Seychelles’ Central Bank watching inflation risk due to rising price of oil
File Photo: Central Bank of Seychelles building. (Seychelles News Agency)
In order to secure stability in domestic prices, the Central Bank of Seychelles has decided to maintain a tight policy stance for the third quarter of 2018, a top official said on last week
The governor of the Central Bank of Seychelles (CBS), Caroline Abel, said that the decision was taken due to the fact that inflation is expected to pick due to external as well domestic factors.
“There is an increase in food prices globally and since we import the majority of our goods there will be an impact on the local prices,” said Abel.
She added that another important commodity is fuel. “The last analysis done in June showed that there is an increase in fuel prices. This is largely due to external factors and one of it is Iran’s fuel productions and supplies, which have been affected due to sanctions imposed on the country,” said the governor.
One of the measures the bank has introduced is a minimum interest rate of 2.0 percent that will be transacted with commercial banks if they deposit their excess money with Central Bank. Another measure -- a credit facility at a rate of 8.0 percent if banks borrow money with the Central Bank -- will also be put in place.
The reserve money target for the third quarter has been set at $270 million (SCR 3,645 million) which is an increase of 6.6 percent compared to the second quarter.
“This money is injected into the system and will allow the public to access loans at a lower rate, which will, in turn, encourage growth in credit to productive sectors such as tourism, fishing and agriculture,” said Abel
Seychelles’ tourism industry remains the main driver of the country’s economic performance in spite of the uncertain outlook on the stability and depreciation of the Euro.
A total of 5,511 visitors arrived in Seychelles during week 25 of 2018 and the year to date figure for 2018 shows that 167,381 visitors disembarked in Seychelles. This was 2 percent above that of 2017 which was 164,866 visitors.
“Such outcome continued to be influenced mainly by the traditional European markets. This is supported by increased air connectivity by British Airways and Air France,” said Abel.
Although the tourism industry is faring well, the same could not be said for tuna production, which is part of the fishing industry, the second pillar of the country’s economy.
“Even if the Indian Ocean Tuna Ltd has noticed a rise in product revenue remains low. This is largely related to approach taken for sustainable fishing and quota put on yellowfin tuna which is more valuable compared to other kinds of tuna,” said Abel.
Despite economic setbacks, the outlook for this year indicates a gradual increase in the Gross Domestic Product (GDP) growth.
Abel said that “for the upcoming months CBS will remain vigilant on the economic performance and take actions where necessary so that the macroeconomic position remains stable.”
In the Fitch Ratings published in June, Seychelles has maintained the same ‘BB-‘ with a stable outlook rating as received last year with the global rating agency.
The governor of Central Bank said that to improve the rating, the government should continue to ensure policies in place maintain the required stability, that more revenue is generated to increase the country’s reserves.