Seychelles

Country Summary

Macroeconomic performance

Real GDP growth was an estimated 3.6% in 2018, down from 5.3% in 2017, due to rising international oil prices, a moratorium on construction, and uncertainty over the Eurozone, on which the country relies for its thriving tourist sector. The service sector—mainly tourism, finance, transport, and communications—led the growth, expanding by an estimated 5.4% in 2018, up from 5.3% in 2017. The primary fiscal deficit was an estimated 0.3% of GDP in 2018, up from a balanced budget in 2017, due mainly to increasing government spending and declining revenue. The country’s debt-to-GDP ratio has declined by almost two-thirds from 183% in 2011 to a relatively high 60% estimated for 2018. Authorities plan to reduce the ratio to less than 50% by 2021 through fiscal discipline coupled with an improved debt management strategy.

Inflation increased to an estimated 4.4% in 2018 from 2.9% in 2017 due to higher global energy prices and 2017 fiscal measures, which included a higher minimum wage, increased social spending (mainly state pensions), and higher civil service wages (raised through a new “13th month salary”). The exchange rate remained stable in 2018 at 13.9 Seychellois rupees per dollar. Average gross international reserves were estimated at 4 months of imports in 2018.

The current account continued to register a large but declining deficit in 2018. The deficit was an estimated 17.6% of GDP in 2018, down from 20.5% in 2017. The country’s main trading partners, Europe and the Middle East (mainly the United Arab Emirates), account for more than 60% of the country’s imports and exports.

Tailwinds and headwinds

Economic growth is projected to be 3.3% in 2019 and 2020, with the service sector remaining the primary driver of growth. The medium-term outlook remains positive, thanks to projected vibrant tourism and growing fishery sectors. On the demand side, growth will continue to be driven by robust investment, estimated at 34.6% of GDP in 2019 and 36.1% in 2020. Given the still high debt-to-GDP ratio, internal downward risks include the expansionary fiscal measures in the 2017 budget, which will continue to trigger inflationary pressures. Overdependence on tourism and fisheries makes the economy vulnerable to external shocks. A slowdown in the construction sector, resulting from a moratorium on large hotels and scarcity of construction materials, may also put a brake on growth. The economy enjoys a high-value tourism sector, a large fishing area, emerging financial services and information and technology sectors, an improving regulatory framework for private participation, and a strategic framework for climate change.

External downward risks include deterioration in the terms of trade, rising international fuel prices since late 2016, and uncertain economic performance in the Eurozone—the main source of tourism. The rising trend in international fuel prices is likely to have a negative effect on the balance of payments, inflation, and productivity because the country is an oil importer. In addition, as an island state, Seychelles is also exposed to climatic shocks, requiring additional resources for resilience building.

Source: African Economic Outlook 2019

Fixed Income

Summary 

  • Seychelles is 10th in the ABMDI 2017 Ranking Report. 
  • Debt issuance is mainly for monetary purposes. 
  • The government of Seychelles mainly uses Treasury bills for its debt issuance purposes. 

Issuance strategy 

Debt issuance is mainly for monetary purposes. Although the short-term plan is to reduce the share of domestic debt in the total debt portfolio, the Medium-Term Debt Strategy indicates that a lengthening of the maturity profile of the domestic debt portfolio is preferred, while the development of the domestic securities market is a stated objective of the plan. 

Benchmark issues 

The government of Seychelles does not have benchmarks in its issues. 

Yield curve 

There is no benchmark yield curve in Seychelles. 

Challenges in building an efficient yield curve 

  • Lack of issuance strategy: government bond issuance is infrequent. Whenever there is an issuance, it is on a tap basis. 
  • Illiquid and limited secondary market: most investors buy and hold securities.

Guide to Buying Bonds

Procedures for market participation

Application forms (for 91-d, 182-d, 365-d)  and prospectus may be obtained at the Public Debt Section of the Central Bank of Seychelles between 8.30am and 12-noon. Tenders are placed by filling a tender form and should be deposited in the tender box at the Central Bank before the closing date specified in the notice.

Auction results are made available the same day to applicants whose Tenders have been accepted in whole or in part.  The Bills are payable 91-days, 182-days and 365-days after the date of issue, which will be three working days.  The Average Tender Rate will be published on the Central Bank website on the auction date. Detailed instructions on how to purchase Treasury securities is available here. 

Settlement cycle

All securities settle on a T+3 basis.

Taxation

Interest income on fixed-income instruments are taxed at a rate of 5% for residents and 15% for non-residents.

There is no capital gains tax in Seychelles; moreover Seychelles enjoys double taxation agreements with the following countries: Bahrain, Barbados, Botswana, China, Cyprus, Indonesia, Malaysia, Mauritius, Oman, Qatar, South Africa, Thailand, United Arab Emirates, Vietnam, Zambia and Monaco. 

Market restrictions

Openness to international investors 

Foreign investors need not get approval to invest in the capital markets. Bonds can be purchased by any individual; in the case of a body of persons, they should be incorporated or registered under the laws of their country of domicile.

To encourage investments in the country, the Seychelles has instituted an investment bureau and board, the Seychelles Investment Board (SIB). A new investment code was also enacted in 2005.

Capital controls 

The implementation of macroeconomic reforms in 2008 was accompanied with the removal of capital controls.

Restrictions on foreign exchange and profit repatriation

The Central Bank Act of 2004 was amended in a session of the National Assembly on October 31, 2008 removing the Bank’s control of the exchange rate. A new exchange rate system was then implemented; the rupee now operates under a free floating regime.

There are no restrictions on repatriation and conversion of foreign exchange, investment income.

Credit rating

In October 2013, Fitch assigned a rating of B+ on the long-term local currency debt of Seychelles, on the outlook of the progress made after the implementation of the IMF reforms in 2008.

List of Primary Dealers

N/A.

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