CENTRAL BANK OF SEYCHELLES

ANNUAL REPORT 2000

CENTRAL BANK OF SEYCHELLES

ANNUAL REPORT

2000

CONTENTS

Letter of Transmittal

Board of Directors

List of Tables

Economic Review of 2000 1

Section One World Economic Conditions 4

Section Two Highlights of the Seychelles Economy 17

Section Three Financial Survey 20

Section Four Government Finance 32

Section Five The External Sector 43

Section Six The Real Sector: Production, Employment and Prices 57

Section Seven Investment and Offshore Developments 77

Section Eight Operations and Administration of the Central Bank 83

Letter of Transmittal

Central Bank of Seychelles

P.O. Box 701

Victoria

March 31, 2001.

President F. A. René

State House

Victoria

Dear Mr. President,

In accordance with section 43(3) of the Central Bank of Seychelles Act, 1982, as

amended, I have the honour to submit for your approval the Eighteenth Annual Report of

the Central Bank together with a copy of the Annual Accounts for 2000 certified by the

Auditors.

Yours faithfully,

CENTRAL BANK OF SEYCHELLES

Board of Directors

(as at 31 December 2000)

Norman Weber, Governor - Chairman Francis Chang Leng - Member

Errol Dias - Member

Francis Chang-Sam - Member

Secretary to the Board

Patrick Stravens

List of Charts and Tables Chart No. Title Page Financial Survey 3.1 Growth rates of the money supply aggregates; 1995-2000 23 3.2 Growth rates of credit of the banking system; 1995-2000 25 3.3 Growth rates of credit held by the economic agents; 1995-2000 27 3.4 The movement in credit/deposit ratio in 2000 30 3.5 The movement in commercial bank credit and deposit in 2000 30 3.6 Level of interest rates; 1995-2000 30 The Real Sector: Production, Employment and Prices 6.1 Real GDP growth; 1990-2000 57

6.2 Tourism arrivals and its growth rates for 1995-2000 63

6.3 Tourism income and its growth rates for 1995-2000 63

6.4 Canned tuna produced and exported from 1995-2000 73

6.5 Revenue earned from export from 1995-2000 73

6.6 Inflation rate for 1995-2000 76

Investment and Offshore Developments 7.1 Number of IBCs registered per year and their

cumulative totals; 1995-2000 80

Operations and Administration of the Central Bank 8.1 Advances to Government; 1995-2000 85 8.2 Currency in circulation; 1995-2000 86 8.3 Stock of Public Debt Instruments; 1995-2000 89 8.4 Local Assets Ratio from 1995-2000 94

Table No. Title Page Financial Survey 3.1 Monetary Survey; 1995-2000 24

3.2 Credit; 1995-2000 26

3.3 Commercial Banks – Loans and Advances to Non-Government

Sector by Economic Sectors; 1996-2000 28

3.4 Loans by Development Bank by Economic Sectors; 1996-2000 29

3.5 Liquidity Indicators of Commercial Banks; 1995-2000 29

3.6 Interest Rates; 1995-2000 31

Government Finance 4.1 Government Budget; Summary 1998-2001 34

4.2 Government Budget; Revenue 1998-2001 35

4.3 Government Budget; Expenditure 1998-2001

4.4 Public Sector Capital Project Expenditure 1995-2000 40

The External Sector 5.1 Balance of Payments; 1995-2000 44

5.2 Domestic Exports; 1995-2000 47

5.3 Imports (cif) – by SITC Sections; 1995-2000 48

5.4 Goods procured in ports; 1995-2000 50

5.5 Services 1995-2000 52

5.6 External Reserves; 1995-2000 55

5.7 Exchange Rates; 1995-2000 56

The Real Sector: Production, Employment and Prices 6.1 Gross Domestic Product by Kind of Economic Activity at constant market prices 58 6.2 Gross Domestic Product by Kind of Economic Activity at current market prices 59 6.3 Gross Domestic Product by Broad Productive Sectors at current market prices 61 6.4 Tourism 64

Table No. Title Page

6.5 SMB Purchases of Vegetables and Fruits 66

6.6 Crops 68

6.7 Livestock (slaughters) 68

6.8 Estimates of Fish Landed 71

6.9 Employment 75

6.10 Composition of Retail Price Index 77

Operations and Administration of the Central Bank 8.1 CBS Advances to government; 1995-2000 85

8.2 Circulation of Notes and Coins; 1995-2000 86

8.3 Bankers’Clearing House Activities; 1995-2000 87

8.4 Treasury Bill Yields; 1995-2000 89

8.5 Treasury Bills; 1995-2000 90

8.6 Treasury Bonds; 1995-2000 91

8.7 Government Stocks; 1995-2000 92

8.8 Capital Fund Ratios of Commercial Banks; 1995-2000 93

8.9 Minimum Reserves and Local Assets Ratio; 1995-2000 94

8.10 Temporary Advances against Government Securities; 1995-2000 95

8.11 Government of Seychelles Re-finance Scheme; 1995-2000 96

8.12 Commercial Bank Advances to Non-Seychellois; 1998-2000 96

8.13 Commercial Bank Advances to Parastatals; 1998-2000 97

Technical Note

Owing to rounding of figures, the sum of separate items may not always add up to the total shown. Abbreviations used in this Report are: R = Seychelles Rupee CBS = Central Bank of Seychelles n.a = Figure not available .. = Negligible -/0 = Nil

ECONOMIC REVIEW OF 2000

Seychelles was formally accepted as a member of the Indian Ocean Rim

Association for Regional Co-operation (IOR-ARC) at an Extraordinary meeting

of the Association’s Council of Minister’s held in Muscat, Oman.

Seychelles benefit from a donation of R13 million from the French Government

following the signing of a treaty between the two Governments.

An agreement for the purchase of 34 new buses by the Seychelles Public transport

Corporation (SPTC) and TATA International of India under an Indian

Government US $2 million credit line was finalised on 11 February.

On March 7, the Executive Chairman of the Public Utilities Corporation (PUC),

Mr Mukesh Valabhji and Mr Johan Oelofse, the Senior Manager for Nedbank

South Africa, signed a financial agreement which will finance a sewage project.

The sewage treatment project would be for the districts of Beau Vallon and part of

Bel Ombre area and would cost around US$14 million (R75 million).

Seychelles Marketing Board (SMB) announced price reductions on 12 imported

commodities following the Vice President’s budget speech.

The Chief Executive Officer (CEO), Captain David Savy, announced that Air

Seychelles would acquire a third aircraft, a Boeing 737-700, to add to its

international fleet in 2001, while the present 767-200 would be replaced with a

B767-300 in April 2001.

January

March

April

New Boeing 737-700 for Air Seychelles

February

PUC to undertake R75m project

SPTC to receive 34 new buses

Paris gives out R13m

Seychelles joins IOR-ARC

Price reduction

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SMB continued to lower prices of goods as part of ongoing efforts to combat

inflation. The price was reduced on the Liqui-Fruit juice, powdered milk as well

as women toiletries.

The US$50 million Victoria power station project was inaugurated by President

Mr. F. A Rene as part of events commemorating the National day celebrations.

The project has been financed partly by the PUC and partly by a US$44 million

loan from the ABN AMRO Bank of Netherlands.

In July a new set of incentives for small business, export-oriented, was announced

by the Vice President. The scheme would include a Small Business Finance

Fund; no trades tax on imported raw material and the right to operate foreign

exchange accounts for export and re-exports businesses.

The Barclays Bank PLC and the Central Bank announced plans to incorporate

Barclays’ existing branches in Seychelles. Barclays Bank (Seychelles) Limited,

effective as from October 1, 2000 would be a wholly owned subsidiary of

Barclays Bank PLC, although shares in the corporation would be offered for sale

to staff and the general public.

The Seychelles International Business authority (SIBA), conducted Seychelles

first ever offshore conference with the theme of ''Future of Offshore Centres in

the Cyber Age''. The two-day conference focussed on the growing influence of

commerce on the International Financial Services Industry.

The Vice-President announced, in the National Assembly in October during a

question time session, that the Government had secured a loan of Euro 50 million

(R245 million) from Citibank to complete the East Coast project.

October October

June

August

September

President inaugurate power station

SIBA Conference

East Coast project

Further price reductions

Bank to be locally incorporated

July

New incentives for small businesses

May

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US$6.4 million loan was signed in Khartoum by the Minister of Foreign Affairs,

Mr Jeremie Bonnelame, and the Director General of the Arab Bank for

Development in Africa (BADEA), Mr Medhat Lofty. The loan would go towards

the construction of the new Seychelles Industrial Training Centre (ITC).

After much deliberation on the 2001 budget proposal, the National Assembly

approved the Appropriation Bill 2001. The Appropriation Bill 2001 caters for a

National Budget of R1,225,536,000 and has been the trend throughout the years,

that the Ministry of Education receives the largest share of the budget, R139

million. The Ministry of Health obtained the second largest allocation - R137

million - followed by the Department of Internal Affairs with R68 million and the

Ministry of Defence with R60 million.

December October

BADEA loan for ITC

Budget 2001 approved

SECTION ONE

World Economic Conditions

1. Overview

The global economic recovery that started in

1999 continued to gain strength in 2000 with

the IMF projecting a global output growth of

4.7 per cent for the year under review.

Growth increased in all major economies of

the world, led by the strong US economy;

the robust upswing in Europe; the

consolidation of the recovery in Asia; and a

rebound from 1999’s slowdowns in

emerging markets in Latin America and the

Middle East and Europe. Activity in Africa

rose further, and the countries in transition

saw a second year of solid growth,

underpinned by a much better than expected

performance in Russia. Nevertheless, a

number of countries continued to experience

serious economic problems, in some cases

due to natural disasters and adverse

movements in commodity prices.

With most advanced economies growing at

rates at or above potential, most central

banks continued to raise interest rates.

Although headline inflation rates increased

in response to higher energy prices,

underlying inflation in most advanced

countries remained relatively subdued. In

part, this reflected the continued margins of

slack in some regions of the world, notably

in Japan and to a lesser extent in continental

Europe. But other factors, including fiscal

consolidation and regulatory and

technological changes also played a role.

While the overall outlook was encouraging,

there were significant risks and

uncertainties, for which one of them was oil

prices. Oil prices have been significantly

higher than previously expected, due to both

supply constraints in producing countries

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ANNUAL REPORT 2000 WORLD ECONOMIC CONDITIONS

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and the continued strength in global

demand. Following the announcement of

further supply increases at the OPEC

meeting in June, as well as indications that

some oil producers would be willing to

boost supply further, the oil price fell back

within in the OPEC target range of US$22-

US28 per barrel in July. However, since

early August prices have rebounded

significantly.

1.1. Developed economies

1.1.1 United States

According to the Monetary Policy Report

submitted to the Congress in February 2001,

the combination of exceptionally strong

growth in the first half of 2000 and subdued

growth in the second half resulted in a rise

in real GDP of about 3.5 per cent for the

year. Domestic demand started out the year

with incredible vigour but decelerated

thereafter and was sluggish by the year-end.

Exports surged for the three quarters and

then faltered. In the labour market, growth

in employment slowed over the year but was

sufficient to keep the unemployment rate

around the lowest sustained level in more

than thirty years.

Core inflation remained low during the year

in the face of sharp increases in energy

prices. Unit labour costs picked up

moderately, adding to the cost pressures

from energy. Nevertheless, the ability of

businesses to raise prices was restrained by

the slowing of the economy and the

persistence of competitive pricing

conditions.

Personal consumption expenditures

increased 4.5 per cent in real terms after

growths of 5.0 per cent and 5.5 per cent in

1998 and 1999 respectively. A large portion

of the gain was in the first quarter, when

consumption grew at a fast pace. For the

remainder of the year, growth was moderate,

averaging about 3.5 per cent. One of the

factors influencing consumption in the year

under review was the change in income and

wealth. Both provided less support to

consumption in 2000 than in other recent

years. Real disposable personal income rose

about 2.25 per cent after a gain of slightly

more than 3.0 per cent in 1999. Disposable

income did not rise quite as much in

nominal terms as it did in 1999, and rising

prices eroded a larger portion of the nominal

gain.

In the business sector, real business fixed

investment rose 10 per cent in 2000

according to an estimate from the

Commerce Department. Investment

spending shot ahead at an annual rate of 21

per cent in the first quarter of the year due to

the high-tech purchases that had been

delayed from 1999 by companies that did

not want their operating systems to be in a

ANNUAL REPORT 2000 WORLD ECONOMIC CONDITIONS

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state of change at the onset of the new

millennium. Expansion of investment was

slower but still relatively brisk in the second

and third quarters, at annual rate of about 15

per cent and 8.0 per cent respectively. In the

fourth quarter, however, capital spending

downshifted abruptly, falling at an annual

rate of 1.5 per cent in response to the

slowing economy, tightening financial

conditions, and rising concern about the

prospects for profits.

On the external front, the current account

deficit reached US$452 billion (annual rate)

in the third quarter or 4.5 per cent of GDP,

compared with US$331 billion for 1999.

Most of the expansion in the deficit occurred

in the balance of trade in goods and services.

The deficit on trade in goods and services

widened to US$383 billion (annual rate) in

the third quarter from US$347 billion in the

first half of the year. Data for October and

November suggest that the deficit may have

increased further in the fourth quarter.

Exports of goods and services rose an

estimated 7.0 per cent during the year under

review. Exports surged during the three

quarters, supported by a pickup in economic

activity abroad that began in 1999. By

market destination, US exports were

strongest in Mexico and countries of Asia.

About 45 per cent of goods exports were

capital equipment, 20 per cent were

industrial supplies, and roughly 10 per cent

each were agricultural, automotive,

consumer, and other goods. The quantity of

import of goods and services expanded

rapidly during the first three quarters, due to

the continuing strength of domestic

economy. The counterpart to the increased

US current account deficit was an increase

in net capital flows. As in the previous year,

US capital flows reflected the relatively

strong cyclical position of the economy for

most of the year and the global wave of

corporate mergers.

In the labour market, the non-farm payroll

employment increased about 1.5 per cent in

2000, measured on a December-to-

December basis. Over the first few months

of 2000, the expansion of jobs proceeded at

a faster pace than in 1999, boosted both by

the federal government’s hiring of the

decennial census and by a somewhat faster

rate of job creation in the private.

Indications of a moderation in private hiring

started to emerge towards mid-year. Over

the remainder of the year, monthly increases

in private employment stepped down further

due to a slowing economy.

In terms of changes in the price level, this

was mainly influenced by the surge in

energy prices. The chain-type price index

for real GDP, the broadest measure of goods

and services produced domestically, rose

ANNUAL REPORT 2000 WORLD ECONOMIC CONDITIONS

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2.25 per cent in 2000. In addition, the price

index for gross domestic purchases, the

broadest measure of prices for goods and

services purchased by domestic buyers,

posted a rise of 2.5 per cent. The prices of

energy products purchased directly by

consumers increased by 15 per cent in 2000.

In response to the rise in world oil prices,

consumer prices of motor fuels rose nearly

20 per cent. Prices also rose rapidly for

home heating oil.

Businesses had to cope with rising costs of

energy production, transportation, and

temperature control. In some industries that

depend particularly heavily on energy

inputs, the rise in costs had a large effect on

product prices. Despite the spillover of

energy effects into other markets, inflation

outside the energy sector remained overall

moderate.

1.1.2 European Union

1.1.2.1 Eurozone economies

The expansion in the Euro area, which

started in the second half of 1999 continued

to gather strength in the first half of 2000,

with GDP growth rising steadily at around

3.0 per cent. This increase in economic

momentum was aided by resurgent export

growth due to the strengthening of the

global recovery and a highly competitive

currency. During the remainder of the year,

high consumer and business confidence and

the favourable external environment

sustained the expansion. For the year as a

whole, GDP growth was projected at 3.5 per

cent, with all countries registering above-

potential growth rates. The pickup in

activity has been accompanied by a

substantial decline in unemployment.

However, with some slack still remaining in

area-wide labour and product markets,

underlying price pressures have been

restrained. The headline CPI increased to

2.4 per cent by midyear, due largely to rising

oil prices and exchange rate pass through.

Core inflation, at about 1.3 per cent, has

remained subdued, aided by moderate wage

settlements, falling utility prices as

deregulation and privatisation took effect,

and, in some countries, cuts in direct taxes.

Nevertheless, one of the preoccupations of

the European economies was the euro. The

Euro was quite volatile, hitting record lows

against the U.S dollar and most other major

currencies in mid-May, and again in early

September. By early September, the Euro

had depreciated over 15 per cent in nominal

effective terms since its inception in 1999,

and was below the level that could be

justified medium-term fundamentals. In

part, this has reflected the relative cyclical

position of the Euro area, with United

States. In addition, relative interest rate

differentials and market perceptions of

ANNUAL REPORT 2000 WORLD ECONOMIC CONDITIONS

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differences in the underlying climate for

investment across countries may have

played a role.

Given buoyant activity, money and credit

development, rising oil prices, and later the

weakness of the Euro, the European Central

Bank (ECB) started raising interest rates

early in the year. Over the period between

February to October, the ECB increased

interest rates by 175 basis points with the

aim on the one hand of forestalling potential

pressures on wages and prices and on the

other to boost the value of the currency.

During 2000, growth rates among individual

countries in the Euro area have continued to

differ markedly, which – since monetary

policy must be set on the basis of conditions

in the Euro area as a whole – has posed

challenges for policymakers, particularly in

the small and faster growing economies.

Over the coming year, differences in growth

rates are projected to decline as the recovery

in Italy and Germany catches up with that in

France and some of the cyclically advanced

countries. Nevertheless, substantially

differences in underlying cyclical positions

are likely to persist for a period. Most of the

cyclically advanced countries continue to

experience higher than average inflation,

rapid growth in domestic credit, sharply

rising property prices, and, in Portugal, a

large current account deficit. In some cases,

particularly Ireland and possibly the

Netherlands, relatively clear signs of

overheating have emerged. While budgetary

positions in these countries are in most cases

in surplus, every effort appeared to have

been made to save the fiscal windfalls

arising from higher growth in order to avoid

fuelling demand pressures.

1.1.2.2 Non-eurozone economies

In the United Kingdom, GDP growth was

projected to pick up to 3.1 per cent in 2000

from 2.1 per cent in 1999, reflecting a

smaller deterioration of the trade balance

and continued strong domestic demand

growth, bolstered partly by the planned

expansion in government consumption.

Inflation has remained below the Bank of

England’s 2.5 per cent target, owing to

subdued wage pressure, falling price-cost

margin, and the strength of sterling.

Nevertheless, labour market conditions

remain tight with the unemployment rate (on

a claimant count basis) below 4.0 per cent.

During the year, the Bank of England

increased interest rates only twice, both at

the early stages of the year, by 50 basis

points taking the repo rate from 5.50 per

cent to 6.00 per cent, where it then remained

until the end of the year.

In Sweden, another country that has

remained outside the monetary union, GDP

growth was estimated at 4.5 per cent in

ANNUAL REPORT 2000 WORLD ECONOMIC CONDITIONS

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2000, driven by strengthening domestic

demand and a firming up of net exports.

Nevertheless, some slack still remained in

the economy; wage increases have been

moderate, and core inflation was well below

the 2 per cent midpoint of the target zone.

Activity has also remained strong in Greece,

which, aided by a stability-oriented

economic policy and also introduction of

administrative measures to reduce inflation,

has helped it to successfully meet the

European Monetary Union (EMU)

convergence requirements. From January

2001, Greece will become the 12th member

of the Monetary Union.

In the smaller states, namely Denmark,

Norway and Switzerland, solid recovery was

also underway. In Norway and Denmark,

where the slowdown partly reflected policy

measures to address overheating, the

ensuing rebound has been led by rising

exports (for Norway, aided by higher oil

prices). Domestic demand increased in both

countries during 2000, as fiscal policies

returned to a broadly neutral stance.

In Switzerland, both exports and domestic

demand, aided by an accommodative

monetary stance, drove the recovery. As the

strength of the recovery became apparent,

the Central Bank appropriately moved to

tighten monetary conditions, while allowing

the franc to appreciate against the Euro.

