Africa-Press – Seychelles. Since the invasion of Ukraine by Russia on February 24 this year, the euro has rapidly lost its value and for the first time in 20 years it hit parity with the dollar.
Yesterday morning, Brian Commettant, head of the research and statistics division within the Central Bank of Seychelles (CBS), said to better understand the difference, it is imperative that we take a look at the American and European markets.
The euro in parity with the dollar means that the euro has lost its value and the dollar is stronger.
“For example, for someone living in Europe, if they are importing something, they will need more money to buy the dollar,” said Mr Commettant.
Previously with the euro you could get more than one dollar but now you will get one dollar.
This means for Europeans conducting transactions using the dollar externally they are at a disadvantage as they will need more euros for the dollar, compared to before. For an American, however, it is an advantage. For example, if he or she was going on vacation in Europe then he or she will spend fewer dollars as the dollar is stronger than before.
“In the context of Seychelles, euro has also lost its value and this means it has lost value against the rupee as well,” noted Mr Commettant.
Most hotels in Seychelles receive tourists from European countries, therefore most the revenue is in euro. When euro is converted to rupee, the tourist gets fewer rupees, therefore the hotel collects less money and also the tourist’s ability to spend reduces.
“The cross rate is the most important,” he said. The majority of revenue of Seychelles is paid in euro, while the majority of importation (payment) is in dollars. With one euro a person used to get more dollars, now he/she only gets one dollar. This means the ability to spend has reduced unless you get more euros to compensate for what has been lost. “Because the exchange rate has fluctuated, the amount of dollars that the country spends, assuming nothing happens, is less. The same for businesses. Even though they are getting less revenue when euro is converted to rupee, their taxes also reduce and government collects less tax,” he further added.
Mr Commettant noted that they are monitoring the market closely and stressed that usually the foreign exchange market indicates how the economy is performing. In this instance, it shows that the European market is in trouble compared to the American.
He noted that the tourism sector of Seychelles so far is doing well and if it continues in that direction there is a possibility that Seychelles might not feel the full impact of the downward trend of the euro, but if the situation changes, the Central Bank of Seychelles will push for an adjustment of the budget to ensure the situation balances out.
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