Central Bank of Seychelles disburses $ 10 million from reserves after drop in foreign exchange inflows
The decision was taken by the Central Bank because of a notable reduction in foreign exchange inflows due to the COVID-19 pandemic. (Seychelles News Agency)
(Seychelles News Agency) - The Central Bank of Seychelles (CBS) has disbursed $10 million out of the country's international reserves of $591 million to assist the domestic market.
The governor of the bank Caroline Abel told a press conference on Wednesday that the decision was taken because of a notable reduction in foreign exchange inflows due to the COVID-19 pandemic – a situation which has given rise to instances where demand for foreign exchange has not been fully met in the past week.
"In view that we had an amount of unmet demand that has not been paid, in view that in the last week with practically no exchange of forex in the system, importers have seen that their demand was not being met and given consideration that some imports have already reached the country," said Abel, explaining the decision taken by the board of directors of the Central Bank.
Abel added that the reserves were accumulated over 12 years and reiterated that the reserve will only be used for basic commodities, which are fuel, food and medicines.
Abel urged that at this crucial time it is important not to spend unnecessarily and to relook at consumption. "Reduce it to a level that is matching the exchange for foreign exchange because we cannot sustain a similar level of demand like in 2019. With the significant reduction of revenue, the country has to significantly reduce consumption level so that we can stretch the maturity level of the reserves to help the country," said Abel.
The governor told journalists that up to March 31, the country was earning an average of up to $3 million per day, but currently, less than $1 million is being earned. However, the demand for foreign exchange continues to rise.
Abel warned that a collective effort and responsibility is needed to keep the country and its economy afloat and added that there will be a short-run increase in prices whose impact will not be equally felt. The Central Bank of Seychelles predicted that the situation of the supply of foreign exchange will persist over an uncertain period.
As Seychelles – 115 islands in the western Indian Ocean - has a free-floating exchange rate regime, CBS expects an adjustment in the exchange rate, which should translate in a reduction in demand for foreign exchange, as the economy adapts to this reality.
SNA spoke to money changers and people using this service and learned that the effect of lack of forex is being felt.
"Cash Plus Co Pty Ltd is currently in a situation where we are feeling the impact of the current pandemic – COVID 19 -- mainly on the forex inflows which is purely dependent on our tourism industry. Hence, the current level of supply for foreign currencies is practically zero," Audrey Rose – managing director of Cash Plus said via an email interview. Cash Plus is a leading money changer with nine branches all over the three main islands of Mahe, Praslin and La Digue.
Rose added that "conversion of foreign currencies to Seychelles Rupees is now on a critical line. What we are doing well at the moment is to provide restricted money transfer services. However, should the situation continue this would lead to an unfortunate end as a Class A bureau de change business which depends on foreign exchange inflows to settle external money transfer accounts and if unavailable makes it impossible to trade," concluded Rose.
Jean-Marc Gardette of Ideal Money Changer at Grand Anse Praslin said that he did a few transactions last week but as of this week he has no forex. Gardette also confirmed that since last Friday the rate of some major currencies has gone up.
A Filipino working in Seychelles recounted that it is proving to be a challenge to send money back home to the Philippines. "The usual bureau that I use every month have not accepted the rupee and has asked for forex, but how will I buy forex if it is not available? After all, I am paid in the local currency," the spa therapist told SNA.
In the meantime, CBS will continue to monitor the market and stands ready to ensure the orderly functioning of the foreign exchange market.