1.1.3 Japan

For the year as a whole, Japanese real GDP

is estimated to have increased about 2.0 per

cent, a substantial improvement from the

very small increase of the previous year and

the decline recorded in 1998. Growth,

which was concentrated in the first part of

the year, was led by private nonresidential

investment. In contrast, residential

investment weakened as the effect of tax

incentives waned. Consumption rebounded

early in the year from a sharp decline at the

end of the previous year but then stagnated,

depressed in part by record-high

unemployment and concerns that ongoing

corporate restructuring could lead to further

job losses. Public investment, which gave a

major boost to the economy in 1999,

remained strong through the first half of the

year but then fell off sharply. For the year

as a whole the fiscal stance is estimated to

have been somewhat contractionary.

Inflation was negative for the second

consecutive year, with the prices of both

consumer goods and real estate continuing

to move lower.

In terms of monetary policy, the Bank of

Japan, which had adopted a zero interest rate

policy since February 1999, changed its

ANNUAL REPORT 2000 WORLD ECONOMIC CONDITIONS

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stance in the second half of the year. More

precisely on August 11, the monetary policy

committee of the Bank decided by majority

vote to increase the key interest rate – the

uncollaterised overnight call rate – by 25

basis points to 0.25 per cent. According to

the Bank, the change was effected due to

substantial improvement in the economy.

At that time, the economy was showing

signs of recovery led mainly by business

fixed investment.

1.2 Developing economies

1.2.1 Asia

The rebound from the crisis of 1997-98

continued in Asia, with growth projected to

rise from 6.0 per cent in 1999 to more than

6.5 per cent in 2000 and 2001. The rapid

recovery of output in 1999 was fuelled by

continuing monetary and fiscal stimulus, as

well as external demand, supported by a

recovery in prices of electronics. Asia was

now the world’s largest supplier of such

equipment.

Continuing demand for information

technology goods helped underpin the

expansion, but private domestic demand

became a more important force propelling

regional growth in 2000, particularly in the

countries most advanced in recovery, where

fixed investment was increasing rapidly.

Activity also continued to be buttressed by

continuing robust growth in the region’s two

most populous economies, China and India.

Despite some concerns in financial markets

about the pace of structural reforms, and

political uncertainties, growth in Indonesia

was set to grow at about 4.0 per cent in 2000

and 5.0 per cent in 2001, supported by firm

oil prices, while activity in South Korea was

forecasted to moderate to 8.75 per cent in

2000 and 6.5 per cent in 2001. Fiscal

policies have been generally supportive of

activity, but were starting to move to a more

neutral stance. This process, which has

already started in Korea, was being initiated

in the Philippines, while elsewhere it is

planned to start in 2001. The export-led

nature of the recovery has led to strong

current account positions throughout the

regions, although surpluses were beginning

to fall in response to domestic recovery and

higher oil prices. External surpluses were

helping to insulate parts of the region from

some of the financial impact of tighter

global monetary conditions.

Economic data indicate that China, the

world’s most populous economy, continued

to grow at a robust pace. Stronger private

consumption and export supported real GDP

growth, set at 7.5 per cent in 2000, with

monetary policy remaining accommodative.

On the fiscal side, the authorities announced

a package of additional expenditures;

ANNUAL REPORT 2000 WORLD ECONOMIC CONDITIONS

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however, buoyant revenues caused by strong

activity were shifting policy to a more

neutral stance. In India, the second largest

economy, economic performance has been

remarkable in recent years, despite the

adverse effects of the regional crisis on

exports and the more recent hike in world oil

prices. Growth for 2000 forecasted at 6.75

per cent, reflected continued strength in the

information technology sector and a rebound

in agricultural production.

1.2.2 Latin America

Latin America and the Caribbean continued

to recover from the effects of the emerging

market crises of 1997-98. Growth was

fuelled by buoyant exports, particularly to

the United States, as well as a recovery in

consumer confidence and spending that was

occurring despite falls in stock prices. Real

GDP, which was basically flat in 1999, was

expected to expand by a healthy 4.25 per

cent in 2000, reflecting healthy export

volumes and some improvement in the terms

of trade coming from higher commodity

prices. These aggregate trends, however,

mask important differences across countries.

Several countries, such as Brazil, Mexico,

and Chile, were exhibiting more rapid

growth than other countries in the region,

particularly those where economic and

political uncertainties were most acute.

Growth in Brazil continued to recover, led

by exports, which surged as a result of the

depreciation in early 1999. As the year

progressed, rising consumer spending and

investment also contributed to the increased

economic momentum. Real GDP was

projected to rise by 4.0 per cent in 2000 and

4.5 per cent in 2001. Chile was also

experiencing a recovery, supported by

buoyant consumer spending. In both

countries, confidence has been maintained

by responsible macroeconomic policies,

including inflation-targeting regimes. In

Brazil, the government targeted for public

sector primary surplus of 3.25 per cent of

GDP, which was expected to be consistent

with a further decline in public debt relative

to GDP.

Mexico’s economy continued to expand at a

healthy pace, as it has been doing since

1995, backed by prudent monetary policy, as

well as higher oil prices, rapid growth in the

United states, buoyant consumer spending,

and healthy demand for investment goods.

Growth was forecasted to accelerate to

almost 6.5 per cent in 2000 before falling

back slightly in 2001, while inflation was

projected to continue to decline as monetary

policy was tightened. Higher oil prices were

supporting the external position and the

fiscal policy.

ANNUAL REPORT 2000 WORLD ECONOMIC CONDITIONS

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In Argentina, the economy was slowly

recuperating from the severe recession of

1999. This should continue in the coming

year in the absence of any external shocks.

Early in the year, the authorities introduced

a fiscal package that reduced planned

government outlays to minimise the

overshoot compared to the targeted deficit.

This helped moderate concerns in

international capital markets about fiscal

slippages, although on average financial

conditions remain tighter than in the latter

part of 1999. Against these headwinds real

GDP was set to grow at around 2 per cent in

2000 and the current account deficit was

anticipated to decline significantly.

Continued structural reform in the fiscal area

remain a high priority, including passing

laws tightening tax administration,

modifying revenue sharing arrangement

with provinces, and reforming the social

security system.

The Andean region, outside of Chile and

Peru, was particularly hard hit by 1998-99

recession. Activity was expanding again in

2000, but political uncertainties was slowing

progress on needed reforms and created

pressures to relax macroeconomic policies.

Business confidence remained weak in

Colombia, in part due to continuing internal

armed conflict, and the currency fell to

record lows against the U.S dollar. In

Venezuela the fiscal benefits of higher oil

prices were partially offset by increased

spending.

1.2.3 The Middle East and Africa

During the 1999-2000 period, the rebound in

world oil prices as well as the increases in

OPEC oil production quotas boosted

economic activity and prospects for most of

the oil-producing countries of the region.

The rise in oil prices and oil output led to

stronger fiscal and external balances in these

countries and also improved confidence and

greater domestic demand. Many of the non-

oil-producing countries of the region,

however, were faced with substantial terms-

of-trade losses as export prices of non-fuel

commodities and other primary goods

remained generally depressed, particularly

in real terms, while oil import prices rose

continuously.

Nonetheless, the upward trend in growth in a

number of these countries in 1999 and 2000

was due to the macroeconomic policies and

reforms that have made economic activity

more broad based and allowed these

countries to benefit from stronger export

market growth.

In the Middle East, economic growth among

the Gulf oil exporters was projected to turn

positive in 2000 and remain so in 2001.

Despite the improved growth prospects, as

well as external and fiscal balances, many of

ANNUAL REPORT 2000 WORLD ECONOMIC CONDITIONS

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these countries are pressing ahead, albeit

sometimes slowly, structural reforms to

boost the non-oil private sector that were

initiated when much slower oil prices

threatened macroeconomic stability. For

example, in Saudi Arabia, the government

has been restructuring and corporatising the

telecommunication and utility sectors to

make them more attractive to private

investment, as well as revising laws and

regulations to improve the business

environment and attract foreign investment

and expertise.

Annual output growth in Africa was

projected at 3 ½ percent in 2000, rising to 4

½ percent in 2001, spurred by rebounds in

South Africa and oil-exporting countries as

well as continued strength in some of the

smaller economies. In South Africa, the

continent’s largest economy, the economic

recovery, while still fragile, was gaining

momentum, with output on track to grow 3

to 4 percent in each of the next two years.

The rebound has been supported by a

strengthening of public finances,

improvements in external competitiveness,

and the expansion in world output. The rand

has come under some pressure since the

beginning of 2000 year largely as a result of

the fallout of the turbulence in Zimbabwe

and decreased relative bond yields, but

progress continued to be made in reducing

the net open forward position of the Reserve

Bank, which has helped reduce the risks

premium on South African investment and

boost economic activity. Improvements in

productivity growth have helped dampen the

potential inflationary impact of the

economic recovery. Nevertheless, some

cost-cut pressures have been evident as a

result of the depreciation of the rand, and

flood-related surge in food prices. The

Reserve Bank is being careful in ensuring

that these developments do not undermine

confidence in the inflationary-targeting

framework.

2. Currency movements

2.1 The euro

The dollar showed particular strength in

2000 against the euro, the common currency

of 11 member countries of Western Europe.

During the first three quarters of the year,

the euro continued to weaken, and by late

October had fallen to a low of just above 82

cents, nearly one-third below its value when

it was introduced in January 1999. The

euro’s decline against the dollar through

most of the year, according to market

analysts, appeared to be due mainly to the

vigorous growth of real GDP and

productivity in the US. In September, a

concerted intervention operation by the

monetary authorities of G-7 countries,

including the US, was undertaken at the

request of European authorities to provide

support for the euro. The European Central

ANNUAL REPORT 2000 WORLD ECONOMIC CONDITIONS

- 14 -

Bank also made intervention purchases on

several occasions acting on its own. Late in

the year, the euro changed course and started

to move up strongly, reversing over half of

its decline witnessed earlier in the year.

This recovery of the euro against the dollar

appeared to reflect mainly a market

perception that, while growth was slowing

in both Europe and the US, the slowdown

was much sharper in the latter. For the year

as a whole, the dollar appreciated, on a net

basis about 7.0 per cent against the euro.

3. Trade and investment

3.1 The World Trade Organisation

According to an assessment by the director-

general of the World Trade Organisation

(WTO), the institution for trade and global

trade in general has been practically good in

2000. One year on from the protest and

anger of the Seattle summit, WTO was

starting to function effectively and fairly as

a forum where 140 governments get together

to negotiate rules, promote freer trade and

provide a transparent and predictable

framework for business. Freer trade means

faster economic growth, cheaper imports

and more choice for consumers. The

Organisation also help countries to settle

trade disputes.

In the first half of 2000, world trade rose by

14 per cent, four times faster than in 1999.

Asia’s exports rose by around a quarter.

Imports from the five Asian developing

countries most affected by the financial

crisis in 1997-98 rose above their pre-crisis

levels. Latin America’s exports rose by

about 20 per cent, the United States by 14

per cent. The WTO estimates that world

trade would rise by 10 per cent in 2000 as a

whole, as fast as in the best years of the

1990s.

At the WTO itself, progress has been made

on at least five issues. First, negotiations

have been launched on agriculture and

services, which together account for over

two-thirds of the world economy. The

world has seen a fall in food prices,

telephone calls and better financial services

and a spread of the internet. Liberalising

agriculture and manufacturing alone would

add over US$250 billion a year to the world

economy, according to the Centre for

Economic Policy Research in London. The

gains from services liberalisation, though

hard to quantify, could be even higher.

Secondly, the WTO has welcomed five new

members: Jordan, Georgia, Albania, Croatia

and Oman. Many more countries are about

to join. By far, the biggest is China, which

has concluded bilateral agreements with all

WTO members that requested one except

Mexico. The US Senate and House of

Representatives have both voted

convincingly for permanent normal trade

relations with China.

ANNUAL REPORT 2000 WORLD ECONOMIC CONDITIONS

- 15 -

Third, WTO is doing its upmost to help

developing countries get a better deal from

the world trading system. It has set up a

mechanism for dealing with their difficulties

in implementing the organisation’s

commitments. It has also worked through

an important package to help the poorest

countries. Twenty-seven richer countries,

including the United States and the 15

members of the European Union, have

offered to open their markets more.

Fourthly, the institution is involving all its

140 members in its work. It operates by

consensus, so every country – however

small – has a veto. Furthermore, it is using

the internet to keep its smaller members

better informed.

Finally, WTO is doing more to reconnect

itself with ordinary people everywhere.

Nearly all WTO documents are posted on its

website immediately.

The organisation is now ready to build on

2000’s achievements. The task as seen by

the director-general for the new year is to

broaden support for further multilateral

liberalisation.

3.2 China-US trade relations

Since the beginning of the year, with the

concern of top leaders and joint efforts from

both countries, China-US bilateral relations

have maintained a trend of stable

development. Bilateral economic and trade

relations have developed very fast with rapid

increase of China’s export to and import

from the United States. The two countries

reached a bilateral agreement in 1999 on

China’s joining the World Trade

Organisation (WTO).

According to statistics of the Chinese

customs, during the period from January to

October 2000, Sino-US bilateral trade

amount reached US$61.323 billion,

increasing by 23.4 per cent over the 1999

level. The toal amount of China’s export to

the US during the 10-month period was

US$43.367 billion, increasing by 27.2 per

cent whilst the total amount of China’s

import during the same period was

US$17.955 billion, rising by 15.1 per cent.

It is estimated that the total amount of

bilateral trade will set an all-time record and

reach about US$73.5 billion, accounting for

about 16 per cent of China’s total trade in

the whole year. The United States is

China’s second largest trading partner, and

China is the fourth largest trading partner of

the US.

Moreover, with the constant deepening of

reform and opening up and sustained

economic growth, the scale of US direct

investment in China has been growing year

after year. From January to November

ANNUAL REPORT 2000 WORLD ECONOMIC CONDITIONS

- 16 -

2000, China has approved 2,301 US

investment projects with a total contract

amount of US$7.326 billion. China has also

increased the establishment of companies in

the US. During the same period, 37 Chinese

funded enterprises have been approved with

a total amount of investment reaching

US$70.62 million.

Experts of foreign economic relations in

China are convinced that economic and

trade cooperation between China and the US

has great development potential and is of

complementary nature and mutually

beneficial.

SECTION TWO

Highlights of the Seychelles Economy

Overview

Despite yet another tough year, the

Seychelles economy continued to weather

the storm in 2000. Most indicators of real

GDP growth point to a slowdown as

industries once again struggled to cope with

the foreign exchange shortage. The

situation was not helped as inflows through

the commercial banks declined. Overall,

however, the signs were that there was a

notable degree of consolidation as the

budget deficit was reduced further and

liquidity growth slowed down.

No firm real GDP figures was yet available

at the time of publication, however, Central

Bank estimates based on a survey of

industries and that of the Management &

Information Systems Division (MISD)

suggest that growth in real output stood at

around 1.4 per cent.

Despite the fall in foreign exchange inflows,

as measured by commercial bank receipts,

the balance of payments position improved

significantly compared to the previous year,

mostly on account of a sharp improvement

in the current account.

Whilst growth in GDP output far from

achieved its full potential there were signs of

growth in some areas of economic activity

as reflected by an increase in sectoral output

growth.

For the year 2000, GDP is estimated at

R3450.4 million (nominal terms). A major

boost to income growth has been the tourism

industry, as both tourism arrivals and

income increased relative to the previous

year. Other sectors that achieved important

growth were in ‘electricity & water’,

‘building and construction’ and

‘telecommunications’.

- 17 -

ANNUAL REPORT 2000 HIGHLIGHTS OF THE SEYCHELLES ECONOMY

-18 -

Whilst a drop would have been preferable, it

was nonetheless encouraging to note that

though it remained on the high side at 6.3

per cent, the inflation rate remained

unchanged in 2000. There were however,

some marked changes in how the prices

moved during the year. There was a

slowdown in import prices compared to the

previous year, down from 10 per cent to

only 4.4 per cent. However, in respect of

local prices there was an increase in the rate

of change from 4.4 per cent to 7.2 per cent,

showing a movement from import prices

into local prices.

The budget deficit was estimated at 9.9 per

cent of the estimated nominal GDP for the

year, down from 11 per cent in 1999. In

monetary terms, the deficit narrowed by

R5.7 million to R342 million. The

improvement in the fiscal position compared

to 1999 resulted mostly from a decline in its

expenditure, with all major headings of

expenditure – current and capital outlays;

and net lending, recording reduced

expenditure relative to their budgeted levels.

The improved fiscal performance had a

positive spin-off effect on the monetary

sector as the lower demand for financing

translated into an abatement of liquidity

growth. Furthermore, the positive outcome

on the monetary side also reflected the

manner in which the government financed

its requirements in 2000 compared to the

previous years. It would be noted that at the

end of 1999, the government introduced a

limit on how much it borrows from the

Central Bank as advances, thus reducing the

monetisation process of the deficit. This

commitment to limit monetisation of

government deficit was announced by the

Finance Minister - Vice-President James

Michel in his budget address for 2000. In

2000, the government switched to the

commercial banks and the non-financial

sector for the bulk of its financing

requirements through the issues of

government paper (treasury bills, treasury

bonds & government stocks). This had a

direct impact on the growth of money

supply, which slowed down from 19 per

cent in 1999 to only 8.2 per cent in 2000.

There were no major changes in interest

rates during 2000. The two rates that are

under the ambit of the Central Bank, the

minimum savings rate and that of the

maximum lending rate remained at 3.0 per

cent and 10.0 per cent respectively. In terms

of the interest on time deposits, most

instruments registered declines in their

respective rates. Interest on treasury bills

remained on the tap system and the yields

stood at 4.502 per cent, 4.995 per cent, and

5.496 per cent for the 91-day, 182-day and

365-day bills respectively.

ANNUAL REPORT 2000 HIGHLIGHTS OF THE SEYCHELLES ECONOMY

-19 -

As already noted above, the year under

review saw an improvement in the external

position of Seychelles as indicated by the

balance of payments (BOP) estimates for the

year. Balance of payments figures (recorded

on a commitment basis) for 2000 show an

overall balance surplus of R109 million.

This represented an increase of R130 million

or 596 per cent relative to last year. This

significant improvement in the external

position of the economy was attributable

mainly to the current account, as the deficit

was reduced to R295 million, down from

R645 million in 1999.

In terms of the rate of exchange between the

Seychelles rupee and that of other

currencies, the rupee remained pegged to the

Seychelles Trade and Tourism Weighted

Basket, the peg introduced in May 1996. As

regards the movement of the local currency

vis-à-vis the major currencies, there was

somewhat a volatile fluctuation, which

ranged between negative 7.9 per cent and

plus 12 per cent.

Activity in the offshore sector managed by

the Seychelles International Business

Authority (SIBA) was significantly more

positive during the year under review. The

year was highlighted by the incorporation of

1.351 IBCs and one new trust, which

brought the total since the operations started

to 6, 159 IBCs and 21 trusts. SIBA also

issued three new SITZ licences.

SECTION THREE

Financial Survey

1. Overview

There were significant improvements in

the movements in the key monetary

indicators. The authorities would have

been encouraged to observe a marked

slowdown in liquidity and credit growth.

For the year as a whole, liquidity growth,

as measured by the movements in M2(p),

was only 8.2 per cent, down from 19 per

cent in 1999. As for credit, it grew by 10

per cent compared to 16 per cent over the

year earlier. This notable slowdown in the

pace of both these aggregates during the

year was helped by the strong government

commitment towards budget

consolidation.

During 2000, the government managed to

curb its fiscal deficit further and at the

same time financing that deficit in a less

expansionary manner, through the sale of

government paper rather than have

recourse to Central Bank advances.

Therefore, the switch from Central Bank

borrowing in favour of commercial bank

funding was a key factor in to curbing

monetary growth. During the year, the

government issued two new bonds with

authorised limits of R200 million and

R300 million respectively. As commercial

banks are the main investors in those

instruments, their lending to the

government increased during the course of

the year, albeit at a much slower pace, as

the lower fiscal deficit reduced

Government’s demand for financing.

However, despite these encouraging

developments outlined above, the foreign

exchange difficulties continued to be a

major concern for the authorities. Despite

- 20 -

ANNUAL REPORT 2000 FINANCIAL SURVEY

- 21 -

not putting new measures in place in the

year under review, the government has

indicated that it would be more vigorous in

its approach in the coming year towards

this problem.

