Africa-Press – Seychelles. ‘Seychelles’ economic recovery on track’
Despite arising challenges being faced by the domestic tourism industry due to the recent surge in Covid-19 cases globally, Seychelles remains on the path to economic recovery.
The observation was made by the Financial Stability Committee (FSC) during its first meeting for the year which was held on February 10, 2022.
Members discussed several matters that could have potential consequences on the country’s financial stability.
The Committee considered the impact of the ongoing pandemic on the economy. The members acknowledged that despite arising challenges being faced by the domestic tourism industry due to the recent surge in Covid-19 cases globally, the country remains on the path to economic
Another matter discussed during the meeting was the trends to normalise monetary policy being observed globally, in light of rising inflationary pressures.
Members raised concerns about the potential implications of the anticipated higher interest rates on the cost of borrowing and ultimately on the country’s debt sustainability.
It was noted that the impact of the normalization of global interest rates on the country’s debt sustainability remains relatively low in the short term.
Nevertheless, members emphasised the need for recent developments in the global interest rate environment to be factored in the country’s Medium-Term Debt Management Strategy.
The risks and implications of a widening gap between global and domestic interest rates were equally highlighted, considering this could result in the outflow of funds as investors search for higher returns abroad.
The meeting also took note of the persisting global supply chain disruptions and rise in fuel prices, which remain key contributing factors to the elevated inflationary pressures on the domestic front.
On the regulatory side, the Committee reiterated the need for effective implementation and operationalisation of the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Act, highlighting, in particular, the application of the administrative sanction provisions of the legislation.
The members were also briefed on progress made to draft a new financial stability law that is at par with international best practices and standards while also considering the local context.
The new law will provide a strong and adequate domestic legislative framework that caters to the ever-changing risks and further promotes financial stability.
The Committee was also apprised of ongoing and upcoming domestic and international developments that may impact the country’s financial stability.
Members concluded that given the uneven economic outlook and prevailing uncertainties globally, risks to domestic financial stability remain. Hence, the continued monitoring of the situation by the relevant authorities is vital to mitigate the various threats to domestic financial stability.
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