SHARP DROP IN FOREX EARNINGS LEAVES SEYCHELLES CENTRAL BANK HARD PRESSED FOR GIVING DOLLARS AND EUROS FOR IMPORTS
(Posted 25th March 2020)
The Seychelles is among the first countries to cite shrinking foreign exchange earnings as the main reason why allocation of US Dollars and Euros will now be restricted to essential goods. Food items, fuel and medications are the top three priority imports the bank has outlined in communications with the banking and other private sector stakeholders.
A survey undertaken over the past few days suggests that within days of the airport lockdown have already nearly 4 million US Dollars worth of vacation bookings been cancelled, leaving the banking system low and dry of the much needed foreign exchange – as tourism is the mainstream economic activity across the islands apart from fishing.
Worst case scenarios shared by regular sources on the islands suggest that the drop in tourism arrivals, should the virus outbreak last for months rather than weeks – something not even the greatest optimists now believe in any longer – could reach 75 percent compared to 2019 arrivals.
The last time the Seychelles had imposed currency controls was during and in the aftermath of the World Financial Crisis in 2008, when tourism was threatened by a sharp downturn – eventually avoided when Mr. Alain St. Ange at the time was appointed Director of Tourism Marketing before later becoming CEO of the Seychelles Tourism Board. St. Ange in 2012 was then named as Minister of Tourism & Culture and enjoyed a record run in terms of tourism growth during his respective terms of office.
Over the past 12 years has the Seychelles enjoyed annual growth, at times in the double digit numbers, for a long time supported by the marketing juggernaut associated with the Seychelles International Carnival. This event has fallen victim to budget restrictions and the planned merger with the Festival Kreol never really happened, reducing the visibility of the islands in a highly competitive world scenario.
Some resorts in the Seychelles have already closed down due to lack of business and the entire sector is staring into the abyss of a catastrophic economic meltdown, affecting the people of the Seychelles like nothing they have seen in a generation.
Maurice Loustau-Lalanne, the Minister of Finance, Trade and Economic Planning, himself a former Minister of Tourism, Civil Aviation, Ports and Marine, in a response to questions raise in the national assembly, is quoted by sources from Victoria to have said: ‘Since Seychelles closed its borders to European visitors, we have seen that visitor arrival has dropped drastically, and we expect it to continue as other countries close their borders and airlines either reduce or suspend their services. The worst-case scenario shows that the economic growth as per Gross Domestic Product (GDP) for 2020 will reach negative 10.8 percent, as compared to a growth of 3.5 percent as projected for the budget. In this new budget we expect a deficit instead of a surplus in the premium balance of 2.5 percent that was projected for the 2020 budget in October last year. Compared to a growth of 5 percent projected, we are predicting that growth within this industry will go down by 50 percent. We are projecting a 64 percent decrease in the number of visitors‘. The Minister’s assessment was below the worst scenario figures quoted to ATCNews.org.
Meanwhile have plans emerged to eventually move infected patients, presently kept on Isle Perseverance, to a hotel along Beau Vallon beach to manage all cases and also isolate suspected cases in one location.
Central Bank sources have also warned of panic buying as it will exhaust existing stocks of a large variety of goods, all of which are imported, after earlier in the week lowering Central Bank interest rates from 5 to now 4 percent. The bank is reportedly also negotiating a moratorium on loan repayments from the private sector and individuals of initially 6 months, details of which are not yet available.