As regards interest rates, there were no

changes to the level of interest rates.

Whilst the two interest rates set by the

Central Bank, namely the savings rate and

the maximum lending rate remained

unchanged, there was a general decline in

the market-determined rates, which are

mostly time deposits.

2. Monetary Policy Instruments1

Central banks use monetary policy

instruments to meet certain objectives and

in most cases, aiming to attain an

environment of stable and low inflation.

However, in Seychelles, the Central Bank

uses such instruments mostly to achieve a

manageable level of liquidity; to manage

foreign currency flows; and to fine-tune

interest rates.

2.1 Interest rate floor

As already noted, there was no change in

the minimum statutory interest rate floor

and the maximum lending rate during

2000. The saving rate remained at 3.0 per

cent per annum, and the maximum lending

rate was at 10.0 per cent per annum

throughout the year.

2.2 Minimum reserve requirement

The minimum reserve ratio, which is the

percentage of its liabilities that a

commercial bank is required to hold with

the Central Bank, remained unchanged at

2.5 per cent during the year. All banks

were able to maintain the ratio.

2.3 Local assets ratio2

The local asset ratio is the instrument that

is used by the Central Bank to influence

liquidity at commercial banks. All banks

operating in Seychelles were able to meet

this requirement, which since September

1998 was set at a minimum of 70 per cent.

__________________________________ 1 The minimum reserve requirement is a minimum ratio of cash reserves to eligible deposits that commercial banks are required to hold at the Central Bank. The higher is this ratio, the lower is the money multiplier, and thus the monetary impact of new injections of liquidity. The minimum reserve requirement was set at 20 per cent on 16 November 1992. As from 15 September 1998, this ratio was lowered to 2.5 per cent (see Section Eight in this report for further details). 2 With effect from 15 September 1998, the local assets ratio was raised from 50 per cent to 70 per cent.

ANNUAL REPORT 2000 FINANCIAL SURVEY

- 22 -

2.4 Central Bank advances to

banks3

Central Bank advances are available to

commercial banks to allow them to meet

shortfalls in liquidity. During 2000, total

advances to the commercial banks

increased further, rising by R167 million

or 53 per cent relative to the previous year.

Out of the R485 million disbursed, R463

million was repaid during the period,

leaving an average outstanding stock of

R6.1 million. The high level of advances

during the year reflected the tight liquidity

positions that banks experienced at times,

particularly towards the end of the year,

when the level of transactions by

economic agents tended to rise faster

(transactions demand for money).

2.5 Open market operations4

Open-market operations is one of the

instruments that a Central Bank can use to

regulate the degree of liquidity in the

economy. Though it has been used in a

limited way in Seychelles in the past, since

last year, this strategy has become more

prominent to control the high level of

liquidity in the Seychelles economy. With

the commitment of the government to

reduce the monetisation of its deficit, by

on one hand, limiting the amount it

borrows from the Central Bank, and on the

other, by issuing securities through the

Bank, it has help to reduce the monetary

growth significantly in 2000. During the

year, the government issued two new

treasury bonds with limits of R200 million

and R300 million.

3. Money Supply

Also in 2000, liquidity growth, as

measured by the broad money aggregate

M2(p) increased by only 8.2 per cent,

which represented a decline of 11 per cent

relative to last year, when it grew by 19

per cent (Chart 3.1). This significant

slowdown in money growth in the

economy could be reviewed as a

welcoming development as it set the stage

for further stabilisation, not only in

liquidity, but also in other main economic

indicators. It is also the first time since

1987 that money growth has been below

the 10 per cent mark.

________________________________________

3 This is the sole standing facility offered by the Central Bank of Seychelles. Since September 1993 the rate on advances has been set at 50 basis points above the average of the last tender rate, rounded to 1/8 of 1 per cent. 4 Open market operations are purchases/sales of financial securities by Central Bank in the open market to regulate the money supply. Such instruments frequently used to mop up excess liquidity. The securities involved can be both short and long term.

ANNUAL REPORT 2000 FINANCIAL SURVEY

- 23 -

Chart 3.1. Growth rates of the money supply aggregates for 1995 to 2000

-40.0

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

1995 1996 1997 1998 1999 2000

Years

Per

cen

t

M2(p) M2 M1 Pipeline deposits

A more detailed analysis of the

deceleration in the pace of the money

growth showed that it stemmed from both

domestic and external factors, with the

latter being influenced by a decline of

R126 million in net foreign assets. From

the domestic side, the pace of money

supply growth declined due to the

moderate growths in bank deposits and in

currency with the public.

This was reflected in the slower growth

rate of M2, which consist of M1 (currency

with public plus demand deposits) and

quasi-money (time deposits plus savings

deposits), compared to the previous year.

M2 grew by 9.1 per cent compared to 22

per cent in the preceding year, influenced

by a 6.2 per cent increase in M1 and an 11

per rise in quasi-money. Last year, these

aggregates grew by 37 per cent and 14 per

cent respectively.

The significant abatement in the growth

rate of M1 was caused by both its

components - "demand deposits" and

"currency with public". They grew at a

considerably slower pace than was

observed in the preceding year. During

2000, "demand deposits" grew by R50

million or 6.1 per cent whilst "currency

with public" rose by R16 million or 6.6

per cent. Of the increase of "demand

deposits", the private sector accounted for

82 per cent, as demand deposits of the

parastatal sector rose by R8.0 million only.

ANNUAL REPORT 2000 FINANCIAL SURVEY

- 24 -

Table 3.1 Monetary Survey;1 1995-2000

1995 1996 1997 1998 1999 2000

(R million) Net Foreign Assets2 107.4 93.3 49.9 -87.0 -68.9 -194.6 Central Bank (net) 109.6 86.7 62.4 -57.9 -51.0 -132.3 Commercial banks -2.2 6.6 -12.5 -29.1 -17.9 -62.3 Domestic Assets 1700.5 1982.6 2291.7 2998.5 3442.7 3864.3 Claims on private sector 275.1 314.6 387.6 460.0 503.5 565.6 Claims on parastatals 99.6 75.9 71.8 55.9 42.6 20.2 Claims on government (net) 1325.8 1592.1 1832.4 2482.7 2896.7 3278.5 Total Assets 1807.9 2075.9 2341.6 2911.5 3373.8 3669.7 Money Supply, M2(p) 1641.3 1847.6 2205.9 2567.8 3056.9 3306.5 Money Supply, M2 1339.8 1530.5 1987.8 2389.5 2908.9 3174.2 Money, M1 350.8 473.8 648.7 780.6 1071.2 1137.5 Currency with public 146.8 163.9 192.2 206.4 247.9 264.4 Demand deposits 204.0 309.9 456.5 574.2 823.3 873.1 (of which parastatals) 77.9 80.1 117.8 124.5 174.4 182.7

Quasi-money 989.0 1056.7 1339.2 1608.9 1837.7 2036.7 Time deposits 583.5 699.5 926.6 1123.9 1253.6 1394.6 (of which parastatals) 57.5 60.8 107.0 119.0 126.5 177.5 Savings deposits 405.5 357.3 412.5 484.9 584.1 642.7 Pipeline deposits 301.4 317.1 218.0 178.3 148.0 132.3 Other items, net 166.6 228.3 135.7 343.7 316.9 363.2 Figures do not necessarily add up due to rounding. 1 End-of-period data. 2 Excludes government balances abroad.

A further decline in the rate of growth in

quasi-money was observed during the

year, reflecting a second consecutive year

that the rate of increase in this aggregate

has slowed down. It grew by 11 per cent

compared to 14 per cent in 1999 and this

influence by both its components, namely

savings deposits and time deposits.

Savings deposits grew by R59 million or

10 per cent during the year compared to

R99 million or 20 per cent in 1999. Time

deposits, the less liquid component of

money supply, increased by almost the

same rate as in the preceding year, rising

by 11 per cent, which was 1.0 per cent

below last year's. Private sector time

deposits, which continue to account for the

bulk of time deposits, grew by R89 million

or 7.9 per cent whilst parastatal sector

deposits grew by R51 million or 40 per

cent relative to 1999.

ANNUAL REPORT 2000 FINANCIAL SURVEY

- 25 -

The other principal component of broad

money M2(p) is pipeline deposits. During

2000, clearing of pipeline deposits

continued with a reduction of R16 million

or 11 per cent. This decline however, was

significantly less than the R30 million

cleared in 1999. This year's outcome

reflects the further decline in the amount

of foreign exchange through entered the

banking system, from R818 million in

1999 to R755 million in 2000.

4. Net Foreign Assets

Seychelles’ net foreign asset position

deteriorated significantly during 2000,

falling by 183 per cent relative to the

previous year. In aggregate, the country's

net foreign assets at the end of the year,

which comprises Central Bank and

commercial bank reserves, stood at

negative R195 million, compared to

negative R69 million at the end of 1999.

This unfavourable outcome in 2000 was

attributed to declines in both the Central

Bank and commercial banks’ reserves.

The central bank’s reserves fell by R81

million whilst the net foreign reserve

position of the banking sector declined

from negative R18 million to negative R62

million.

5. Domestic Credit

5.1 Central Bank and commercial

bank credit

Domestic credit has been one of the

primary factors that affect monetary

growth in the Seychelles economy.

Therefore, limiting its growth generally

help contain the liquidity overhang. Since

1999, the authorities have put great effort

in that direction, which saw a reduction in

the growth of domestic credit from 29 per

cent in 1998 to 16 per cent in 1999. The

government has again succeeded in

reducing the pace of growth of credit

further, this time to 10 per cent (Chart

3.2).

Chart 3.2. Growth rates of credit of the banking system - 1995 to 2000

-60.0

-40.0

-20.0

0.0

20.0

40.0

60.0

80.0

1995

1996

1997

1998

1999

2000

Years

Per

cen

t

Total domestic creditCommercial bank creditCentral Bank - credit

ANNUAL REPORT 2000 FINANCIAL SURVEY

- 26 -

The two principal lenders in the economy,

namely the commercial banks and Central

Bank, influenced the decline in the rate of

growth in 2000. Total commercial banks’

credit expanded by R319 million or 10 per

cent compared to R450 million or 17 per

cent in 1999. Credit of the Central Bank

grew by R58 million or 9.2 per cent during

the year, compared to a rise of 11 per cent

in 1999.

Table 3.2

Credit;1/2 1995-2000 1995 1996 1997 1998 1999 2000 (R million) Total Credit 1879.1 2139.8 2473.0 3197.6 3712.8 4090.3 Commercial banks 1215.7 1349.4 1546.2 2622.6 3072.7 3391.5 Claims on private sector 275.1 314.6 387.6 460.0 503.5 565.6 Claims on parastatals 99.6 75.9 71.8 55.9 42.6 20.2 Claims on government 841.0 958.9 1086.9 2106.7 2526.6 2805.7 Of which: Dev. Fund Stocks (64.6) (68.6) (82.0) (89.1) (96.2) (100.7) Treasury bonds (205.4) (308.0) (326.1) (1130.7) (770.6) (903.6) Treasury bills (484.1) (471.9) (608.8) (832.2) (1621.6) (1777.1) Central Bank 663.3 790.5 926.8 575.0 640.1 698.8 Claims on government 663.3 790.5 926.8 575.0 640.1 698.8 Of which: Advances (452.4) (503.6) (923.2) (469.0) (623.9) (395.8) Treasury bonds (23.3) (23.4) (3.2) (0.05) (0.05) (300.7) Treasury bills (184.0) (259.9) (0.4) (106.0) (16.2) (2.3) Figures do not necessarily add up due to rounding. 1 End-of period data. 2 All figures for stocks, bonds and bills are at cost value. Unlike the Central Bank, which lends only

to the Government, commercial banks also

lend to the private sector and parastatals.

Analysing the different movements in

these portfolios of debt Chart 3.3, it was

observed that there was an increase in

credit extended to the private sector, rising

from 9.5 per cent in 1999 to 12 per cent in

the current year under review. For the

government, there continued to be a

further slowdown in its growth, falling to

11 per cent compared to a 20 per cent rise

in the previous year. This slowdown in

the growth of government claims from the

commercials reflected the lower than

forecasted deficit during the year, which

thus reduced the need to borrow. The

lower demand for funds by the

government has also released funds to

other sectors, namely to the private sector,

which has seen an increase in its growth as

described above. In terms of the

parastatals, there was a further decline,

this time by 53 per cent relative to 1999.

ANNUAL REPORT 2000 FINANCIAL SURVEY

- 27 -

Chart 3.3. Growth rates of credit held by the economic agents - 1995 to 2000

-60.0

-40.0

-20.0

0.0

20.0

40.0

60.0

80.0

100.0

120.0

1995 1996 1997 1998 1999 2000

Years

Per

cen

t

Commercial bank - parastatal Commercial bank - private

Commercial bank - government Central Bank - government

Credit from the Central bank, as explained

above is extended only to the government.

During 2000, there was a reduction in the

rate of growth of credit to 9.2 per cent

(Chart 3.3). As with the commercial

banks, the reduced growth in credit from

the Central Bank in 2000 reflects the lower

deficit achieved by the government and

also the fact that a significant portion of

the budget-financing requirement was met

from funds from overseas. As such the

government had less recourse to the

domestic market.

Despite the different movements in credit,

the government remains the largest

borrower in the economy with the bulk of

its debt portfolio being in the form of

commercial bank claims, primarily in

holdings of securities.

5.2 Sectoral Development of Credit

to Private Sector and

Parastatals

Gross commercial banks’ loans and

advances extended to the private sector

and parastatals grew by 7.3 per cent during

2000. Mixed developments were once

again observed in the distribution of the

commercial banks’ loans and advances to

the various sectors of the economy.

Individually, some sectors registered

increases whilst others registered

decreases. The “agriculture and fishing”

sector sustained the greatest cut; loans and

advances to that sector fell by R15 million

or 56 per cent. This fall brought down its

total share of credit to 2.0 per cent for the

year. This decline was mainly due to

loans taken under the “refinance scheme”.

Most loans under the scheme, which is a

five-year period, were nearing expiry.

ANNUAL REPORT 2000 FINANCIAL SURVEY

- 28 -

Table 3.3

Commercial Banks – Loans and Advances To Non-Government Sector by Economic Sectors;1 1996-2000

1996 1997 1998 1999 2000 1996 1997 1998 1999 2000 (R million) (per cent) Total Advances 338.3 459.3 515.8 546.0 585.8 100.0 100.0 100.0 100.0 100.0 Agriculture & fishing 29.8 26.7 26.6 26.6 11.6 8.8 5.8 5.2 4.9 2.0 of which: Refinance scheme 18.0 18.8 18.3 18.8 3.1 5.3 4.1 3.5 3.4 0.5 Manufacturing 10.4 9.0 33.8 3.4 4.8 3.1 2.0 6.6 0.6 0.8 of which: Refinance scheme 8.0 7.0 29.0 0.0 0.0 2.4 1.5 5.6 0.0 0.0 Construction 13.1 15.8 22.9 20.6 29.8 3.4 3.3 3.4 4.4 3.8 Transportation 21.0 14.6 8.6 4.8 4.7 6.2 3.2 1.7 0.9 0.8 Tourist facilities 80.5 82.2 75.1 87.4 107.7 23.8 17.9 14.6 16.0 18.4 Wholesale & Retail trade 55.3 64.0 58.8 51.3 38.7 16.3 13.9 11.4 9.4 6.6 Other businesses 50.3 69.8 81.9 104.6 99.5 14.9 15.2 15.9 19.2 17.0 Private households & Non-profit organisations 77.8 177.3 208.2 247.3 288.9 23.0 38.6 40.4 45.3 49.3 of which: Mortgage loans 29.3 93.0 80.5 114.2 156.6 8.7 20.2 15.6 20.9 26.7 Figures do not necessarily add up due to rounding. 1 End-of-period data.

The most notable increase was observed in

credit granted to the construction sector.

Loans and advances made to that sector

rose by R9 million or 45 per cent during

the year to bring its share of total loans to

5.1 per cent. Loans and advances to the

transport sector fell further despite only by

1.6 per cent whilst the most significant

change occurred in respect of loans and

advances to the other business sector.

During the year, loans and advances to

other businesses fell by 4.9 per cent

compared to an increase of 28 per cent in

1999. This decline brought down its

percentage share of total credit by 2.2

percentage points to 17 per cent, in

relation to 1999. The other significant fall

was registered in respect of credit to the

trade sector; that sector lost 2.8 per cent of

its share of total credit by being granted 25

per cent less credit than the preceding

year.

However, the “manufacturing” and

“private household” sectors benefited from

42 per cent and 17 per cent increases in

credit allocated to them. During the year

2000, the tourism sector was granted 23

per cent or R18 million more credit than in

the preceding year. This growth brought

its percentage share of total to 18 per cent.

5.3 Development Bank Credit5

The Development Bank of Seychelles

(DBS) provides credit to mostly small to

medium sized enterprises, which generally

cannot obtain advances from commercial

banks. Data provided to the Central Bank

by DBS showed that total advances grew

during 2000, depicting an increase in

______________________________ 5 From 17 January 1994, the Development Bank of Seychelles provided credit to Seychellois investors at a concessionary rate of 12 per cent per annum. To qualify as ‘Seychellois’, Seychellois nationals must own at least 50 per cent of the investment. The minimum contribution for the investor was raised to 25 per cent from 15 per cent at the same occasion. The Development Bank does not provide credit for purposes of working capital. Previously it had lent at 12 per cent per annum for loans in excess of R50,000, rates varied between 9 per cent and 11 per cent depending on economic sector. This rule had been implemented on 17 July 1991.

ANNUAL REPORT 2000 FINANCIAL SURVEY

- 29 -

economic activity in the small business

sector. Credit from the bank rose by R18

million or 8.8 per cent in relation to the

preceding year. This growth compares

favourably to the fall of R3.9 million or

1.9 per cent in 1999. Increases were

recorded in the “fishing sector” and that of

“other services”, which grew by R12

million and R17 million respectively.

Nevertheless, there were decreases in

some areas. Loans granted to the industry

sector fell by a significant R2.3 million or

11 per cent whilst loans to the tourism

sector fell by R8.1 million or 8.2 per cent.

Credit to the agricultural sector also fell,

decreasing by R0.6 million or 8.8 per cent.

Table 3.4 Loans by Development Bank by Economic Sectors;* 1996-2000

1996 1997 1998 1999 2000 1996 1997 1998 1999 2000 (R million) (per cent) Total Advances 181.0 196.0 209.2 205.3 223.3 100.0 100.0 100.0 100.0 100.0 Agriculture 4.9 6.4 7.3 6.8 6.2 2.7 3.2 3.5 3.3 2.8 Fishing 24.5 21.7 23.9 9.5 21.2 13.5 11.1 11.4 4.6 9.5 Industry 24.4 27.1 25.5 20.5 18.2 13.5 13.8 12.2 10.0 8.1 Tourism 94.7 103.8 99.4 98.0 89.9 52.3 52.9 47.5 47.7 40.3 Other services 32.6 37.2 53.1 70.5 87.8 18.0 18.9 25.4 34.4 39.3 Figures do not necessarily add up due to rounding. * End-of-period data.

6. Commercial Bank Liquidity

The credit/deposit ratio, which measures

the liquidity position of the commercial

banks, rose slightly during the year. After

registering a decline of 3.7 per cent in the

preceding year, the ratio grew by 1.6 per

cent to stand at 108.9 at the end 2000

(Table 3.5).

Table 3.5

Liquidity Indicators of Commercial Banks;1 1995-2000 1995 1996 1997 1998 1999 2000

(R million) Credit 1085.3 1181.4 1546.2 2622.6 3072.7 3391.5 Deposits 1174.1 1311.5 1958.9 2364.0 2864.5 3114.3

(per cent) Credit-deposit ratio 92.4 90.1 78.9 110.9 107.3 108.9 Figures do not necessarily add up due to rounding. 1 End-of-period data.

ANNUAL REPORT 2000 FINANCIAL SURVEY

- 30 -

As shown in Chart 3.4, there were

fluctuations in the ratio, but the overall

trend was upwards, reflecting a decline in

the liquidity position of banks. Over the

year, however, the degree of fluctuation

ranged between 106.7 and 108.7, which

was about the same as last year.

