Seychelles Central Bank re-iterates warning about foreign exchange demand, devaluation of rupee
The governor of the Central Bank of Seychelles (CBS) is continuing to raise the alarm about the demand for foreign exchange, demand that is pushing the value of the rupee down.
Caroline Abel told a press conference on Friday that analysis on the foreign exchange situation for the month of October shows that “there has been a demand of $1.9 million compared to what we are receiving. This means that demand is still high compared to the foreign currency being sold.”
From November 5-12, there has been an average increase of 75 cents on the dollar and 90 cents on the Euro.
She said depreciation is a real concern as this will result in a continuous rise in the price of commodities. She is urging people to reduce expenses for the necessities so as to help the economy of Seychelles, an archipelago in the western Indian Ocean.
Abel also talked about two credit lines made available to help enterprises of all sizes being affected by the economic downturn as a result of the COVID-19 pandemic.
“Along with the board of the Central Bank, we have reviewed the way the credit line is functioning. We have extended the time that businesses have to get access to the credit line and that will be extended to another six months,” she said.
Businesses will be able to access the credit line to purchase equipment for information technology and for other costs like salaries, electricity and water bills.
“This is because we have seen an increase in the number of businesses coming forward with the need to incorporate technologies in their daily operation in view of COVID-19 and measures put in place,” said Abel.
Borrowers will need to be conscious that their debts need to be sustainable and repayable.
Another financial instrument put in place to help the economy and business affected by the pandemic is treasury bills.
“Every week, based on the finance that the government needs to find, there is what we call an auction on Friday for treasury bills. If the government needs finance on a long-term basis, CBS puts out Treasury bonds. People that have invested in those instruments will perhaps feel that they would not need to take any loan. We are encouraging the public to invest in an instrument that could be converted into liquidity,” said Abel.
She warned, however, that CBS needs to ensure that there is no excess liquidity in the system as it would need to use another instrument to remove it and this will come at a cost.
At present, the country’s reserves stand at $663 million, out of which $425 million could be spent and this will last the country for 18 months.