Yearbook 2008
Seychelles. According to
Countryaah reports, the international financial crisis in the
fall of 2008 led to a decline in Seychelles' important
tourism industry. The crisis also made it clear that the
country's powerhouse had built up an unsustainable economy
with large government spending at the expense of very high
foreign debt.
In September, the effects of the international financial
crisis came. Until now, tourism had remained at the same
level as in 2007, but in September it turned downwards. At
that time, the number of tourists was eleven percent lower
than the same month the year before. The tourism sector was
also threatened by a tax increase, which it feared would
reduce the number of visitors to the relatively expensive
tourist country even more.
In October, the country's central bank governor resigned.
He argued for health reasons, but there were speculations
that the economic downturn also played a role. Seychelles'
external debt amounted to USD 800 million, close to 175
percent of the country's GDP. The government announced that
the country was unable to pay its debts and initiated loan
negotiations with the International Monetary Fund (IMF). In
November, the IMF granted $ 26 million in support over two
years. In return, the government promised to reduce the
state's role in the economy, cut the number of civil
servants, increase privatization and review tax policy. In
addition, restrictions on currency exchange were abolished,
and the Seychelles Rupee was allowed to float freely. These
measures were hoped by the government and the IMF would lead
to increased access to foreign currency, which has been a
major problem,
But the support program was not enough. A few days after
the IMF agreement became clear, the finance minister
traveled to Paris to renegotiate Seychelles' loans with
various lenders.
On December 9, Seychelles's first president and founder
of the Democratic Party, James Richard Mancham, called on
the country's politicians to form a unifying government to
deal with the crisis. He also criticized recent governments
for conducting irresponsible economic policies. In December,
the State Mortgage Institution announced that mortgage rates
would rise from 7 to 13 percent from January 2009.
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