Compared to last year, movements in

deposits were more pronounced than that

of credit, as shown in Chart 3.5.

7. Interest rates6

There were no changes to the Central

Bank fixed interest rates during the year

under review. The minimum statutory

interest rate floor, the savings rate,

remained at 3.0 per cent and the maximum

lending rate stood at 10.0 per cent. There

was also no change in the yield of

government on treasury bills, as all three

bills (91-day, 182-day and 365-day)

continued to be issued on tap. Chart 3.6

shows the level of the most important

interest rates, whilst Table 3.6 shows all

interest rate levels.

Chart 3.6. Level of interest rates

0.00

5.00

10.00

15.00

20.00

1995 1996 1997 1998 1/ 1998 2/ 1999 2000

Years

Per

cen

t

Savings rate>6 months < 12 monthsVolume weighted average lending rate91-day treasury bill

Chart 3.4. The movement in Credit/Deposit Ratio in 2000

105.0

106.0

107.0

108.0

109.0

110.0

Jan

Feb

Mar

Apr

May Jun

Jul

Aug

Sep Oct

Nov

Dec

Months

Cre

dit

/dep

osi

t ra

tio

Chart 3.5. The movement in commercial bank credit and deposits in 2000

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

Jan

Feb

Mar

Apr

May Jun

Jul

Aug

Sep Oct

Nov

Dec

Months

Per

cen

tag

e

Growth in Credit Growth in deposits

_____________________________________________

6 (Comparison of the changes in interest rates in 1999 are made with Oct-Dec 1998)

ANNUAL REPORT 2000 FINANCIAL SURVEY

- 31 -

As regards the market-determined interest

rates, there was again a general decline

during 2000. Nevertheless, the

movements in these rates were less

pronounced than they were in 1999. All

the rates on time deposits, except for the

rate on deposits with maturity between 3

months and 6 months and the deposits

with maturity above twelve months, fell on

average relative to 1999.

The rate on deposits maturing within 7

days fell by 14 basis points to reach 2.79

per cent at the end of the year, this after

registering a rise of 18 basis points in

1999. Interest on deposits with maturity

between 7 days and 3 months fell by 36

basis points to average 4.77 per cent. The

most significant decline was recorded in

respect of the rate on deposits with

maturity between 6 and 12 months, which

fell by 76 basis points relative to the

previous year, to reach 4.29 per cent. The

only increase as stated above was on

deposits with maturity between 3 months

and 6 months, which rose by only 5 basis

points whilst the rate on deposits which

maturity exceeds 12 months rose by a

negligible 1 basis point.

Table 3.6

Interest Rates;1/2 1995-2000 1995 1996 1997 1 9 9 8 1999 2000 Jan-

Sep Oct-Dec

(per cent) Volume-weighted average deposit rates: Savings rate 8.00 8.00 8.00 7.11 3.00 3.00 3.00 Time deposits 7 days 8.74 8.36 7.86 7.11 2.75 2.93 2.79 > 7 days < 3 months 9.22 9.90 9.20 8.03 6.03 5.13 4.77 > 3 months < 6 months 9.48 9.44 9.11 8.77 6.94 4.71 4.76 > 6 months < 12 months 10.65 10.50 9.91 9.31 7.64 5.05 4.29 > 12 months 10.70 11.30 8.46 7.18 5.23 5.13 5.14 Volume-weighted Average lending rate 15.76 16.21 14.88 14.88 12.92 12.01 11.45 91-day treasury bill rate 12.15 11.33 10.50 10.50 4.50 4.50 4.50 1 Averages of quarterly data, compiled on an end-of-period basis, whereas that of the 91-day bill rate is the average of monthly data, compiled on an end-of-period basis. 2 With the exception of the 91-day bill rate, all other figures differ to the 1994 Annual Report due to revision.

SECTION FOUR

Government Finance

1. Overview

Since 1999 when the government renewed

its commitment to consolidate its finances,

there has been a sustained reduction in the

budget deficit and a marked reduction in

monetisation of deficits. 2000 saw a

further improvement in this regard as the

government budget deficit narrowed

further. From R602 million in 1998 the

deficit was slashed to R348 million in

1999. Despite not to the same extent,

there was a further reduction in 2000 as

the year ended on a R342 million deficit

which was equivalent to 9.9 per cent of the

estimated GDP. (Chart 4.1) This also

compared favourably to the revised

budgeted deficit of R419 million.

Chart 4.1. Actual Government finance outcomes for 1998 to 2000

-1000-500

0500

1000150020002500

1998 1999 2000

Years

R m

illio

n

Overall balance Total Receipts Total outlays

- 32 -

ANNUAL REPORT 2000 GOVERNMENT FINANCE

- 33 -

The R342 million deficit was the result of

expenditure, which totalled R1,675 million,

exceeding revenue of R1,333 million. In

relation to budget, it was the shortfall in

receipts that proved the determining factor in

explaining the overall outcome. Total revenue

was R195 million below budget, which

significantly outweighed the savings in total

outlays, particularly in net lending and current

expenditure. Net lending posted a saving of

R191 million whilst current outlays were in

aggregate R82 million short of expectations.

Whilst capital expenditure recorded an

overrun, this was minimal, amounting to R1.9

million, on account of development grants.

Whilst overall development grants came in

some R41 million over budget, savings of R8.3

million and R31 million in “compensation for

land acquisiton” and “capital projects”

respectively helped contain the overall capital

spending.

Unlike in recent years, foreign loans were

the main source of finance for the

budgetary shortfall on a net basis. Net

foreign financing amounted to R461

million, with inflows of R501 million and

repayment of R40 million. From the

domestic market, the government raised

R8.5 million (net). The balance was made

up for by a R127 million increase in

government cash balances.

Compared to the previous year, the

shortfall in fiscal receipts over outlays

narrowed by R5.7 million. As already

noted, in 1999 the deficit stood at R348

million, which was 11 per cent of GDP.

The decline to R342 million was due

primarily to a cutback in government

expenditure as receipts were lower than in

the previous year. Provisional government

finance data shows that there was an

abatement of R113 million in total

spending compared to the 1999 level,

mainly on account of net lending.

Contrary to the positive developments on

the expenditure side, however, revenue

performed less encouragingly that last

year, falling by R107 million. This

reduction was attributable primarily to

lower current receipts. There were

nonetheless, improved performances in

certain categories of current revenue, most

notably in the collection of business tax,

which exceeded the 1999 level by R22

million.

ANNUAL REPORT 2000 GOVERNMENT FINANCE

- 34 -

Table 4.1 Government Budget; 1998- 2001

Summary

1998 1998 1999 1999 2000 2000 2001 Revised Revised Revised Budget Actual1 Budget Actual1 Budget Actual1 Budget

(R million)

Total Receipts 1379 1340 1484 1440 1528 1333 1405 Current receipts 1369 1312 1400 1400 1477 1283 1389 Of which: Trades tax [553] [575] [602] [577] [591] [578] [610] Transfers from Social Security [100] [66] [125] [77] [80] [80] [95] Business/income tax [161] [165] [182] [223] [205] [244] [219] Grants 10 28 84 41 51 50 16 Total Outlays 1692 1942 1822 1788 1947 1675 1650 Current outlays 1440 1380 1314 1352 1440 1358 1468 Appropriation items 1075 1025 1060 1019 1149 1083 1226 Of which: Ministries/departments [730] [707] [731] [705] [735] [712] [728] Social Security contributions [120] [120] [119] [119] [119] [119] [125] Current outlays to parastatals [37] [38] [32] [32] [33] [35] [71] Charges 364 355 254 333 291 274 242 Of which: Interest payments [338] [329] [243] [322] [280] [263] [231] Capital outlays 222 412 457 402 461 463 263 Net lending 30 150 52 33 46 -145 -80 Of which: Parastatals [28] [67] [22] [7] [17] [-47] [-80] Primary Balance2 25 -273 -95 -26 -139 -79 -14 Overall Balance -313 -602 -338 -348 -419 -342 -245 Financing 313 602 338 348 419 342 245 Foreign loans (net) -27 -27 47 -65 208 461 92 Domestic loans (net) 320 624 271 447 210 9 153 Cash movements 20 6 20 -34 0 -127 0 Memorandum Items: Amortisation of loans 227 245 227 245 849 876 390 Foreign loans 67 80 91 100 112 40 90 Domestic loans 159 164 758 776 278 604 589 Figures do not necessarily add up due to rounding. 1 These series are subject to audit and might be revised accordingly. 2 The primary balance is obtained by excluding interest payments from the overall balance. Source: Ministry of Finance

ANNUAL REPORT 2000 GOVERNMENT FINANCE

- 35 -

2. Revenue

For the fiscal year of 2000, total income -

current and grant receipts - amounted to

R1,333 million. This was R195 million or

13 per cent below forecast. The bulk of

this shortfall – 99 per cent - was due to

current revenue. Grant receipts, which

consist mainly of capital project grants,

came in at R50 million, only R1.4 million

below budget.

Looking in more details at the different

flows of current income for 2000, it was

observed that the primarily stream of

income was trades tax. During the year,

the government collected R578 million in

trades tax, followed by R244 million in

“income & business tax”. The

government also raised R126 million in

“administration fees and charges” and R80

million in transfers from the Social

Security Fund.

Table 4.2 Government Budget; 1998-2001

Revenue

1998 1998 1999 1999 2000 2000 2001 Revised Revised Revised Budget Actual1 Budget Actual1 Budget Actual1 Budget

(R million) Total Receipts 1379 1340 1484 1440 1528 1333 1405 Current receipts 1369 1312 1400 1400 1477 1283 1389 Transfers from social security fund 100 66 125 77 80 80 95 Trades tax 553 575 602 577 591 578 610 Income/business tax 161 165 182 223 205 244 219 Other indirect taxes 52 58 54 52 41 44 41 Fees and fines 84 77 81 93 87 84 96 Administration fees and charges

98

98

126

123

126

126

126

Rent and royalties 25 23 13 13 12 15 12 Income – public service 9 10 10 10 10 9 10 Dividends and interest 212 176 160 190 144 58 102 Reimbursements 43 35 45 32 26 38 36 Miscellaneous 31 30 2 11 156 5 42 Grants 10 28 84 41 51 50 16 Figures do not necessarily add up due to rounding. 1 These series are subject to audit and might be revised accordingly. Source: Ministry of Finance

Whilst trades tax continued to account for

the largest share of fiscal revenue, the

amount collected fell R13 million short of

the budgeted R591 million. The shortfall

ANNUAL REPORT 2000 GOVERNMENT FINANCE

- 36 -

was attributable principally to taxes on

locally manufactured goods and on

services. Those taxes fell below

expectations by R8.1 million and R4.9

million respectively. On the other hand,

revenue from taxes on direct imports was

virtually on target falling by only

R329,000. The main sources of tax on

direct imports were “mineral products”

(R122 million), “beverages, spirits &

vinegar” (R41 million) and “vehicles,

aircraft & vessels” (R27 million).

A comparison of trades tax inflows of

2000 with that of the previous year shows

that in the current year, revenue was only

R943,000 higher. Higher receipts of R2.0

million from taxes on services and R1.6

million from taxes on locally

manufactured goods explained this

increase, whilst the other source of trades

tax, namely taxes on direct import,

registered a decline of R2.7 million.

Contrary to trades taxes, revenue from

“income & business tax” was R39 million

or 19 per cent above the expected R205

million. This significant increase owed

primarily to the corporate sector from

which the government collected a total of

R244 million. In addition, the inflow in

the current period was R22 million higher

than in the previous year. This was the

fourth consecutive annual inflow increases

in respect of “income & business tax”.

These increases over those years represent

the rise in the number of businesses as

well as the better collection mechanism for

taxes put into place by the government.

The third most important inflow of income

in current receipts was “administration

fees and charges” from which the

government gained R126 million during

2000. This was nearly on target, falling

below budget by only R23,000.

Nevertheless, it was R3.4 million higher

than in 1999. Transfers from Social

Security Fund were exactly on target at

R80 million and this was R2.9 million

more than in the previous year.

Besides “income & business tax”, which

brought the government a significant

increase in its revenue, there were four

other components, namely

“reimbursements”, “other fees and fines,

excluding fishing licences”, “rents &

royalties” and “other indirect taxes” which

recorded better than anticipated outcome.

Their respective budget and actual data are

shown below.

Budget Actual Excess

(R m) (R m) (R m)

Reimbursements 26 38 12

Other fees & fines 50 58 8.2

Rents & royalties 12 15 3.8

Other indirect taxes 41 44 3.6

ANNUAL REPORT 2000 GOVERNMENT FINANCE

- 37 -

During 2000 inflows in respect of

“reimbursements” and “rents & royalties”

were R5.9 million and R2.7 million higher

than 1999, respectively, whilst those in

respect of “other indirect taxes” and

“other fees and fines” were below last

year’s levels, by R7.6 million and R1.6

million respectively.

The outcome in respect of other revenue

flows, namely “miscellaneous receipts”,

“dividends & interests”, “fishing licences”

and “income – public services”, were less

encouraging. Indeed, two of those

incomes were particularly influential in

explaining the overall shortfall in current

revenue. These were “miscellaneous

receipts” and “dividends & interests”

which fell by R151 million R86 million

respectively. The main factor explaining

the fall in “miscellaneous receipts” was

the lower than expected inflows in respect

of “sale of assets” for which the

government collected R1.7 million against

a forecast of R150 million. This reflected

in turn the failure to get the Housing

Ownership Scheme under way in 2000 as

the Government had anticipated. To a

letter extent there was also lower revenue

from “sale of equity holdings”, which

amounted to R1.9 million against the

expected R5.0 million.

For “dividends & interest”, the lower that

expected outcome came from lower

dividends from the petroleum company

SEPEC and also in the statutory transfers

from the Central Bank. Relative to the

previous year income from “miscellaneous

receipts” was R3.3 million higher than in

the previous year, however, “dividends &

interests” dropped by R132 million.

In respect of “fishing licences”, the lower

than expected income of R26 million

reflected mainly the 31 per cent reduction

in foreign licences fees. On the other

hand, income from public services fell

only marginally relative to budget, by

R0.6 million, amounting to R9.3 million.

A comparison with last year’s results

reveals that “fishing licences” were R7.1

million lower in 2000, whilst “income

public services” fell only marginally.

Relative to 1999, total receipts fell by a

significant R107 million, caused by a

decline of R117 million in current

revenue, which completely overshadowed

the rise of R9.1 million in grant receipts.

This decline in current inflows stemmed

predominantly from the lower than

expected revenue in respect of “dividends

& interest”, which as noted above was

R132 million below its 1999 level.

Nevertheless, it was encouraging to note

some notable increases in current revenue

despite the overall fall, notably in “income

& business tax”. This category of taxes

brought the government an additional R22

million relative to the previous year.

3. Expenditure

Government expenses amounted to R1,675

million, which represents a saving of R272

ANNUAL REPORT 2000 GOVERNMENT FINANCE

- 38 -

million or 14 per cent relative to the

budgeted R1,947 million. It was the

savings in current outlays and net lending

that explained this favourable

performance. The lower expenditure

under these two headings helped to

outweigh the slight overrun in capital

outlays.

3.1 Current outlays

Current spending, which totalled R1,358

million was R83 million or 5.7 per cent

below forecast. This outcome was

attributable to both its components namely

‘appropriation items’ and ‘charges’. Both

these categories fell below their respective

budgets, by R66 million and R17 million

respectively. Lower spending in respect of

appropriation items was attributable to

most items with the exception of current

outlays to parastatals, which overshot its

target by R1.2 million. The latter was

explained mainly by the higher than

budgeted outlays towards the Seychelles

Public Transport Corporation (SPTC).

The overall saving in ‘appropriation items’

was attributable to

“ministries/departments”, with all

ministries having contained their spending

well below budget. In total a saving of

R23 million was realized. The

government spent less than budgeted in

respect of “centralized payments”,

“pensions & gratuities” and “current

outlays on regulatory bodies”. These

items fell R34 million, R5.4 million and

R3.9 million below their respective

budgets. Other expenditure items, namely

contributions to the Social Security Fund

and Pension Scheme were both on target.

In terms of ‘charges’, positive outcome

relative to the budgeted expenditure was

due to lower spending in relation to

“public debt interest payments”, which fell

R17 million short of forecast, totalling

R263 million. Out of this total, R213

million represented domestic payments.

The reduced spending on public interest

payments reflected the lower deficit in

1999, which warranted less borrowing.

Current expenditure increased compared

to last year. From R1,352 million in 1999,

expenditure under this heading rose to

R1,358 million. This increase of R5.3

million or 0.4 per cent, was mainly due to

the rise of R64 million in the level of

spending in ‘appropriation items’, which

overshadowed the decline of R58 million

in ‘charges’. The higher level of spending

in ‘appropriation items’ was influenced by

the increased spending in relation to ‘other

appropriations’, which rose by R46

million relative to its 1999 level. On the

other hand, the fall in ‘charges’ reflected a

R59 million decline in “public interest

payments".

ANNUAL REPORT 2000 GOVERNMENT FINANCE

- 39 -

Table 4.3 Government Budget; 1999-2002

Expenditure

1998 1998 1999 1999 2000 2000 2001 Revised Revised Revised

Budget Actual1 Budget Actual1 Budget Actual1 Budget

(R million)

Total Budget Outlays 1692 1942 1822 1788 1947 1675 1765 Current Outlays 1440 1380 1314 1352 1440 1358 1625 Appropriation items 1075 1025 1060 1019 1149 1083 1306 Ministries/departments2 730 707 731 705 735 712 757 Tourism & Civil Aviation 57 53 51 47 44 42 72 Education 149 147 143 134 139 136 151 Health 143 141 141 141 135 133 140 Defence 55 56 60 61 63 62 64 Internal Affairs 60 58 61 60 66 65 68 Pension & Gratuities 34 32 31 37 44 38 38 Subventions 71 72 81 72 83 81 120 Regulatory bodies3 35 35 49 39 50 46 51 Parastatals 37 38 32 32 33 35 101 Social Security Contributions 120 120 119 119 119 119 131 Pension Scheme Contributions 7 7 7 7 7 7 7 Other appropriations4 113 87 91 81 161 127 222 Charges 364 355 254 333 291 274 319 Public debt interest 338 329 243 322 280 263 307 Other charges5 26 26 11 11 12 12 11 Total Capital Outlays 222 412 457 402 461 463 219 Development grants to parastatals 11 11 10 10 17 58 13 Land acquisitions 12 12 12 7 12 4 7 Capital projects 200 390 435 386 432 401 200 Net Lending 30 150 52 33 46 -145 -80 BTL advances – parastatals 28 67 22 7 0 -47 -80 BTL advances – others 1 80 29 26 28 -99 0 Capital subscriptions 1 0 1 0 1 0 0 Equity participation 0 3 0 0 0 0 0 Figures do not necessarily add up due to rounding. 1 These series are subject to audit and might be revised accordingly. 2 Due to a reclassification, there is a break in the series of this item. Road and building maintenance, contributions to political parties, and housing improvement grants are examples of items that were recorded under “other current transfers” in previous Reports, but are included in various “ministries/departments” or “other charges” in this Report. 3 Regulatory bodies are Seychelles Licensing Authority, Seychelles Fishing Authority and Seychelles Bureau of Standards. For 1995 Seychelles International Business Authority is also regulatory body. 4 Examples of “other appropriations” are contributions to a training fund and international organisations. 5 “Other charges” consist of : salaries of constitutional appointees; contribution to political parties; and execution of elections. Source: Ministry of Finance

ANNUAL REPORT 2000 GOVERNMENT FINANCE

- 40 -

3.2 Capital Outlays

During the year 2000, the government

spent a total of R463 million on capital

expenditure, which was R1.9 million

above its budgeted allocation of R461

million. The excess spending was

influenced by higher than budgeted of R41

million on development grants.

Nonetheless, this was contained by

savings of R8.3 million and R31 million in

“compensation for land acquisition” and

“capital projects” respectively. Capital

projects continued to account for the bulk

of spending in this category with outlays

standing at R401 million, R31 million

below forecast. Those funds went

principally towards the reclamation works

in the East Coast Phase III Project whilst

the excess spending under “developments

grants” was due to an unbudgeted R51

million allocation accorded to the

Seychelles Fishing Authority.

