Seychelles Central Bank has issued a yellow card warning to the government and general public on under performance of the economy and lack of fiscal discipline in the market last week, in first a TODAY article in the Business section followed by an EXTRA presentation on SBC by the Governor Caroline Abel, herself, giving rise to the speculation of the urgency of the warnings.
Banks Not Holding Reserve Requirements
The Central Bank has admitted for the first time since 2007, when the country faced national bankruptcy that the liquidity situation at the commercial banks is alarmingly low, below the regulated amounts required by the Central Bank ( Precautionary Balance). There was speculation that reserve requirement for June 2016 may not be met.
Monetary Sector Touch and Go
The Central Bank highlighted in its report: " sustainability of existing Demand and pressures within the banking system remain uncertain should deposit and lending rates continue to be sticky". A key phrase that basically alerts us to the in congruence of commercial bank interest rates which are back to 17% in some instances, lack of deposits by account holders, most notably, hard currency.
High interest rates make economic development and economic participation impossible for local operators. Hence the dormant Fisheries Industry and under performing Tourism Industry which seems to have lost itself by mid year out of sheer lack of management and foresight, by the government.
Carnival can provide some marketing impetus for Tourism, it rightly does, but at the end of the day, government must INSURE visitors are coming to Paradise, and not a tropical dumping sight for plastics on the ocean, drug addicts strung along the beaches where Tourist frolick to only face petty theft and harassment while on holiday. For this, ministers must take their jobs more seriously, and be more result oriented, instead on being focus on perfecting the art of excuses.
Demand For Hard Currency Exceeds Supply
The Central Bank has correctly noted that the demand for hard currency has surged by 17% but the supply has sloped by 11%. This should have had the consequence of lowering the Seychelles Rupee against the Euro and Pound Sterling. However, it has not.
Central Bank does not explain the reason. Perhaps the embryo of a Black Market has been conceived,prompting the Governor to issue the series of warnings to the government, private sector,public at large.
Reserves Decline
The National Reserve has declined by $25 Million CB says. Since CB has been slow to react to market forces, in order to stabilize the true value of the Seychelles Rupee, retain, increase reserves, it is foreseeable that given the long drawn out election season, and populist programs in place, demand for hard currency will increase beyond 20% of supply.
Consequently, Black Market may be put in place by lack of timely action by CB by the third quarter. If so, Reserves will drop another $25 Million - 35 Million by years end, the price for a hardened political season,wherein few paid attention to the downward economic trends and even fewer cared to do anything about it to reverse the trend with immediate, smart strategies.
Instability In Europe and Uk Means Less Visitors
Instability in Europe and Brexit mean less long haul travelers. This will mean less hard currency inbound for Seychelles. CB should adopt a proactive stance, anticipate reduction in Arrivals, curtail the same with sound monetary policy that is proactive, progressive. Waiting for the results of the Brexit on the Seychelles economy, will only reduce Reserves further, challenge CB with debt servicing, falter the private sector, let down the citizenry and Seychelles fairly successful program up to now.
Sesel Pou Seselwa!
May God Bless All Freedom Loving Seychellois!
10 comments:
Central Bank is watching the situation closely and will react with appropriate measures.
One measure is we will create a committee of stakeholders who can contribute valuable input into this development.
Excellent article. It shows the level of intelligence and lateral perception of the author. The Governor stated in SBC she is waiting to see the impact of Uk exit. This is an inappropriate response for the Governor, she needs to adjust her monetary policy with fiscal policy of the government under a solid strategy to face the downturn. It is already here. The wrong monetary policy and wrong fiscal strategy will leave Seychelles in a mess.
Very good insight and perception I see trouble ahead if Gill is right. He has been in the past.
Zhe govenor tells us he solution is wait and see while zhings fall apart.Zhis is unacceptable,zhe govenor should be taking rapid,temporary,timely actions immediately.That zhe govenor is back with zhe same problem.of a year ago showed that zhe CB has not been delivering.
Ot is a breach ofcommonsense for zhe govenor zo say “she will waitcand see“zhere is no time zo wait and see,aczions are needed immediately.Zhis inact will push zhe rupee furzhercinto spiral ,drive up zhe cost of doing business and ultimately fuel economic activity in zhe heartland of businesses.In zhis draszic ill_chosen inaction,zhis would also stimulate inflationary pressure and push people into unmanageable debt loads.
Immediately after the Brexit vote results were announced, UK Central Bank announced measures to instill confidence in UK so as to not lose any business and companies being based there. They proposed the lowest tax on business in All of Europe will be implemented.
central bank in Seychelles wants to wait and see.
We have more to lose then uk bc we are small. Bc we are small we need to act swifter then larger countries, assess the dynamics come up with solid proposals. Bc we are small it is so much more easier to derail.
This situation could have been avoided if the Government and FIU would not have been using offshore bank accounts like a personal ATM machine. The financial services sector was supposed to contribute to the economy and bring forex to our banks.. Unfortunately the Government and FIU have destroyed Seychelles offshore banking. Nobody in the offshore sector is recommending Seychelles banks to clients now.
Mafia tactics with bank accounts by FIU under State House over sight has indeed destroyed Seychelles offshore image.
What Misel does not understand or never did figure was the impact of the Internet press on his portfolio. Because he does not understand how to use Internet, he ignores it.
This is destroying him.
I agree fully with last comment. Michel does not have a clue on Internet strategies. Example he told us in national address that ministers will interact with us on Facebook.
This is the worse proposal he could come up with given most of his ministers have dirty laundry.
If you have dirt Misel the Internet is the last last place you want to be in a conversation. Ask Rene he tactfully intelligently avoids it.
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