Seychelles is the only African nation to be classified as “high income” by the World Bank, and it was also the first country in the Indian Ocean to attain this classification. As the Central Bank of Seychelles marks its 40th anniversary this year, Governor Caroline Abel reflects on the role this institution has played in achieving this success, and on the challenges of developing policies that strike a balance between sustained growth and domestic price stability
What has been the role of the Central Bank of Seychelles (CBS) in the economic development of the country?
The CBS has undergone many transformations over time, and our contributions have been made through engagement and through our ability to change. We work closely with the government on policy orientation, and in the 1980s and 90s, there was a lot of support for the transformation that was going on in this country. In the late 2000s, there was a significant shift in economic direction, and we sought support from international institutions like the International Monetary Fund (IMF), the World Bank and the African Development Bank. We also transformed internally to be able to deliver on that set of economic reforms. To us, the important thing was to bring about macroeconomic stability, the initial component of the program. We worked closely with the finance ministry to do that and managed it within just a year. After the initial shock wore off, we were able to concentrate on structural reforms in the economy inclusive of the financial system. It’s been 10 years since we implemented major reforms and we still have some work to do. The next focus is on infrastructure investment.
What are some of the reforms you are looking at for the Seychelles?
We are again working closely with the finance ministry to ensure we have the tools for major projects because in terms of size it’s going to be significant. We are working together to improve our infrastructure in order to take our economy to the next level for the benefit of the people, but without undermining the progress that has already been achieved. One important aspect is modernizing the payment system platform. The rest of the world is moving towards the digital world, and in the last four years there have been many discussions on this topic, and digital platforms have been implemented. But a greater effort is required, among other things to better attract foreign investment. In the last two years, we have also worked closely with our Financial Services Authority. We want to ensure that the international community sees us in a good light; we want to be supportive of investment while taking our own needs into consideration as well, so the population will benefit. This is the direction that the government of Seychelles is taking: more inclusion, more distribution.
You have been Governor since 2012, during which time the country “implemented prudent macroeconomic policies together with bold structural reforms that led to strong economic growth,” in the words of the IMF. What have been your most significant decisions as governor?
As governor, you need to make sure that decisions are implemented. I look at my own participation as a collaborative effort. There are many initiatives within the institution, and my role in these six years has been to make sure the CBS is doing the right thing, that we have a strong team and a strong capacity-building structure to provide for the needs of the next generations, and also that our internal policies are understood by the public. Part of my job is to explain what the CBS is doing, and communication has been a key element throughout this time.
What potential is there to add direct flight connections between China and Seychelles?
We are in discussions with Chinese companies about the possibility of adding Seychelles to their route network. The eventual decisions have to be with the airlines. We can support the airlines in marketing, but they have to ensure that when they do launch that it’s a profitable run. So far, we’ve had a lot of discussions but nothing has materialized yet. It is something we’re always exploring.
What are the main selling points of Seychelles as a tourist destination?
One of our top selling points is island hopping, we are a multi islands destination, and no two islands are the same. If you come several times, you can have a new experience every time. However, even if there are new activities at each destination, what stays consistent is that the natural beauty is unparalleled in Seychelles. But of course, as a destination, we cannot just be content with that. We continue to modernize and stay relevant with current travel trends. For example, authentic experiential travel is in demand. Tourists are interested in cultural and heritage tours to learn about Seychelles. We get people in touch with the soul of the destination.
How does the CBS communicate and explain its policies to the average person?
Celebrating 40 years is a good time to evaluate how close we are to the people. On occasion of the anniversary, we are organizing many activities to reach out to society. We are also engaging a lot with the media and analyzing how well people understand financial terms. Last year, we launched a strategy for financial education to raise the level of financial literacy in the Seychelles. When we say we want financial inclusion, not everyone understands what that means. Around 94 percent of the population has a bank account, but that does not mean they have complete access to all financial services because often they don’t even know that these services exist. So we are engaging a lot of stakeholders to put out this information. For the last three years, every time we make policy decisions I make public statements to explain it to the public. The public is very active on social media and we will shortly have a bigger presence there in order to communicate more directly.
According to the CBS 2017 Annual Report, real GDP grew by 4.2 percent in 2017 and growth is predicted to continue at 3.3 percent in 2018. How do you regulate to prevent inflation and overheating in some sectors?
One important driver of growth is tourism, which has been doing very well lately. The trend is continuing this year with more airlines and a diversification of tourism markets. But the CBS has a balancing act to do on a continuous basis because we know that any monetary policy decision needs to support economic activity while achieving price stability. This is very important to us because we are very open to the world, and when it comes to direct trade we import more than we export. The exchange rate is a key element, and when the currency depreciates the CBS looks out for potential threats. In the second half of last year, we saw strong growth in credit to the private sector from an investment and consumption perspective. This is a bit of a concern because it means higher imports, so we make sure that when we change our policies, investment is not threatened. This is a critical point. Since April we’ve had to tighten back, so the economy is a bit edgy because we know that any tightening has an impact on investment.
If you were a Chinese investor or company considering entering the Seychelles market, what would you view as the most significant competitive advantages that it offers compared to other countries in the region?
When you look at us, one important element is stability – political, macroeconomic – and the fact that we stick to our policies. We still have work to do and we are empowering the private sector to take on more investment, but the stability factor is critical. Foreign and national investors need to make long-term decisions, so they need this kind of solid framework.
What is your economic relationship with China?
We do quite a bit of trade with them, and we need to see how we can facilitate that even more. The CBS has a relationship with a Chinese bank from a reserve management perspective, but we also look at how we can collaborate through our financial institutions to facilitate trade flows.
You made history by becoming the first female Governor of the Central Bank of Seychelles. On top of that, you were awarded the African Female Public Servant of the Year award by the African Business Leadership Forum and Awards in 2015 for your outstanding contributions to your country. What do these achievements mean to you personally?
When I was appointed in 2012 it was in recognition of my work since I joined the bank in 1994. Having grown within the institution, I didn’t find it too difficult to take on the role. At the beginning, from a technical perspective, it was not overwhelming, but within three months I had to make a major policy announcement about the exchange rate, which was depreciating, and we were discussing whether to intervene. I had to announce that decision. That was my first major challenge in office. After that everything flowed in terms of the reaction from the public, how they see the bank going forward. I feel gratified in terms of our work and our team effort, so even though the job is challenging, I enjoy it because every day is new and we have to work out solutions to the problems that come up. I was reappointed In March, reflecting the confidence of authorities in myself but also in our staff. We felt reinforced that our work in the last six years has been appreciated. Now we are working on a new strategic plan to be launched early next year.