Committee (FSC) met for the third time this year on November 15, 2022, where members discussed various matters that could potentially impact the country’s financial stability.
The committee acknowledged the positive performance of the domestic economy, particularly the recovery of the tourism industry, despite the challenging environment.
Nonetheless, given that downside risks to financial stability remain elevated, concerns were raised about the adverse impact that this may have on the domestic outlook.
On the global front, members noted that economic growth continues to be weighed down by tightened monetary and financial conditions, exacerbated by rising inflation pressures.
Other developments dampening global economic activity include the lingering effects of the Covid-19 pandemic and the adverse impact of the Russia-Ukraine conflict.
Additionally, with the Eurozone being one of Seychelles’ main trading partners, members were particularly concerned about the persisting uncertainties, as well as the weakened growth prospects for that region and the implications that this could have on the domestic economy.
Consideration was also given to developments on the local front, where members were apprised of pertinent issues, including the rising cost of living emanating from elevated domestic inflation, which is anticipated to remain high in the short term, given the rise in global prices.
The committee was apprised of developments in the domestic insurance sector. Following discussions that ensued, members agreed on the need to strengthen the relevant legislative and regulatory frameworks to address vulnerabilities and mitigate potential risks to the insurance industry.
On the positive side, members noted the recent upgrade of the country’s Issuer Default Rating from B+ to BB- by Fitch Ratings due to the positive economic recovery and public debt sustainability.
The committee was also provided with an overview of the proposed Financial Sector Strategy for the country, where members emphasised the need for effective operationalisation of the various components to ensure its successful implementation.
Regarding the development of the country’s Financial Stability Framework, the committee was informed that work is ongoing to draft the Financial Stability Bill and develop the necessary governance regimes to support the framework.
The members concluded that although the economy is on a positive path to recovery, this remains uneven amid challenging domestic financial stability conditions.
In light of this, they reiterated the importance of close collaboration between the relevant authorities to mitigate the impact of potential risks to domestic financial stability.
Press release from the Central Bank of Seychelles