Compared to the previous year, capital

spending rose by R60 million.

Development grants and capital projects,

which stood at R58 million and R401

million, were R48 million and R15 million

above their 1999 levels. On the other

hand, expenditure going towards

compensation of land acquisitions fell by

R3.7 million.

3.2.1 Public Sector Capital Project

Expenditure

Capital project expenditure of the

government for the fiscal year 2000

reached a total of R401 million, depicting

a rise of R15 million or 4.0 per cent

relative to the previous year. In sectoral

terms, the increase in total expenditure

was due to mainly to the subgroup of

‘infrastructure and utilities’, which rose by

R103 million or 62 per cent. Spending

under the other two main headings,

namely ‘economic sectors’ and ‘services’,

fell by R11 million and R76 million

respectively.

3.2.1.1 Economic Sectors

Expenditure on ‘economic sectors’

declined by R11 million. The fall in this

category was in respect of all the sectors,

with the most significant being R8.5

million in agriculture. The declines in all

the sectors were due to major projects

being completed in the previous year. In

terms of agriculture, where the highest

decline occurred, the fall was attributable

to the completion of the rehabilitation of

the Victoria market and the Farming

Training Centre in the 1999.

ANNUAL REPORT 2000 GOVERNMENT FINANCE

- 41 -

Table 4.4

Public Sector Capital Expenditure

1995 1996 1997 1998 1999 2000

(R thousand) Total 131,068 185,023 213,983 390,008 385,561 400,986Economic Sectors 11,917 19,267 25,941 35,463 15,380 3,930 Agriculture 1,047 4,511 2,991 9,055 9,605 1,112 Fisheries 1,535 1,139 2,195 8,776 522 18 Tourism 3,214 949 2,372 882 2,823 2,674 Outer island development 1,399 1,882 708 2,500 500 - Craft & home industries 1,424 595 1,393 2,515 - - Trade & commerce 3,298 10,191 16,283 11,735 1,929 126 Infrastructure and Utilities 33,583 38,405 67,022 172,018 166,191 268,694 Transport 20,099 6,531 21,988 29,201 53,223 49,267 Water supply & sanitation 443 14,331 13,533 60,621 26,394 64,805 Communications 687 842 358 1,679 4,657 4,581 Land Reclamation 5,327 1,701 315 45,521 63,738 137,317 Land Bank 7,027 15,000 30,827 34,996 18,179 12,725 Services 85,568 127,351 121,020 182,527 203,990 128,362 Education 35,533 31,861 16,721 40,481 25,440 13,057 Health 4,043 15,575 15,593 14,054 4,190 6,726 Housing 19,459 41,280 41,748 63,377 82,195 58,826 Social development 7,782 17,525 27,102 34,878 15,658 8,934 Culture 388 172 197 99 276 908 Sports 778 180 1,567 3,089 2,063 1,915 Information & media 172 46 452 918 39,046 4,157 Internal affairs 8,503 8,456 7,008 9,817 5,012 4,226 Public sector management 2,508 798 4,972 4,832 9,850 17,910 Environment 6,401 11,458 5,659 10,982 20,259 11,704 Source: Ministry of Finance

3.2.1.2 Infrastructure and Utilities

As pointed out above, the only increase in

capital expenditure was in respect of

‘infrastructure and utilities’, which

amounted to R269 million, a rise of R103

million relative to the previous year. The

largest increases were in respect of “land

reclamation” and “electricity, water supply

& sanitation”, which rose by R74 million

and R38 million respectively. The rise in

expenditure towards “land reclamation” is

explained mostly by the East Coast Phase

III Project, which started in the previous

year. During the year under review, was

the start of the reclamation itself compared

to last year, where works comprised of the

setting up of barriers. With regards to

“electricity, water supply & sanitation”,

the increase in cost was due the project on

the Anse Royale landfill and two sewage

projects, one for Greater Victoria and the

other for Beau Vallon. Together, these

projects accounted for 76 per cent of total

expenditure under “electricity, water

supply & sanitation”.

ANNUAL REPORT 2000 GOVERNMENT FINANCE

- 42 -

For the rest of the remaining headings of

expenditures under ‘infrastructure and

utilities’, there were reduced spending

relative to the previous year, ranging

between R76,000 and R5.5 million.

Spending of R49 million on “transport” in

2000 went principally on the Praslin

Airport re-development project and on the

completion of the Providence-Airport

Highway link on Mahe. Government

expenditure on “communications”, which

amounted to R4.6 million, represented

mainly spending on the ‘electronic

government’ project. This initiative

involves the linkage of major government

departments electronically. In terms of

expenditure on land bank, this is the

ongoing effort of the government to make

land available for housing projects.

3.2.1.3 Services

‘Services’ was the other category that

recorded a decline in its overall

expenditure during the year under review,

a fall of 37 per cent. All categories

registered declines with the exception of

“health”, “culture” and “public sector

management”. As in the ‘economic

sector’, the drop in spending in services is

explained by the fact that major projects

were completed in the previous year, most

particularly in “education”, “housing” and

“information & media”. The latter, which

recorded the largest fall was due to the fact

that in the previous year, expenditure went

principally to improve computer systems

to make them Y2K compliant.

The most significant increase in relation to

the three headings mentioned above was in

respect of “public sector management” and

“health”. The rise of R8.1 million in

spending towards “public sector

management” was mainly for renovation

work on government offices and for

“health”, it went towards the cost of

renovation works on the paediatric &

maternity wards, which accounted for 60

per cent of total spending in health and

also on new facilities.

3.3 Net Lending

Expenses under net lending continued to

be strictly controlled in 2000. Against a

budgeted total government advance of R46

million, the government actually registered

a net repayment of R145 million. Lending

under this category, which goes

principally to parastatals and general-

purpose loans, saw a net repayment of R47

million for the former and R99 million

under the latter.

Analyzing the 2000 outcome relative to

the previous year, it was observed that net

lending was significantly curtailed. From

R33 million in 1999, it shrank to a net

repayment of R145 million, a saving of

R179 million. The favourable

performance in the year under review is

attributable to the R47 million and R99

million net repayments for parastatals and

general-purpose loans, as compared to a

net lending of R7.0 million and R26

ANNUAL REPORT 2000 GOVERNMENT FINANCE

- 43 -

million for the same headings in the

previous year.

4. Financing

In a complete switch from normal trends,

it was foreign savings that made up for the

bulk of the budgetary shortfall in 2000.

On a net basis, foreign loans amounted to

R461 million, of which gross inflows

totalled R501 million and amortisation

amaounting to R40 million. It would be

noted that at this level, gross inflows was

extraordinarily high and this reflected inter

alia the drawdown, through the Central

Bank, of Euro 50 million facility from an

overseas bank.

In addition, the government accessed R8.5

million from the domestic market, with

inflows at R613 million and redemption at

R604 million. It should be noted that

during the fiscal year 2000, the

government intensified its efforts in

reducing the monetisation of its deficits.

Borrowing from the domestic market was

mainly through the issue of securities, with

minimal recourse to central bank

advances. The R613 million that was

raised consisted primarily of R84 million

worth of treasury bills and R1.1 billion

worth of treasury bonds and also a

significant repayment by the government

of R622 million on its stocks of advances.

The balance of R127 million was met

through movement in cash balances held

mainly with the Central Bank.

SECTION FIVE

The External Sector

1. Overview

The year 2000 saw a major improvement

in the Balance of Payments (BOP).

Overall, the BOP moved into a surplus

mostly on account of a substantial

narrowing of the current account deficit.

These movements are illustrated in Chart

5.1 and Table 5.1 below. This marked a

major overturn of the situation over the

last two years, in particular with regards to

the current account.

-800.0

-600.0

-400.0

-200.0

0.0

200.0

400.0

600.0

800.0

R M

illio

n

1995

1996

1997

1998

1999

2000

Chart 5.1. The overall balance, current account and capital & financial account of the BOP for 1995 to 2000

Overall balance Current account Capital & Financial account

- 43 -

ANNUAL REPORT 2000 THE EXTERNAL SECTOR

- 44 -

Table 5.1 Balance of Payments;1 1995-2000

1995 1996 1997 1998 1999 2000 Provisional

(R million) CURRENT ACCOUNT -263.5 -289.9 -334.5 -567.6 -645.0 -294.5 Goods, -765.6 -846.6 -957.1 -1114.4 -1223.0 -619.2 Receipts (of which)

254.8 480.4 568.5 646.4 778.4 1111.4 Merchandise exports (f.o.b) 128.0 315.1 358.7 490.9 596.5 740.5 Payments (of which) 1020.3 1327.0 1525.6 1760.8 2001.4 1730.6 Merchandise imports (f.o.b) 942.8 1238.5 1454.5 1713.2 1931.0 1658.7 Services 562.5 580.8 644.5 607.9 677.8 469.4 Receipts (of which) 1069.9 1178.2 1285.9 1302.3 1450.6 1449.8 Tourism income thru’ Commercial banks 466.2 524.5 612.5 583.8 596.2 600.0 Payments 507.4 597.4 641.4 694.4 772.8 980.4 Income -91.9 -73.6 -62.0 -110.1 -128.2 -151.5 Compensation of employees 1.1 1.7 -0.7 -7.6 -7.0 -25.0 Credit 2.4 3.5 1.1 0.6 1.0 1.0 Debit 1.3 1.8 1.8 8.2 8.0 26.0 Investment income -93.0 -75.3 -61.3 -102.5 -121.2 -126.5 Receipts 60.5 49.7 50.0 29.3 44.8 62.2 Payments 153.5 125.0 111..3 131.8 165.9 188.7 Current transfers 31.5 49.5 40.1 49.1 28.3 6.7 General government gG

55.2 79.9 72.3 89.8 56.0 45.0 Receipts 56.9 85.1 75.8 91.6 56.1 45.0 Fishing license fees 36.2 51.1 41.7 32.2 32.8 25.0 Overseas grants 12.8 13.8 10.0 25.3 12.3 0.0 Educational grants 8.0 20.1 24.1 34.1 11.0 20.0 Payments 1.8 5.2 3.5 1.8 0.1 0.0 Other sectors -23.7 -30.4 -32.2 -40.7 -27.7 -38.3 Receipts 28.2 24.4 29.9 19.2 21.1 21.7 Payments 51.9 54.8 62.1 59.9 48.8 60.0 CAPITAL AND FINANCIAL ACCOUNT 118.1 186.5 213.1 455.8 611.2 395.3 CAPITAL ACCOUNT 5.0 28.1 34.0 114.0 88.0 50.0 FINANCIAL ACCOUNT 113.1 158.5 179.1 341.8 523.2 345.3 Direct investment 142.1 126.3 193.0 210.0 246.9 78.8 Abroad 76.4 64.6 75.4 70.0 48.1 60.2 In Seychelles (of which) 218.5 190.9 268.4 280.0 295.0 139.0 Sale of Assets (Privatised enterprises) 88.3 23.1 0.5 0.0 0.0 0.0 Equity capital 75.0 135.2 247.9 260.0 275.0 114.0 Re-invested earnings 55.2 32.6 20.0 20.0 20.0 25.0 Portfolio investment -28.2 33.0 15.3 10.8 2.9 5.4 Assets 27.4 -33.1 -0.4 4.1 0.1 0.5 Liabilities -0.8 0.0 14.8 14.9 3.0 6.0 Other investment -0.9 -0.9 -29.2 121.0 273.3 261.1 Assets 12.2 58.6 64.0 29.8 69.3 89.7 Liabilities 11.3 57.7 34.8 150.8 342.6 350.7 Net errors and omissions 71.6 19.3 86.5 43.4 12.0 7.7 OVERALL BALANCE -73.8 -84.1 -34.9 -68.4 -21.9 108.5 Financing of overall balance 73.8 84.1 34.9 68.4 21.9 -108.5 Reserve assets 16.3 24.2 -25.7 11.5 -45.0 -111.6 Arrears 57.5 59.9 60.6 56.9 66.9 3.1 Memorandum items: Current account (percentage of GDP) -9.7 -11.9 -9.7 -19.3 -20.4 -7.9 Trade Balance (f.o.b) -814.9 -923.5 -1095.9 -1222.2 -1334.6 -918.2 Stock of Reserves (Gross)(R million) 127.6 103.4 129.1 117.6 162.2 274.2 Stock of Reserves (Gross) (Weeks of cif imports) million)

6.0 3.7 3.9 3.0 3.7 7.3

1 Contrary to the exchange record, this series is recorded on an accrual basis. 2 Data series differ from previous publications due to revisions 3 (-) sign indicates increase in reserves.

ANNUAL REPORT 2000 THE EXTERNAL SECTOR

- 45 -

Provisional estimates based on

information gathered by the Central Bank

points to an overall BOP surplus of R108

million in 2000, which was an

improvement of R130 million relative to

the previous year (Table 5.1). The gross

reserve position of the country improved

by some R112 million, with the balance

representing accumulation of arrears.

The determining factor in the overall

improvement during 2000 was the current

account. Over the last few years, the

growing current account deficit had been a

major concern. However, there was a

major turnaround in 2000 as the deficit

shrank to R295 million, representing a

decline of R351 million or 54 per cent

relative to 1999. The lower deficit was

ascribed mainly to the reduction in the

trade deficit, which helped to outweigh the

decline in the surpluses in “services” and

“current transfers” and the expansion of

the deficit in “income”.

The deficit on account of “goods” stood at

R619 million, representing an

improvement of R604 million or 49 per

cent relative to the previous year. This

outcome was attributable to an increase in

receipts coupled with a fall in payments.

Receipt in respect of trade in goods

totalled R1.1 billion, of which

merchandise exports accounted for R740

million, an increase of R144 million

relative to 1999. The increase in exports

came primarily from canned tuna, which

rose by R74 million, though frozen prawns

also posted an encouraging R11 million.

The remainder of exports posted an overall

growth of R68 million.

Payments amounted to R1.7 billion of

which imports accounted for 96 per cent.

Imports, which comprise the bulk of

"goods" payment declined relative to the

previous year. For 2000, the total import

bill was estimated at R1.7 billion (f.o.b),

which was R272 million or 14 per cent

lower than in 1999. The most notable

reductions were observed under

“machinery and transport equipment”,

“manufactured goods and miscellaneous

manufactured goods” and “chemicals”.

On the other hand, there was a significant

increase in import of oil. Whilst the

decline in most non-oil imports reflected

the shortage in foreign currency, the rise in

oil imports was explained primarily by the

sharp rise in oil prices on the international

market.

As already noted, the services account

surplus fell by R208 million, amounting to

R469 million. This sharp contraction

reflected principally a strong growth in

payments, which completely outweighed

the minimal growth in receipts. Whilst on

an individual basis certain services items -

such as “transportation” - recorded notable

increases in revenue, it was the fall in the

surplus from travel and the worsening

ANNUAL REPORT 2000 THE EXTERNAL SECTOR

- 46 -

position of the “financial and business

services” account that contributed to the

deterioration of the services surplus.

With regards to the “income account”, the

expansion of the deficit was accountable

in most part by an increase in net

payments of investment income which in

turn reflected the further increase in the

country's external interest burden. As for

“current transfers”, the 76 per cent drop in

the surplus relative to 1999 was mainly

due to a fall in receipts under “general

government” and an increase in payments

by “other sectors”. The decline in

“general government” inflows owed

primarily to a decrease in receipt from

fishing licences and overseas grants.

The other main heading in the BOP is the

“capital and financial account”. For 2000,

the balance under this heading stood at

R395 million, which was 216 million or

35 per cent below the previous year’s

level. Direct investment inflows were

estimated at R139 million, of which 82 per

consisted of equity capital. Portfolio

investment, though remaining relatively

low, registered an increase compared to

1999, rising by R2.5 million.

“Other investment”, which represents

mostly loans, showed a net inflow of R261

million, a reduction of R12 million

relative to 1999. Inflows amounted to

R351 million whilst foreign loan

repayment stood at R90 million.

2. Current account

2.1 Trade in goods

For the first time since 1994, there was a

marked improvement in respect of the

"goods account". This account, which

consists of trade in merchandise goods, the

value of repairs carried out on non-

resident goods, mainly carriers, and goods

procured in ports (re-exports) registered a

lower deficit compared to the preceding

year. Provisional estimates showed the

deficit at R619 million, representing a

decline of R604 million or 49 per cent.

The significant improvement in the deficit

in goods during 2000 was attributable to

the two largest items under the goods

account, the most important being "general

merchandise", which covers the export and

import of goods. It recorded a deficit of

R918 million, which represented a fall of

R416 million relative to last year. In turn,

this reflected a combination of a decline in

imports and a continued growth in export

revenue.

With regards to "goods procured in ports",

the second largest component of the goods

account, the surplus continued to widen,

amounting to R302 million, which was

R188 million above the last year's level.

By contrast, "repairs" remain in deficit

compared to the previous year.

2.1.1 Merchandise exports

As outlined above, there was a decline in

the deficit in respect of general

merchandise, i.e., the trade balance. In

2000 the deficit amounted to R918

million, representing a fall of 31 per cent

ANNUAL REPORT 2000 THE EXTERNAL SECTOR

- 47 -

compared to an increase in the shortfall of

9.2 per cent in 1999. For the fifth year

running, the strong performance of

domestic exports has been a key element

of the trade balance. Domestic exports

reached a new record of R740 million, a

growth of 24 per cent (Table 5.2).

Canned tuna, which accounted for 82 per

cent of total export revenue, rose from

R532 million in 1999 to R606 million in

2000. This performance reflects the

largely successful operations of the Indian

Ocean Tuna (IOT) canning factory. The

main markets for the canned tuna were the

UK, France and Germany.

Table 5.2

Domestic Exports; 1995-2000

1995 1996 1997 1998 1999 2000

(R million) Total 128.0 315.1 358.7 490.9 596.5 740.5 Copra 0.3 0.0 0.0 0.0 0.0 0.0 Cinnamon bark 3.5 4.7 3.4 2.8 2.2 1.3 Frozen and fresh fish 10.1 11.2 20.4 13.2 28.2 20.7 Canned tuna 88.0 169.8 286.2 413.3 531.9 606.2 Shark Fins (Dried) 2.9 2.4 0.8 0.2 0.3 0.2 Frozen Prawns 6.9 10.9 22.7 34.1 7.7 18.3 Other exports 16.2 116.1 25.2 27.4 26.1 93.8

Source: Management and Information Systems Division

Earnings were also boosted by "other

export", which are mainly from small

businesses in the export-oriented

activities. For the year, revenue earned

from those exports amounted to R94

million, an increase of R68 million

relative to the previous year. A notable

recovery was observed in respect of frozen

prawns for which exports increased by

R11 million or 137 per cent following the

fall in the preceding year. In 2000, two-

thirds of the exports went to the British

market.

Declines in export revenue were

experienced in "fresh & frozen fish",

"cinnamon bark" and "shark fins". For

"frozen & fresh fish", proceeds amounted

to R21 million compared to R28 million in

the previous year, though demand for this

commodity from the main markets

remained strong, particularly in the first

half of the year. In respect of "cinnamon

bark", there was a decline of R900,000,

reflecting a general fall in international

demand. For "shark fins", there was only

a marginal fall in foreign earnings of

R100,000.

There was still no export of copra in 2000.

However, in the coming year, there should

be a revival in copra production for export,

with the lifting of the ban by Seychelles’

main importer and the new company, that

has invested in this activity.

ANNUAL REPORT 2000 THE EXTERNAL SECTOR

- 48 -

With regards to trading partners, UK

topped the list with total imports worth

R316 million of Seychelles products

compared to R286 million in the previous

year, representing a rise of 11 per cent.

The second major importer in 2000 was

France with R154 million, followed by

Germany with R86 million and Italy R60

million. The commodities that were

exported to those counties were mainly

fish products both frozen and canned,

prawns and cinnamon bark.

2.1.2 Merchandise imports

Whilst exports, contributed somewhat to

reducing the trade deficit in 2000, imports

proved to be the determining factor.

