Central Bank of Seychelles maintains interest rates at 2 percent amidst COVID uncertainty

The decision was taken by the CBS board on Monday and the governor of the Central Bank. (Central Bank of Seychelles)

(Seychelles News Agency) - The Central Bank of Seychelles has decided to maintain its monetary policy rate at 2 percent for the first quarter of 2022 as the global economy remains uncertain with the emergence of the new COVID-19 Omicron variant, said a top official on Tuesday.

CBS said that although visitor arrivals and earnings remain below pre-pandemic levels, the performance of the tourism industry has gradually improved with the continued easing of restrictions in the source markets and increased connectivity to various destinations.

However, the emergence of new variants and rising COVID-19 cases pose a threat to the ongoing recovery of the global economy and could lead to stricter travel restrictions.

The decision was taken by the CBS board on Monday and the governor of the Central Bank, Caroline Abel, said that the Board "has to take into account the global situations when making their decisions. Uncertainty remains due to the new COVID-19 variant affecting many countries, although should thing change, then the Board can also take other decision."

In late June the Central Bank lowered its monetary policy rates for the third quarter of 2021 to 2 percent, one percentage point lower than the previous quarters.  This realignment was deemed necessary in order to reduce the cost of credit and in turn boost economic activity.

One of the main issues which could be a cause for concern for Seychelles, an archipelago in the western Indian Ocean, with regards to the new Omicron variant is that it can affect the main tourism markets in Europe.  

At the moment, Seychelles' recovery remains promising with tourism arrivals still increasing to a level close to the pre-pandemic days. During the third quarter of this year, foreign exchange earnings reached a total of $121 million compared to only $34 million during the same period in 2020.

Meanwhile, Abel said that inflation pressures remain high despite it being on a downward trajectory.

At the moment, the inflation rate is at 9.37 percent, down from a high of 10.63 percent.

Abel explained the high inflation rate is due to a number of factors, including those that Seychelles has no control over such as global food prices, oil price, as well the high cost of shipping at the moment.

Abel also addressed talked about the drop in loan interest rates that the CBS had asked bank to implement earlier this year.

"As you remember, we had asked local banks to lower their interest rates and they all managed to do it, but at the moment, we are also in discussions with the bank, where we expect that there will be another drop in the rates in early 2022, although we must remain aware of global issues, which can change things," added Abel.

With the festive season, Abel continues to call on people to spend wisely and to remain mindful that things can change at any moment due to the unpredictable nature of the pandemic.