PESA Editorial - Seychelles - 1Q2017/18

Impact of Slow Global Growth on the Seychelles

Economic growth globally continues to be subdued. Brexit and the Trump victory are the two main factors which continue to present uncertainties for many countries. According to the Seychelles 2017 Budget Speech, which was delivered by the Minister of Finance, the uncertainties in the international markets continuously reduce investor confidence. As a result, global economic growth is likely to remain subdued. In terms of Sub-Saharan Africa (SSA), growth is assumed to have declined to 1.4% in 2016 from the 3.4% in 2015 – a significant 2% decline.

The Seychelles’ economy has continued to grow steadily however. Dr. Larose, in his Budget Speech, highlighted that revisions of expected growth from 4.3% to 4.4% for 2016. For 2017, real GDP growth is forecast at 4.1%. This is a 0.3% decline compared to 2016. One of the factors responsible for this decline in growth is the recent decline in beverage manufacturing. Inflation is expected to reach an annual average of 3.7% in 2017, due to the rise in the prices of fuel and electricity. High inflation rates reflect price instability in an economy. The country’s relatively high income per capita, of USD 14,760, reflects sound macroeconomic policies and indicated an improvement in the standard of living of the average Seychellois. According UNCTAD, foreign direct investment (FDI) in Seychelles increased from USD 170 million in 2013 to USD 195 million in the year 2015. This can be attributed to the recent growth in tourism activities.

Globally, FDI inflows totaled USD 1.43 trillion in 2013, rising gradually to USD 1.77 trillion in 2015. This represents a 23.8% increase, comparatively less than the 63.3% increase within the SADC region over the same period. The relatively higher growth rate of FDI inflows in the region suggests current and future potential to attract foreign investment and therefore stimulate economic growth.

According to the Debt Management Strategy produced by the Government of Seychelles, since the year 2008, Seychelles’ public debt stock has maintained a downward trend. The total debt stock has decreased from 150% of GDP at the end of 2008 to 68% (SR 13.130 million) of GDP at the end of October 2016. As a percentage of GDP, this total public debt stock is still above the average of 61% of countries that have a Fitch rating of “BB-”. When compared to the average total public debt of emerging markets and developing economies, the Seychelles total public debt is about 21% higher. Seychelles government must introduce policies which maintain its debt and bring it in line with regional debt levels.

As at the end of October 2016, the external debt stock, including guarantees, was USD 421.01 million, this being 29% of GDP as at 2016. In 2012 the debt amounted 42% of GDP. This debt stock is owed to four groups of creditors, that is, multilateral and bilateral organizations, commercial banks and private creditors1. Private creditors are the largest creditors in the group, accounting for 38.1% of the external debt. They are the subscribers to the external notes of USD 168.89 million at face value, and this will mature in 2026.

Multilateral organisations are the second largest group of creditors, making up 31.4% of the external debt. The African development Bank and the World Bank being the largest multilateral banks, make up 68% (SR 1 212.29 million) of the multilateral debt.

Bilateral organisations make up the third largest group of creditors and is made up of debts to sovereign countries. They make up 21% of the external debt. Meanwhile 52% (SR 614.30 million) of the total debt is owed to creditors that are members of the Paris club and 48% (SR 570.21 million) are non-members. The commercial banks then only make up 9.5% of this debt.

On 16 December 2015, the US Federal Reserve announced an interest rate hike of 25 basis points and the new benchmark rate ranging from 0.25% and 0.5%. Seychelles’ external debt is in Dollars so the recent interest rate hike from the Fed means that Seychelles is now faced with rising debt repayments.

On July 4th 2014, the IMF approved a USD 17.6 million arrangement under the Extended Fund Facility (EFF) for the Republic of Seychelles for the main purpose of supporting the authorities’ economic program. About USD 2.5 million had to be immediately released, and the remaining amount was going to be phased over the life span of the program, semi-annual programme reviews are being conducted. The aim of this programme is to reduce the high debt-levels the country is currently facing, improve external buffers and sustainability in the face of emerging balance of payments pressures, and also strengthen the economy by means of sustained and inclusive growth2.

Through the semi-annual programme reviews, up to the end of June 2016, all the programme performance criteria were met and the programme basically stayed on track for the rest of the year3. On 11 January 2017, the IMF concluded fourth and fifth reviews under the Extended Fund Facility arrangement (EFF) with Seychelles. The completion of these reviews has led to a further USD 4.4 million being released, bringing the total funds released to date to USD 13.2 million.

Seychelles’ overall growth outlook looks positive, however this growth is at a slower rate given its forecast 0.3% decrease from 4.4% in 2016 to 4.1% in 2017. In terms of FDI, Seychelles seems to be performing well, indicating that investors still see the Seychelles economy as a conducive environment in which to invest, especially with regard to the tourism sector. However, there is a need for economic diversification so as to reduce the economy’s vulnerability to external shocks resulting from its dependency on the tourism and fisheries sector.


1 Seychellois Ministry of Finance, Trade and Economic Planning
2-3 International Monetary Fund




Inga Mtolo

Role: Editing and Research Specialist
Inga is an Economist specialising in Financial Markets and Socioeconomic Research...

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