Compared to the last five years, during

which there has been a gradual rise in the

country's demand for imports, imports

declined significantly compared to the

previous year. On a (c.i.f.) basis, imports

totalled R1,952 million, representing a fall

of R320 million or 14 per cent relative to

1999 (Table 5.3). Whilst it is encouraging

to observe a decrease in imports as it

means a fall in foreign exchange outflows,

from a GDP standpoint, this would likely

to have had a dampening effect as most of

the country’s consumption are imported.

Table 5.3

Imports (cif) – by HS1 Sections; 1995-2000 1995 1996 1997 1998 1999 2000 (R million) Description Total imports 1109.2 1457.1 1711.2 2015.5 2271.8 1951.4 Food and live animals 222.8 322.3 416.8 455.9 484.2 517.8 Beverages & tobacco 21.3 23.5 27.5 30.0 29.9 27.1 Mineral fuels etc. 155.6 211.3 252.0 189.5 229.0 423.7 Chemicals 88.2 90.8 125.6 129.1 138.3 129.3 Manufactured goods & Misc. manufactured articles 277.7 352.5 462.9 564.5 714.4 472.3 Machinery & transport equipment 327.2 415.9 384.7 603.4 638.7 334.0 Other commodities 16.4 40.8 41.7 43.1 37.3 47.3 1 Harmonised System

The primary explanation for the

significant fall in imports was the

continued shortage of foreign exchange,

and the restrictions that remain on import.

The categories of imports that were most

affected were "manufactured goods &

miscellaneous articles" and "machinery &

transport equipment", which in turn

affected to some extent the smooth

running of businesses, which are

dependent on those items. Import of these

two groups of commodities amounted to

R472 million and R334 million,

representing a fall of R242 million and

R305 million respectively over the

previous years’ levels.

There were also declines reported in

respect of "chemicals" and "beverages &

tobacco", falling by 6.6 per cent and 9.3

ANNUAL REPORT 2000 THE EXTERNAL SECTOR

- 49 -

per cent respectively relative to 1999.

Again the foreign exchange shortage and

tighter quantitative controls provided the

main explanation for the decline.

Nevertheless, despite the overall decrease

in import in 2000, there were some

notable increases in certain categories, the

most notable being "mineral fuels", the

third most important item. For the whole

year, the country imported R424 million

worth of fuel, representing an increase of

R195 million or 85 per cent relative to the

previous year. The primary factor

explaining this increase was the surge in

the price of oil on the international market,

which caused the country’s fuel bill to rise

considerably.

Growth in imports were also recorded in

"food & live animals", which rose by R34

million or 6.9 per cent. This increase was

influenced by the import of “fish and

related product” and “animal and

vegetable oils” with the former resulting

primarily by higher imports of fish by the

tuna-canning factory. This was reflected

under the sub-item "fish, crustaceans,

molluscs and other aquatic invertebrates"

which rose by R14 million.

The combined value of items not included

in any of the mentioned categories above

recorded an increase of R10 million or 27

per cent relative to the previous year. In

aggregate, these products summed up to

R47 million.

In terms of trading partners, Saudi Arabia

was the country's largest source of imports

with R408 million, representing over 21

per cent of total imports, principally the

importation of oil. South Africa was

Seychelles' largest non-oil supplier with an

11 per cent share of total imports, this,

despite seeing a fall of R31 million

relative to the previous year. It was

followed by Italy and the UK both with an

8.7 per cent share.

2.1.3 Goods procured in ports

As outlined above, there was a notable

increase in the surplus in "goods procured

in ports" in 2000, mainly on account of

petroleum re-exports. On a net basis, the

surplus in re-exports to ships and aircraft

incurred by resident carriers overseas

stood at R302 million (Table 5.4). This

represented an improvement of R188

million or 164 per cent relative to 1999.

In aggregate, receipts from re-export to

ships and aircraft rose by 106 per cent to

R368 million, of which R357 million was

petroleum products. Besides a rise in the

number of carriers that were being handled

at the ports, the rise in revenue from oil re-

export during the year under review was

mainly attributable to the general price

increase of oil on the world market.

Re-export of "food and beverages"

increased relative to 1999, amounting

R8.4 million, a rise of 15 per cent. An

increase of 23 per cent was also observed

in the category of "other", which include

items such as duty free sales among

others.

ANNUAL REPORT 2000 THE EXTERNAL SECTOR

- 50 -

Table 5.4 Goods procured in Ports; 1995-2000

1995 1996 1997 1998 1999 2000

(R million) Goods procured in port, net 77.2 104.5 148.9 105.1 114.5 302.2 Receipts 125.5 163.6 208.4 152.7 179.1 368.1 Petrol 118.4 151.3 200.1 140.3 169.4 356.8 Food and beverages 4.5 10.5 6.1 6.3 7.3 8.4 Others 2.6 1.8 2.2 6.1 2.4 2.9 Payments 48.3 59.1 59.5 47.7 64.6 65.9 Petrol 41.5 56.9 50.2 42.8 54.6 50.9 Food and beverages 6.8 2.3 9.3 4.8 10.0 15.0

Source: Management and Information Systems Division

Re-export excluding those to ships and

aircraft totalled R35 million in 2000,

representing a rise of R20 million

compared to the previous year. It should

be noted that since these re-exports do not

represent goods procured in ports, for

balance of payments recording purposes,

they are treated as export in the "goods

account".

Payments on the other hand rose only

marginally during the year, by R1.3

million or 1.9 per cent. This slight

expansion in payments in overseas ports

by Seychelles carriers reflected mostly a

rise in spending on fuel, and to some

extent, on food and beverages, the bulk of

these being procurement by the national

carrier - Air Seychelles.

2.1.4 Repairs

As is recommended by the IMF’s Balance

of Payments Manual (Fifth Edition) the

value of repairs carried out on non-

residents property is recorded under

"goods". In 2000, the net flow in respect

of these transactions stood at negative

R3.2 million, representing a widening of

the deficit relative to last year. The

increase in the deficit was caused entirely

by the rise in payments in 2000, as

revenue remained constant. The bulk of

the expenses, which stood at R6.0 million,

was incurred by the national carrier Air

Seychelles.

2.2 Services

The surplus on the "services" account

shrank sharply in 2000. At the aggregate

level, it amounted to R469 million or a

ANNUAL REPORT 2000 THE EXTERNAL SECTOR

- 51 -

decline of R208 million or 31 per cent

relative to 1999. The surplus decreased

mainly on account of “financial &

business services” and to a lesser extent

“travel” and “government services”. In

respect of “financial & business services",

the shortfall widened by R185 million

whilst for the other two items mentioned

above, these surplus widened by R37

million and R18 million respectively.

In analysing the different service inflows

for 2000, it was observed that receipts

from “travel” remained one of the largest

service components. Nevertheless, on a

net basis “travel” recorded a surplus of

R574 million, which was R37 million or

6.1 per cent below last year level. This

downturn was attributable mainly to the

sharp rise in outflows, which completely

outweighed the moderate increase in

receipts. The rise in payments for the

current year under review was in turn

explained by the increase in relation to

foreign travel expenditure and training of

residents abroad, which rose by R30

million and a R12 million respectively.

Receipts, on the other hand, rose

moderately by only R5.2 million

compared to R15 million in the previous

year. Tourism earnings which makes up

the bulk of travel receipts grew by an

estimated R4.6 million.

The second largest revenue item under

services, “transportation” posted a further

increase - the third consecutive increase.

This was also the only major item under

services that recorded an improvement.

The surplus expanded by 17 per cent

amounting to R319 million and was

primarily on account of passenger-related

services, which grew by R11 million.

This reflected principally growth in ticket

sales by the national carrier, Air

Seychelles. Nevertheless, there was also

an increase in payments in 2000, in the

order of R4.2 million.

Other “transportation” items registered

mix outcomes. On the one hand there was

an improvement in “freight” payment and

that of “other transportation services” for

which payment declined, though the latter

only marginally. In respect of “freight”,

the shortfall stood at R41 million or 22 per

cent in relation to the previous year, due to

the sharp drop in imports. At R244

million, freight costs fell by R40 million

or 14 per cent.

As noted above it was the deterioration in

“financial & business services” that was

the key factor that caused the decline in

services. Whilst there was an increase in

receipts from “financial & business

services”, it was the rise in payments that

was most significant. This was in turn

caused by a rise in expenses incurred in

relation to operational lease and other

services payments.

ANNUAL REPORT 2000 THE EXTERNAL SECTOR

- 52 -

Table 5.5 Services;1 1995-2000

1995 1996 1997 1998 1999 2000

(R million)

SERVICES, NET 562.5 580.8 644.5 607.9 677.8 469.4 Transportation 146.1 123.8 122.9 203.0 272.4 318.7 Passenger 180.6 191.9 201.8 312.2 368.2 375.4 Receipts 226.1 238.5 218.0 326.1 381.6 393.1 Ticket sales to non-residents by Air Seychelles 202.1 202.1 188.9 296.9 351.6 362.2 Others 24.0 36.4 29.2 29.2 30.0 30.9 Payments (tickets to foreign airlines by residents) 15.4 16.1 16.3 13.9 13.4 17.7 Freight -123.6 -152.2 -156.1 -175.2 -181.6 -140.9 Receipts 15.0 27.4 45.0 58.1 102.4 103.0 Payments 138.6 179.6 201.1 233.3 284.0 243.9 Other transportation services 89.1 84.0 77.3 66.0 85.8 84.2 Receipts (of which) 98.6 109.7 111.8 93.6 126.4 117.8 Marine and port charges 25.0 21.4 26.5 25.9 27.9 25.1 Income from stevedoring 40.0 42.0 23.0 24.3 53.4 48.1 Agency service income 2.4 14.3 21.1 18.0 16.2 16.6 Airport handling fees 20.0 17.3 13.5 14.0 14.3 12.9 Aircraft landing fees 11.2 14.6 27.7 11.4 14.6 15.1 Payments of aircraft landing Fees abroad 9.6 25.6 34.5 27.7 40.5 33.6 Travel 479.8 558.6 647.8 574.6 611.3 574.2 Receipts 615.0 699.3 787.1 709.0 724.0 729.2 Tourism earnings 612.0 696.0 783.0 703.0 717.9 722.5 (of which income thru’ Commercial banks) 466.2 524.5 612.5 583.8 596.2 600.0 Others 3.0 3.3 4.1 6.0 6.1 6.7 Payments 135.2 140.6 139.3 134.3 112.7 155.0 Foreign travel expenditure 109.2 113.4 115.0 98.0 95.0 125.0 Training of residents abroad 26.0 27.2 24.3 36.3 17.7 30.0 Others 0.0 0.0 0.0 0.0 0.0 0.0 Insurance, net -33.2 -33.3 -37.1 -49.1 -18.3 -18.8 Royalty payments -2.0 -3.1 -3.0 -2.0 -2.5 -2.5 Financial and Business Services -98.3 -106.4 -119.3 -140.5 -150.0 -335.2 Receipts (of which) 20.0 18.6 30.7 38.9 43.5 44.8 Telecommunications Seychelles 15.0 17.4 25.3 28.0 39.6 40.8 Payments 118.3 125.0 150.0 179.4 193.5 380.0 Government services 70.1 41.2 33.1 31.0 44.6 26.1 Receipts 85.1 69.3 53.2 56.1 66.6 55.6 USAF Tracking Station 40.8 19.1 0.0 0.0 0.0 0.0 Foreign embassies in Seychelles 12.0 10.0 2.7 2.2 3.0 3.0 Licences and other fees 32.3 40.2 50.5 53.9 63.6 52.6 Payments 15.0 28.2 20.2 25.1 22.0 29.5 Expenses by Seychelles embassies 3.0 3.2 3.2 4.5 6.7 4.5 Tourism promotion 12.0 25.0 17.0 20.8 15.3 25.0

ANNUAL REPORT 2000 THE EXTERNAL SECTOR

- 53 -

2.3 Income

In 2000 net income flows accruing to the

Seychelles economy declined somewhat,

as reflected by the widening of the deficit

to R152 million. This deterioration was

ascribed to the worsening positions of both

major headings of income "compensation

of employees" and "investment income".

Firstly, the widening in the shortfall in

"compensation of employees", which

amounted to R18 million, was due to an

increase in payments, whilst receipts

remained unchanged relative to last year.

The underlying factor with regards to the

rise in payments was the increase in

income paid for the services rendered by

non-residents in the private sector in the

form of salaries.

With regards to "investment income", net

outflow during 2000 stood at R127 million

and this comprised of net direct

investment and net other investment. In

terms of direct investment income, for the

year under review, it registered a surplus

of R3.8 million, a significant improvement

of R12 million relative to the previous

year. This movement from a deficit to a

surplus over the two years reflected the

notable increase in re-invested earnings

abroad by 50 per cent. It is worth noting

here that whilst actual payments i.e. cash

transfers of re-invested earnings was

constrained by the shortage of foreign

exchange, the increase reflects the fact that

such earnings are recorded on an accrual

basis.

Payments on the other hand remained

practically unchanged relative to last year.

It totalled R32 million and this consisted

of re-invested earnings in Seychelles and

dividend and distributed profits abroad,

which amounted to R20 million and R12

million respectively.

The most important component of income

flows remained other investment income,

which comprises mainly of interest flows.

In 2000, interest accruing to residents

from foreign investment amounted to R26

million, an increase of R5.5 million

relative to 1999. However, payments rose

by more than the increase in receipts,

resulting in a deterioration in the overall

balance on other investment income. In

total, payments amounted to R156 million,

a rise of R23 million.

At the aggregate level, the R26 million

inflow for 2000 represented interest

receipts of R8.7 million, R4.7 million and

R10 million for the Central Bank,

commercial banks and the private sector

respectively. In all three cases, inflows

were higher than in the year before.

In terms of payments, there were growths

in all payment categories with the

exception of interest payments by the

government, which fell by R11 million

relative to the previous year.

ANNUAL REPORT 2000 THE EXTERNAL SECTOR

- 54 -

2.4 Transfers

Whilst “net transfers” remained in surplus,

it contracted significantly compared to the

previous year, falling by R22 million or 76

per cent. This contraction was explained

by a combination of a drop in receipts and

a rise in payments.

Current transfers to government, which

accounts for the bulk of flows, recorded a

surplus of R45 million. At this level, it

represented a decline of R11 million or 20

per cent. One of the influential factors in

determining the level of current transfers

to the government is fishing licences.

During 2000, revenue from this item fell

to R25 million compared to R33 million in

1999. Furthermore, there was a decline in

overseas grants. This was partly

compensated, however, by an increase in

transfers to government in the form of

grants. It rose by R9.0 million or 82 per

cent relative to the previous year.

Net transfers to the private sector

remained in deficit during the year under

review, amounting to R38 million, a

deterioration of R11 million relative to the

previous year. The widening of the deficit

was entirely due to the rise in payments,

which completely overshadowed the

marginal increase in receipts. Receipts

amounted to R22 million compared to R21

million in 1999 whilst payments stood at

R60 million as against the R49 million

recorded in the previous year.

3. Capital and financial account

3.1 Capital account

For a second consecutive year, there was a

decline in the surplus recorded in the

capital account. According to data from

the Ministry of Foreign Affairs, capital

grants to Seychelles in 2000 from bilateral

and multilateral donors amounted to R50

million. This represented a fall of R38

million or 43 per cent relative to the

previous year.

3.2 Financial account

The Financial account remained in surplus

during 2000, with capital flows accounting

for 87 per cent of total inflows under the

combined “capital and financial account”.

For the year, net capital flow under the

financial account amounted to R345

million. At this level, it represented a

decline of R178 million or 34 per cent

relative to previous year. A net direct

investment inflow of R79 million was

recorded whilst the surplus in “other

investment” stood at R261 million.

Portfolio investment also registered a

surplus, though minimal in magnitude,

amounting to R5.4 million.

As stated above net foreign direct

investment (FDI) in the Seychelles

economy amounted to R79 million, of

which R60 million was investment by

Seychellois residents overseas and R139

million being investment of non-residents

in the economy. Outward FDI represents

ANNUAL REPORT 2000 THE EXTERNAL SECTOR

- 55 -

investment of equity capital and re-

investment of resident funds abroad by

Seychelles residents and compared to last

year, it has increased by R12 million

mainly on account of the latter.

As stated above FDI within the economy

amounted to R139 million a decline of

R156 million compared to 1999.

Investment in the form of equity capital

accounted for the bulk of total inflow,

though compared to last year. Most of the

investment went into the tourism industry.

As regards to the last heading of inflow in

the financial account, “other investment”,

on a net basis, it remained in surplus in

2000, though the surplus contracted

compared to the previous year. At the

aggregate level, it amounted to R261

million, representing a fall of R12 million

or 4.5 per cent relative to last year. On the

asset side (debit), currency and deposits

grew by R20 million. However, the bulk

of the inflow was accounted for on the

liability side (credit). Inflows totalled

R351 million, an increase of 2.4 per cent

relative to the previous year. This increase

represented new drawdown by the Central

Bank and the government respectively.

4. External reserves

Gross official reserves increased by a

further R112 million or 69 per cent. At

the end of December, gross reserves stood

at R274 million. This was equivalent to

7.3 weeks of imports 2000 imports (c.i.f.).

Table 5.6 External Reserves;1 1995-2000

1995 1996 1997 1998 1999 2000

(R million) Gross official reserves 127.6 103.4 129.1 117.6 162.7 274.2 Central Bank 126.8 99.2 127.2 115.2 160.2 271.1 Government 0.8 4.2 1.9 2.4 2.5 3.1 Central Bank’s short-term Borrowings 17.2 12.5 64.8 173.1 211.2 403.4 Net official reserves 110.4 90.9 64.3 -55.5 -48.5 -129.2

1 End-of period data.

But despite the growth in gross reserves,

on a net official basis reserves deteriorated

by R81 million. This adverse movement

in the net position was due to the rise in

the Central Bank’s short-term borrowings,

which increased by R192 million relative

to the end of last year. At the end of the

year, the net official reserves position

stood at negative R129 million.

5. Exchange rates

The Seychelles rupee remained pegged to

the Seychelles Trade and Tourism

Weighted basket (STTWB) during 2000,

ANNUAL REPORT 2000 THE EXTERNAL SECTOR

- 56 -

the peg, which was introduced in May

1996. During the year, the movements in

the value of the rupee relative to the major

world currencies were somewhat volatile

compared to the previous year with the

range of fluctuation being between

negative 7.9 per cent and plus 13 per cent.

The rupee recorded mixed movements

relative to the different currencies. The

greatest gain was against the euro (7.6 per

cent) and that of the South African rand

(5.7 per cent).

In terms of the other currencies in the

basket, the rupee lost grounds against the

Japanese yen, which depreciated by the

highest margin of 13 per cent. This was

followed by the US dollar by 7.0 per cent

and the Singapore dollar by 5.1 per cent.

The marginal lost was against the UK

pound by 0.04 per cent.

Table 5.7 Exchange Rates;1 1995-2000

1995 1996 1997 1998 1999 2000

(Seychelles Rupees per currency unit) US dollar 4.7722 4.9699 5.0269 5.2638 5.3418 5.7132 Pound sterling 7.5312 7.7991 8.2379 8.7229 8.6415 8.6446 Deutsche mark 3.3339 3.2899 2.9029 2.9989 2.9217 2.6917 Japanese yen 0.0509 0.0455 0.0416 0.0404 0.0471 0.0530 French franc 0.9569 0.9676 0.8624 0.8945 0.8710 0.8026 Italian lira 0.0029 0.0032 0.0030 0.0030 0.0030 0.0027 South African rand 1.3160 1.1602 1.0915 0.9572 0.8742 0.8248 Singapore dollar 3.3652 3.5066 3.3921 3.1481 3.1515 3.3132

1 Period averages.

SECTION SIX

The Real Sector: Production,

Employment and Prices

1. Macroeconomic developments

in 2000 - Overview

Provisional estimates of national income

for the year point to a further slowdown in

real economic growth. This year’s

outcome emanated principally from a

decline in nominal growth of Gross

Domestic Product (GDP), as inflation

remained stable relative to the previous

year, standing at 6.3 per cent. Central

Bank estimates based on information

collected from various sources including

MISD suggest that GDP growth for the

year 2000 stood at 1.4 per cent, down from

2.9 per cent in 1999 (Chart 6.1 & Table

6.1) in real terms.

C h a r t 6 . 1 . R e a l G D P g r o w t h

-4 .0

-2 .0

0 .0

2 .0

4 .0

6 .0

8 .0

10 .0

1 9 9 0 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0

Y e a r s

Per

cen

tag

e

R e a l G D P g r o w t h

- 57 -

ANNUAL REPORT 2000 THE REAL SECTOR: PRODUCTION, EMPLOYMENT AND PRICES

- 58 -

Despite the general slowdown, there were

sectors of the economy that registered

encouraging growth, notably “electricity

& water”, “building & construction”,

“transport, distributions and

communications” and “other services”.

Rather encouraging in 2000 was the

recovery of the tourism industry, both in

terms of arrivals and in revenue earned.

This turnaround in fortunes for the sector

also had a positive impact for other

sectors, in particular those directly or

indirectly linked to the industry. This was

reflected in higher growth in “other

services” category of Gross Domestic

Product.

Growth in the industrial sector, which is

becoming increasingly important, was

again hampered by the continued foreign

exchange shortage. In Seychelles the

sector depends largely on imported raw

materials. It is for this reason that

impediments on imports would normally

leads to the sector performing below its

potential.

Table 6.1

Gross Domestic Product by Kind of Economic Activity1 at constant market prices

1995 1996 1997 1998 1999 2000 Percentage change -0.8 4.9 4.6 5.5 2.9 1.4

(R million) GDP at constant market prices 1933.9 2029.0 2122.11 2238.8 2303.7 2336.0 Agriculture, forestry and fishing 61.4 64.1 65.0 64.4 67.5 67.2 Mining, manufacturing and Handicrafts 243.4 280.0 368.0 389.3 433.4 426.7 Electricity and water 81.2 107.6 128.6 138.5 149.7 156.1 Building and construction 116.4 133.0 148.6 159.7 167.7 173.6 Transport, distribution and Communications 617.9 612.7 597.4 657.1 690.0 714.1 Hotels and restaurants 101.5 89.2 75.9 76.3 72.8 75.0 Financial and business services 231.4 240.9 250.0 242.7 244.8 244.8 Government services 232.4 242.0 224.1 245.0 239.9 237.5 Other services 248.2 259.3 264.5 265.7 237.9 241.0

Source: Management and Information Systems Division (except 1997, 1998 and 1999 which are Central Bank

estimates with the help of IMF projections.

All the three broad sectors of economic

activity, namely the primary, secondary

and tertiary sectors, contributed to the

growth in GDP. However, the major

influence on growth appeared to come

from the secondary and tertiary sectors,

which comprises mainly of utilities and

construction, transport, communication,

tourism and government services

respectively (Tables 6.1-6.3).

ANNUAL REPORT 2000 THE REAL SECTOR: PRODUCTION, EMPLOYMENT AND PRICES

- 59 -

Although there was a slowdown in the

growth of the industrial sector, there were

nevertheless some encouraging

developments, especially with regards to

locally processed food for both the local

and international markets. Meat and fish

processing industries, El 's Products

(meat), Oceana Fisheries and Sea Harvest

have performed generally strongly

whereby in some cases exporting to

Europe. The country's primary

manufacturing entity, the Indian Ocean

Tuna (IOT) canning factory registered an

increase in exports in 2000, although the

level of output declined relative to the

previous year, the latter caused mostly by

excess supply abroad. In absolute terms

there was a general increase in revenue but

in percentage terms a declining growth

rate was recorded relative to the previous

year. There was an increase in the

exports of prawn feeds mostly to

Madagascar.

The construction sector, recorded a

slowdown in real growth relative to 1999,

due to two main constraints. Firstly the

industry remained largely dependent on

imported inputs, notably cement, steel and

most of the finishing materials mainly as a

result of the foreign exchange shortage.

In turn the shortage had an influence on

prices on the limited products available,

causing growth to be eroded in real terms.

Nevertheless, there were major

construction projects implemented in

2000. Among them being the continuation

of the reclamation work on the East Coast

Phase III, the ongoing Government

housing projects at Les Mamelles, Union

Vale and upper Anse Aux Pins, the near

completion of the Praslin airport, and the

construction of various shopping

complexes in Victoria.

During 2000, the combined output of

electricity and water was estimated to have

grown by 4.3 per cent in real terms. The

rise in the output of utilities came

primarily from increased generation of

electricity with the completion of the new

generating station, which was opened in

June. This new station has increased the

generating capacity significantly.

ANNUAL REPORT 2000 THE REAL SECTOR: PRODUCTION, EMPLOYMENT AND PRICES

- 60 -

Table 6.2 Gross Domestic Product by Kind of Economic Activity1

at current market prices 1995 1996 1997 1998 1999 2000

(R million) GDP at market value 2419.8 2588.7 2829.6 3201.0 3379.1 3450.4 Agriculture, forestry and fishing 101.0 97.4 98.8 84.2 81.3 83.3 Mining, manufacturing and Handicrafts 306.2 321.7 406.8 482.1 512.0 498.8 Electricity and water 51.2 52.5 69.5 80.1 81.5 86.7 Building and construction 190.9 208.1 212.7 264.9 310.1 341.1 Transport, distribution and Communications 717.5 799.6 816.7 963.6 1105.5 1123.3 Hotels and restaurants 226.3 247.2 268.9 289.5 279.2 295.6 Financial and business services 254.6 287.5 320.8 341.7 373.4 373.3 Government services 338.8 351.0 376.0 410.0 422.2 440.3 Other services 233.3 223.7 259.4 284.9 213.9 208.0

Source: Management and Information Systems Division (except 1996, which is a Central Bank estimate).

In absolute terms the primary sector

witnessed encouraging performances in

2000, though overall growth declined in

real terms relative to the previous year.

The primary focus of this sector, namely

agriculture experienced a further upward

trend in overall output during the year.

The rise in output was primarily induced

by the rise in livestock production, whilst

both crop production and the production of

fruit and vegetables fell relative to 1999.

There was also an increase in production

of copra, whilst cinnamon recorded a

decline.

In terms of the fisheries sector, there was a

general decline in output – as measured by

the catch. This was the case for all three

methods of fishing, namely artisanal,

semi-industrial and industrial. However,

Exports and revenue in all these different

methods increased. There was also an

increase in transhipment activities,

confirming Victoria as the principal

transhipment port in the Indian Ocean

during the year.

ANNUAL REPORT 2000 THE REAL SECTOR: PRODUCTION, EMPLOYMENT AND PRICES

- 61 -

Table 6.3 Gross Domestic Product by Broad Productive Sectors1

at current market prices 1995 1996 1997 1998 1999 2000

(R million) GDP 2419.8 2588.7 2829.5 3201.3 3379.1 3450.4 Agriculture, forestry and fishing 101.0 97.4 98.8 84.2 81.3 83.3 Industries 529.6 560.6 666.1 800.3 877.5 898.2 Tourism 386.1 370.7 415.4 549.4 546.4 573.9 Government 338.8 351.0 376.0 410.0 422.2 440.3 Other services2 1064.3 1209.0 1273.2 1357.4 1451.7 1454.7

1 Source: Management and Information Systems Division (except 1996, which is a Central Bank estimate). 2 Includes import duties.

With regard to the tertiary sector, the

indicators point to an increase of around

2.0 per cent in nominal terms in 2000. In

real terms, the sector, which accounts for

72 per cent of gross domestic product

grew by 1.8 per cent. The main factors

behind this increase were improvement in

tourism activities, transport and

communications. Tourism accounted for

17 per cent of GDP in 2000, thus

remaining the country's major economic

activity. There were growth in terms of

the main indicators, namely arrivals and

income. These positive observations in

terms of tourism would have boosted the

rest of the economy, in view of its domino

effect on other areas of the economy such

as "transportation " and "other services".

Increased activity of "hotels & restaurants"

and "other activities" both mirrored the

rise in tourism. The "other activities"

category comprises of recreational

activities directed to tourists and other

related tourism activities. The increase in

tourism arrivals in 2000 was due partly to

the improved code-sharing agreements

with the different international airlines,

enabling the accommodation of more

passengers on behalf of Air Seychelles.

During 2000 the Seychelles Tourism

Marketing Authority (STMA) continued to

play a pivotal role in marketing Seychelles

overseas. The rise in tourism income via

banks is another plus recorded in that

sector.

Output in relation to “transportation” was

boosted by the increase in transhipment

activities during 2000.

The communications sector, also saw its

output increase in 2000. Several

developments have contributed to the

increased dynamism of this sector. Firstly,

there was a follow up to the dynamic price

war and competition between the two

telephone companies in the previous year,

ANNUAL REPORT 2000 THE REAL SECTOR: PRODUCTION, EMPLOYMENT AND PRICES

- 62 -

namely Airtel and Cable & Wireless (Sey)

Ltd, with the former introducing its own

fixed line services. There has also been a

continuous rise in mobile phone services.

Secondly, there was another opening in the

telecommunications business with the

introduction of a second Internet Services

Provider (ISP) company - Kokonet. This

new company would provide services

alongside incumbent company ATLAS.

Kokonet, jointly owned by Space 95,

Cable & Wireless (Sey) Ltd, and Mauritian

group Blanche Birger Limited as well as

staff grouping would be offering a choice

of different link-up technologies - dial-up,

digital leased line and wireless.

The example of the communications sector

should serve as a model on the benefits

that more competition could bring to the

Seychelles economy.

After registering an increase in both real

and nominal terms in 1999, financial and

business services remained constant

during the year under review, as there was

no major development. Its contribution to

overall GDP in both nominal and real

terms remained roughly at 11 per cent as

recorded in the preceding year.

Outlook for the year 2001 will depend on

the policies that the government

implement in its efforts to improve the

influx of foreign exchange situation.

Under current circumstances the primary

focus will remain on addressing shortage.

This shortage remains the core of the

distortions that the economy is facing.

Producers have been affected by their

inability to access inputs required in the

production process. As far as inflation is

concerned, the existence of price control

will likely to continue to keep inflation in

single digits. However, it is also important

that more fundamental measures need to

be strengthened, in particular the excessive

credit expansion. In this regard it would

assist largely if the Government would

maintain the fiscal discipline, if not

strengthen it, in view of the fact that

Government accounts for a 85 per cent of

total domestic credit.

Whilst supply side policies will also need

to be re-looked at, the looming threat of

inflation warrants serious consideration by

the authorities.

2. Tourism

The year 2000 saw a turnaround for the

most important economic activity.

Analysis at the two main targeted

indicators of growth for the industry,

namely arrivals and income, revealed that

there were increases in both these

aggregates, although the latter was

marginal (Charts 6.2 & 6.3 below).

Furthermore, according to provisional

data on national income, the rise in

activity in the industry during the year

meant that the share of tourism value

added in Gross Domestic Product rose to

17 per cent compared to 16 per cent in the

previous year. This meant that it was not

only the industry that grew but also other

auxiliary services that provide support to

the sector saw increases in their activities.

ANNUAL REPORT 2000 THE REAL SECTOR: PRODUCTION, EMPLOYMENT AND PRICES

- 63 -

In 2000, arrivals rose by 4.2 per cent to

130,046 (Table 6.4). Analysing the

pattern over the year, it was observed that

the spread was relatively even.

Nevertheless, more visitors came in the

first half of the year, with the period

between February and April being the time

with the highest number of visitors. One

of the reasons underpinning the increase in

visitors could have been the increased

marketing drive of the Seychelles Tourism

Marketing Authority (STMA) and that of

the national carrier, Air Seychelles.

Despite the growth in arrivals, the average

length of stay remained unchanged at 10.4

nights. Tourism income through the

banking system also increased during the

year, though as noted above, growth was

marginal, at 0.6 per cent. In total income

amounted to R600 million. With arrivals

rising faster than income, the average per

diem expenditure declined to R445, down

from R460 in the previous year.

Table 6.4 Tourism

1995 1996 1997 1998 1999 2000 Visitor nights – thousands 1147 1270 1340 1347 1299 1352 Visitor arrivals – thousands 121 131 130 128 125 130 Average length of stay (nights) 9.5 9.7 10.3 10.5 10.4 10.4 Tourism income – R million 466 524 612 584 596 600 Average expenditure Per diem – Rupees 407 413 457 434 460 445 Memorandum Hotel bed occupancy rate (%) 53 57 56 53 53 52

Source: Management and Information Systems Division (except tourism income, which is compiled by Central Bank based on commercial bank purchases of foreign exchange from the tourism sector)

Chart 6.2. Tourism arrivals and its growth rates for 1995 to 2000

116

118

120

122

124

126

128

130

132

1995

1996

1997

1998

1999

2000

Years

Th

ou

san

ds

-4

-2

0

2

4

6

8

10

12

Per

cen

t

Arrivals Percentage change

Chart 6.3. Tourism income and its growth rates for 1995 to 2000

0

100

200

300

400

500

600

700

1995

1996

1997

1998

1999

2000

Years

R m

illio

n

-10

-5

0

5

10

15

20

Per

cen

t

Tourism income Percentage change

ANNUAL REPORT 2000 THE REAL SECTOR: PRODUCTION, EMPLOYMENT AND PRICES

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In terms of geographical distribution, the

European continent remained the leading

market with 80 per cent of total visitors.

France, like in previous years was the

most important market with 28,282

visitors. At this level, it accounted for 22

per cent of total arrivals 3.0 per cent

higher than the 1999 aggregate. The other

important European markets remained

Italy, Germany and the UK, accounting for

15 per cent, 14 per cent and 13 per cent of

the total number of visitors respectively.

The market share of Scandinavia and that

of other countries in Europe remained

relatively unchanged. From the other

sources, with the exception of Africa,

there were increases in respect of America

and Asia. For those two markets, the rise

in arrivals was 51 per cent and 7.6 per cent

respectively.

The interest of foreign investors in the

country’s major industry continued during

the year with the start of the construction

of a new five-star hotel at Intendance.

This will be Mahe’s first 5 star hotel. The

hotel owned by Banyan Tree Resort will

be a 100-room hotel and is expected to be

completed by November 2001. Further

capacity increases in luxury hotels have

already been approved. These include

Sofitel Seychelles Hotel and Petite Anse

Hotel. Other project proposals on the

table are Corvina investment/ Sun Resort

(Port Launay), Beach Comber (Ste.Anne),

North Island and Carana Beach.

The opening of the Lemuria Resort further

complemented this strong interest of

foreign investors during the year.

President Rene officially opened the five-

star luxury Lemuria Resort and golf course

on Praslin on October 22, calling on all

Praslinois to support the establishment and

value it as part of their land and the

economic development of their island. He

described the luxury resort, as a “jewel”

which we must all treasure.

In April, Air Seychelles announced the

acquisition of a new generation Boeing

737-700 and a third aircraft in November

2001 to serve regional routes. Its first

aircraft, a Boeing 767-200 would be

replaced by a 767-300, which has 20 per

cent more seat capacity, in April the same

year. This boost in capacity has been

rendered necessary due to the increase in

the number of passengers on some of the

airline’s routes, particularly that of the

UK. The Airline, which operates two

flights a week from Gatwick to Mahe, will

be able to offer more capacity from April

2001 when a Boeing 767-300 will come

into its fleet.

Further additions to Air Seychelles

services have been a partnership with

Avis, a car rental company. Air

Seychelles and international car rental

company Avis, launched a joint initiative,

which will offer passengers flying Air

Seychelles the opportunity to rent Avis

ANNUAL REPORT 2000 THE REAL SECTOR: PRODUCTION, EMPLOYMENT AND PRICES

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cars at beneficial rates. Air Seychelles’

passengers are identified through Avis’

worldwide system as being specifically

Air Seychelles passengers, which means

that if and when they make a booking for a

car rental with Avis anywhere in the

world, they are given beneficial rates.

In addition, there will be special

programmes such as upgrades, running

through the coming year to promote the

partnerships. In Seychelles, it costs on

average about SR350 to SR400 to rent a

car with Avis for a day, but under the

programme, passengers flying Air

Seychelles will pay an average of SR317,

benefiting a reduction of about 9 per cent.

Other developments in terms of air traffic,

has been the re-launching of Inter-Air

services in September from Johannesburg

to Seychelles via Madagascar. There were

also discussions with other airline

companies to start operations in the

coming years.

The Ministry of Tourism & Civil Aviation

again organised its Tourism Week at the

end of September. This time instead of

organising a conference on Mahé, it did a

symposium, by decentralising the

activities to the islands of Praslin and La

Digue, reflecting their continued growing

importance in the tourism trade. The

symposium theme “Impact of Tourism on

the National Economy”, offered the

opportunity for all those involved in the

industry, particularly those on these two

islands.

The prospects for the coming year are

overall positive. The marketing strategy

of STMA and the acquisition of the two

aircraft by Air Seychelles will surely be a

boost to the industry, not just for 2001 but

also for the years ahead.

3. Agriculture

Overview

Agricultural output remained on the

upward trend in the year 2000. Overall,

production increased relative to the

previous year, but it was livestock more

than crop output that explained the rise in

agricultural production. Local production

of livestock continued to expand further,

particularly that of chicken, pork and beef.

If this trend continues this should help

reduce our dependence on imports in the

long run.

As far as crop production was concerned,

there was a decline relative to the previous

year on account of various difficulties

encountered by the farming sector.

Declines were particularly pronounced in

the traditional crops, namely

cinnamon, where both deliveries to

warehouses and export fell significantly.

Copra on the other hand saw an increase in

output, whilst at the same time, there was

a new breath of life for export with an

SITZ company Hinds looking into the

possibility of exporting coconut products.

ANNUAL REPORT 2000 THE REAL SECTOR: PRODUCTION, EMPLOYMENT AND PRICES

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Fruits and vegetables

Information on purchases of fruits and

vegetables by the Seychelles Marketing

Board (SMB) – the traditional measure for

local production – showed that there was a

fall during 2000, which led to an increase

in imports to meet the continued increase

demand of the local market.

Local production, according to the

statistics of SMB, fell by 28 per cent,

which was partly compensated by an

increase of 6.3 per cent in imports (Table

6.5). However, despite the decline in local

production, it was observed that output in

some areas of the country grew

significantly in 2000, especially in the

inner islands of Praslin and La Digue,

which accounted for 43 per cent of total

output.

Table 6.5

SMB Purchases of Vegetables and Fruits 1995 1996 1997 1998 1999 2000

(tonnes) Total 4,614 5,481 5,409 5,964 6,097 6,349 Local 220 333 160 247 388 278 Change (%) 20 51 -52 54 57 -28 Imported 4,394 5,148 5,249 5,717 5,710 6,071 Change (%) -4.0 17 2.0 8.9 -0.1 6.3 *Figures for 1999 have been revised Source: Seychelles Marketing Board

Cinnamon

Cinnamon production, one of the

country’s traditional cash crops, declined

significantly relative to the previous year.

According to data received from the

national statistics office – the Management

& Information Systems Division (MISD) –

cinnamon warehouse deliveries and

exports declined by 94 per cent and 17 per

cent respectively (Table 6.6). The

countries where demand for the product

was the highest were the United Kingdom,

South Africa, Australia and Italy.

Copra

Again in 2000, there was an increase in the

production of copra, as shown in Table 6.6

through a rise in the deliveries to

warehouses of 76 tonnes. However, there

was no export of the product.

Nevertheless, in December, a new SITZ

company, Hinds, was established with the

ANNUAL REPORT 2000 THE REAL SECTOR: PRODUCTION, EMPLOYMENT AND PRICES

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aim of reviving the coconut industry with

value-added coconut products such as

coconut husk, oil and activated carbon

produced from coconut shell, which would

be targeted mainly for the international

market.

Tea

After two years of low output due to

drought, tea production saw an increase,

rising by 4.3 per cent to total 246 tonnes

(Table 6.6). This improvement was due

mainly to better weather conditions.

Table 6.6 Crops

1995 1996 1997 1998 1999 2000

(tonnes) Copra (exports) 353 0 0 0 0 0 Copra (warehouse deliveries) 344 393 314 259 301 377 Cinnamon bark (exports) 487 318 220 289 214 177 Cinnamon bark (warehouse Deliveries) 414 280 241 478 385 25 Tea, green leaf (processed) 226 223 270 250 236 246 Source: Management & Information Systems Division

4. Livestock

The production of livestock, as highlighted

above, was significantly higher than in the

previous year. Data obtained from the

Ministry of Agriculture and Marine

Resources show that local production of

the three most demanded meat rose on

aggregate by 17 per cent, with increases of

34 per cent, 10 per cent and 6.2 per cent in

pork, chicken and beef respectively. The

rise in local production of meat was also

reflected by the traditional indicator of

animals slaughtered at the abattoir in

(Table 6.7). This indicates that increases

were registered in all three meat products

of 30 per cent, 5.7 per cent and 5.8 per

cent respectively.

Table 6.7

Livestock (slaughters)1 1995 1996 1997 1998 1999 2000 (Units) Cattle 189 162 91 123 139 147 Pigs 6,739 5,302 5,165 6,430 6,629 8,619 Chicken (‘000) 733 720 806 684 695 734 1 Le Rocher Abattoir only

ANNUAL REPORT 2000 THE REAL SECTOR: PRODUCTION, EMPLOYMENT AND PRICES

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5. Fisheries

The fisheries sector continued to play a

major role in the country’s economy in the

year under review, both in terms of

employment and value added. Though the

total volume of production from the sector

experienced a drop in terms of fish caught,

namely artisanal and semi-industrial, the

quantity exported and revenue earned from

the fishing industry grew significantly

during 2000, according to data obtained

from the Seychelles Fishing Athority

(SFA).

The lobster season, which was reopened in

the previous year, again produced record

landings. According to preliminary

statistics over fourteen metric tonnes of

lobster were caught in the period of

November 2000 to January 2001.

With regards to the industrial fishing

activity, which in Seychelles covers

entirely tuna fishing, the year 2000 was on

the whole another good year, even though

there was a marginal decline in total catch.

It fell by 0.3 per cent. Nevetheless, there

was an increase in transhipment through

Port Victoria. Furthermore, there was a

rise in total revenue obtained from this

activity.

5.1 Artisanal and semi-industrial

fishing sector

According to information provided to the

Central Bank by the Seychelles Fishing

Authority (SFA), landing through artisanal

fishing, which represent mostly fishing

along the coast (including through the use

of traps) declined marginally during 2000.

Total catch amounted to 4,768 metric

tonnes, a decline of 74 metric tonnes

relative to the previous year (Table 6.8).

Whilst the bulk of what is caught through

this type of fishing is for local

consumption, there continued to be an

increase in demand on the international

market for the high value species of fish.

This was particularly evident in 2000,

where the amount of fresh, frozen and

processed fish exported increased from

825 metric tonnes in 1999 to 2,271 metric

tonnes in the year under review. This

brought the country R45 million in foreign

earnings. The export of fish also includes

those caught using semi-industrial

methods, one of the fishing methods that is

increasingly being encouraged.

SFA concerted efforts have been geared to

promote the development of the semi-

industrial fishing technique. Another boat

built in Sri Lanka joined the fishery during

the year and loans were disbursed for two

22-metre boats financed under the

European Union (EU) longline

disbursement project. The local semi-

industrial fleet as of December 2000 now

comprises 9 vessels. A total of 390 metric

tonnes of fish was caught during 2000

compared to 457 metric tonnes in 1999.

The predation rate an important drawback

for longline fishing decreased substantially

to 11 per cent. Swordfish was the main

species targeted (56 per cent), whilst shark

catch made up 15 per cent of the catch,

this being principally due to the value of

their fins on the international market.

ANNUAL REPORT 2000 THE REAL SECTOR: PRODUCTION, EMPLOYMENT AND PRICES

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The lobster season, which was opened

from November to January for the second

consecutive year, produced landings of 14

metric tonnes. In 2000 this activity was

also better monitored with regular night

patrols organised and more catch and

effort data collected.

Other developments during the year

included negotiations with the Japanese

Government to finalise the grant aid

project for the development of the

artisanal fishery. This project, valued at

R25 million involves the acquisition of an

ice plat of 5 metric tonnes daily capacity,

approximately 60 inboard engines, 5

fishing vessels, fishing and safety

equipment that will eventually be sold to

the local fishermen.

The fuel voucher scheme was also

reviewed with the objective of ensuring

that abuse of the scheme was minimised.

The scheme was also computerised to

facilitate its administration.

5.2 Industrial fishing

The industrial tuna purse-seining fleet

continued to play an active role with 49

purse-seiners licensed, of which 45 were

active. This is a reduction in the number

of licensed vessel compared to 1999 when

56 vessels were licensed but roughly the

same number i.e. 46 were active. The total

catch for the purse seiners licensed to fish

in Seychelles Exclusive Economic Zone

(EEZ) and generally operating in the

Western Indian Ocean during 2000 was

330,340 metric tonnes, compared with a

catch of 331,424 metric tonnes in 1999

(Table 6.8).

Transhipment activity, which includes

landings to the canning factory, increased

during 2000 with 269,673 metric tonnes

transhipped compared to 257,447 in 1999.

This maintained Port Victoria’s status as

the principal transhipment port in the

Indian Ocean. The total amount

transhipped represented 82 per cent of

total catch. This reflects an increase in

fishing operations in the western part of

the Indian Ocean compared to last year.

Concerning industrial longlining activity

165 licences were issued (the major

countries being Taiwan 69, South Korea

28 and Japan 43). The licence fees from

foreign purse-seiners and longliners

dropped significantly in 2000 to R24.6

million compared to R34.6 million in

1999. This is partly due to a reduction in

the catch inside the EEZ as well as the

decrease in the number of longliners

applying for a licence, in particular

Taiwanese vessels.

ANNUAL REPORT 2000 THE REAL SECTOR: PRODUCTION, EMPLOYMENT AND PRICES

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Table 6.8 Estimates of Fish Landed

1995 1996 1997 1998 1999 20001

(tonnes) Artisanal method 4,256 4,510 4,095 3,334 4,842 4,768 Semi-industrial (longline) 50 210 311 280 457 390 Industrial method - Caught 280,000 265,658 271,095 252,595 331,424 330,340 - Transhipped 185,000 163,657 200,279 151,592 257,447 269,673 1 Estimate Source: Seychelles Fishing Authority

Outlook

During 2001, SFA will be working on

several important projects including the

implementation of new management

measures to regulate the local artisanal

fishery and the foreign dominated fishery.

Already, legislation is being passed to

regulate fishing activities around certain

islands in particular those of the Southern

Groups. Seychelles-registered vessels will

now have to report their position and catch

even when fishing outside the (EEZ) and

they will have to be issued with a licence.

A Vessel Monitoring System (VSM) will

be implemented during the course of the

year to ensure that vessels comply with

existing and new regulations.

Lastly, the final phase of the Japanese

grant aid project will be implemented by

the end of the year and hopefully this will

give a boost to the local fishing industry.

6. Industries

The year 2000 was yet another year of

below potential output from the industrial

sector. Information on industrial

development in 2000, based on the yearly

industrial survey conducted by the Central

Bank, indicate that this was another

difficult year for industry. Whilst the

factors impeding growth differed across

industries, the survey showed that the most

common obstacle to growth remained the

shortage of foreign exchange. The latter

affects the importation of raw material and

also hinders the capacity of companies in

their capital investment programmes as

capital equipment is also imported.

Despite difficulties in the industrial sector,

there were areas of production that were

able to produce at a higher level than in

the previous year. This was particularly

true for entities that were producing using

local materials, particularly industries in

the primary sector, namely in agriculture

and fishing sectors. Products made were

targeting both the local and foreign

markets.

Encouraging developments were observed

in the choice of more locally processed

food for both the local and international

markets. With more liberalisation in the

meat and fish processing industries, El’s

ANNUAL REPORT 2000 THE REAL SECTOR: PRODUCTION, EMPLOYMENT AND PRICES

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Products specializing in meat products

and Oceana Fisheries and Sea Harvest

focusing on fish products, all made efforts

to introduce processed meat and fish. In

October, Oceana Fisheries went one step

further and announced export plans to

Europe for its smoked fish, following

completion of a R1.0 million factory using

high technology to meet European Union

standards. El’s Products started to expand

its product range during the year to meet

increased demand from both private and

commercial consumers on the main

islands. In March, it started to offer

‘halaal’ meat products for the Muslim

community. In total, it has more than 30

products of meat and processed meat. The

owners of the company went one step

further by expanding vertically in August

when they launched a new company,

Island Taste, which produces a range of

sauces as an import-substitution industry.

The Indian Ocean Tuna (IOT) canning

factory continued to be the prime

manufacturing entity in the economy

during 2000. Though its output declined

relative to the previous year, amounting to

28,781 metric tonnes. The amount it

exported increased from 34,605 metric

tonnes to 41,490 metric tonnes, accounting

for 93 per cent of the total amount of fish

and other marine products exported during

the year. The revenue earned from this

activity brought the economy R606

million in foreign exchange, an increase of

14 per cent relative to 1999. These

changes are shown below in the following

charts.

Focus: The Ministry of Industries and

International Business Development

Strategy 2000 – 2003

In its endeavour to promote industrial

development further and also recognising

the development that has been achieved so

far, the Ministry of Industries and

International Business (MIIB) has outlined

a Development Strategy for the period

2000 – 2003. The document outlines the

aims and objectives of the ministry that

will enable it to achieve its goal of

bringing industrial and economic progress

to new highs. The document looks at

broad issues but in this short summary

emphasis is put on the industrial

Chart 6.4. Canned tuna produced and exported from 1995 to 2000

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

1995

1996

1997

1998

1999

2000

Years

To

nn

es

Production of canned tuna Canned tuna exported

Chart 6.5. Revenue earned from export from 1995 to 2000

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

1995

1996

1997

1998

1999

2000

Years

Ru

pee

mill

ion

Revenue earned from export

ANNUAL REPORT 2000 THE REAL SECTOR: PRODUCTION, EMPLOYMENT AND PRICES

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development programme and the industrial

management programme.

§ The industrial development

programme

This consists of the following:

Identify, plan and facilitate the co-

ordination and development of appropriate

infrastructure facilities in line with

prospective and future industrial

development;

Evaluate and develop the right policy and

facilitative framework for the various

emerging and developing business sectors,

especially small and micro businesses;

Put in place an equitable financial system

to allow small and medium sized

enterprises (SMEs) access to more

available and cheaper sources of finance;

Identify constraints and solutions to SME

development by consulting representatives

of the private sector and by conducting

periodical surveys;

Guide and work closely with the

Seychelles Bureau of Standards in

developing a policy framework for the co-

ordination of research and development in

the country and facilitating the appropriate

transfer of technology into industrial

processes; and

Facilitate and co-ordinate research

activities carried out by overseas

institutions within Seychelles.

§ The industrial management

programme

This consists of the following:

Guide and support local businesses and

provide facilitatory information on

administrative regulations, procedures and

on concession and incentives available;

Develop and implement an information

system to include intranet services,

industrial statistics and to automate

applications processing;

Provide national databases on business,

standards, science and technology for use

by various organisations and enterprises in

the industrial, commercial and scientific

sectors;

Develop and implement an evaluation

system, which encompasses benchmarking

analysis, determining industrial standards,

value added, and productivity levels; and

Ensure the proper management and

disposition of natural resources to allow

for their sustainable exploitation by

industry.

7. Employment

According to the records of the Social

Security Fund, growth in the labour

market remained strong during the year

under review despite the economic

slowdown. The level of job creation was

even more than last year, particularly in

the private sector. One important factor

that contributed to the rise was the

ANNUAL REPORT 2000 THE REAL SECTOR: PRODUCTION, EMPLOYMENT AND PRICES

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continued expansion of some companies in

the manufacturing sector, particularly

those engaged in export-oriented and

import-substitution activities and also that

of the services sector. The significant

increase in the services sector was

attributable to the revival of the tourism

industry and related activities and also to

the continued growth of

telecommunication provision.

As shown below in Table 6.9, total

employment rose by 1,916 or 5.1 per cent,

of which an increase of 1,845 or 10 per

cent was in respect of the private sector.

This expansion in the level of employment

took the number of people employed in the

country to 39,381. Apart from the

parastatal sector, which also recorded a

rise in its employment pool by another 450

or 8.8 per cent, the government sector

registered a decline. It fell by 379 or 2.6

per cent. The last fall in government

employment was in 1997, when it fell by

8.7 per cent.

Table 6.9 Employment

Dec Dec Dec Dec Dec 1996 1997 1998 1999 2000 Total 30,935 33,328 36,207 37,465 39,381 Private Sector 13,534 16,486 17,675 17,908 19,753 Parastatals 4,836 5,368 4,921 5,100 5,550 Government 12,565 11,474 13,611 14,457 14,078

Source: Social Security Fund

With these diverge movements in sectoral

employment, the share of each sector,

namely private, parastatal and

government, also changed relative to last

year. With the significant increase in

private employment, this sector registered

a rise in its share from 48 per cent in the

previous year to 50 per cent.

Consequently, that of the parastatals and

government put together fell from 52 per

cent to 50 per cent for the same period.

This was mainly on account of the fall in

government employment as the share of

the parastatal sector remained unchanged.

8. Prices

Containing the surge in inflation was one

of government’s major priorities for 2000,

after having seen the average price level

surge from 2.6 per cent in 1998 to 6.3 per

cent in 1999. The inflation rate for 2000,

as published by the Management and

ANNUAL REPORT 2000 THE REAL SECTOR: PRODUCTION, EMPLOYMENT AND PRICES

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Information Systems Division (MISD),

remained unchanged at 6.3 per cent (Chart

6.6 & Table 6.10). This indicates that

whilst the government could not succeed

in slowing down inflation, it at least

managed to prevent a further escalation

thus laying a platform in the coming year

to achieving a reduction in the general

price level.

The relative stability in prices in 2000 was

attributable to all subgroups of the retail

price index (RPI). In Seychelles, there are

three broad categories, namely fish, ‘other

food items’ and ‘non-food products’.

Chart 6.6. Inflation rate for 1995 to 2000

-2.0-1.00.01.02.03.04.05.06.07.0

1995

1996

1997

1998

1999

2000

Years

Per

cen

t

Looking in more detail at these

components, it was observed that the

movements in the price of fish and the

‘non-food’ categories contributed most in

stabilising prices over the twelve months.

There was a fall of 6.5 per cent in the price

of fish along with a moderation in the

growth of prices in the ‘non-food’

subgroup, which rose by 7.7 per cent

compared to 8.6 per cent in the previous

year. The continued fall in fish prices was

in response to the increase in the supply of

fish particularly those of the artisanal

fishery, which makes up the bulk of the

consumption of fish in the economy. In

terms of the slowdown in the price of

‘non-food’ products, the main factor was

the import content on that category.

Compared to a year earlier, the import

index of that group moderated

significantly from 13 per cent to 5.5 per

cent in the year under review. The

moderate growths in the price of

“alcoholic beverages & tobacco”, “fuel,

power & water” and “personal items”

were the main influences in movements in

ANNUAL REPORT 2000 THE REAL SECTOR: PRODUCTION, EMPLOYMENT AND PRICES

- 75 -

the ‘non-food’ category. The first two sets

of items suggested that the effects of the

tax increases that were effected in

September 1998 have already filtered

through the system. Furthermore,

increases in oil prices did not appear to

affect the domestic price of fuel, as the

government kept prices stable even though

those on international markets were

continuously rising.

Table 6.10 Composition of Retail Price Index1

1995 1996 1997 1998 1999 2000 Weights

(percentage change) All Items 1,000 -0.3 -1.1 0.6 2.7 6.3 6.3 Local 656 -0.8 -1.3 0.4 3.2 4.4 7.2 Imported 344 0.6 -0.5 1.2 1.3 10.3 4.4 Fish 32 6.8 -7.3 12.0 10.8 -15.3 -6.5 Other Food Items 234 -1.5 -2.2 0.7 1.0 1.9 2.9 Local 119 -1.3 1.9 1.0 1.5 0.9 4.5 Imported 115 -1.8 -2.6 0.3 0.3 3.3 0.7 Non-Food Items 734 -0.3 -0.4 0.0 2.7 8.6 7.7 Local 505 -1.0 -0.9 -0.5 3.0 6.7 8.6 Imported 229 1.6 0.3 1.4 1.8 12.9 5.5 1 Period averages. Source: Management & Information Systems Division

Nevertheless, despite the slowdown in the

import content of the ‘non-food’ category,

this was partly outweighed by the rise in

the price of locally produced items in that

subgroup. Compared to 6.7 per cent in the

previous year, it increased by 8.6 per cent

in the current year. This was mainly on

account of “housing costs”, which rose by

21 per cent on average compared to 2.4

per cent a year earlier.

For the third sub-group, the ‘other food’,

there was an acceleration in the rate of

growth of its prices, increasing by 1.0

percentage point relative to 1999 to stand

at 2.9 per cent. Again, like the ‘non-food’

category the local component was the

main influential factor explaining the

movement in the price. The local index

rose by 4.5 per cent on average compared

to only 0.9 per cent in the previous year.

The main contributory factors were the

increases in the rate of growth in the price

of “fruits & vegetables” and that of “other

food & non-alcoholic beverages”. As for

the latter, growth mainly attributable to

non-alcoholic beverages as there was a

rise in the price of soft drinks by the main

manufacturer. On the other hand, the

ANNUAL REPORT 2000 THE REAL SECTOR: PRODUCTION, EMPLOYMENT AND PRICES

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import content of the ‘other food’

subgroup moderated considerably, from

3.3 per cent to 0.7 per cent. This was on

account of declines in the prices of

imported “meat and tinned fish” and that

of “dairy products, oils & fats”.

SECTION SEVEN

Offshore and Investment Developments

1. Overview

During the year 2000, activity in the

offshore sector picked up further when

compared to 1999. Firstly, there was an

increase of 11 International Business

Companies (IBCs) above the total

registered in the previous year. Secondly,

a record of 416 IBCs was registered in the

first quarter in the international business

company registration, that brought the

total number of new IBCs for the year to a

total of 1,351. Furthermore, three new

companies were awarded licences to

operate within the Industrial Trade Zone

(ITZ), whilst one new trust was registered.

Among the new ITZ companies, there was

a can manufacturing company, Impress

Packaging Limited that set up operations

to supply cans exclusively to the Indian

Ocean Tuna (IOT) canning factory.

In a separate development, Planus Dental

Technology received ISO certification for

quality management and for

manufacturing and servicing medical

devices.

Mayfair Trust Company Limited, a

licensed registered agent and trustee that

specialises in providing offshore services

opened its offices in Seychelles. The

opening of this foreign owned company

highlighted Seychelles potential as a

growing offshore centre.

In September, SIBA hosted its first

offshore conference at the Casino Des Iles

on Praslin. The influence of e-commerce

on the International Financial Services

Industry was the focus of the conference.

In a move that would further cement the

already strong technological base, on

which offshore businesses rely critically,

the telecommunication sector saw the

introduction of a second Internet Service

Provider (ISP) under the name of Kokonet

that was launched during the year. This

would offer access to some key Internet

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ANNUAL REPORT 2000 OFFSHORE AND INVESTMENT DEVELOPMENTS

- 78 -

services such as wireless services.

Kokonet would be making use of the latest

state-of-the-art technology, and would

provide a reliable and performing

connection to Internet customers.

Other developments included Seychelles'

eligibility to receive benefits under the

provisions of the Africa Growth and

Opportunity Act (AGOA). This

development would help facilitate Africa's

involvement into the global economy.

With regards to developments on-shore,

the Investment Desk issued an additional

14 ‘certificates of approval’ under the

Investment Promotion Act (IPA) 1994. At

the end of 2000, a total of 98 companies

had attained the IPA status, with the bulk

of those companies being tourism-related

investments.

During the year, the Seychelles Industrial

Development Corporation (SIDEC)

reported that it had approved 88 cases for

assistance at a value of R1.8 million,

whilst disbursing R1.9 million. The

European Credit Line Project, which is

also under SIDEC's auspices, disbursed a

further half a million rupees worth of loans

in 2000.

2. Offshore developments

An important component of the country's

offshore sector is the registration of

International Business Companies (IBCs)

by the Seychelles International Business

Authority (SIBA). The IBCs are

incorporated in Seychelles through 18

registered agents. These agents are

responsible for marketing the country's

offshore services abroad. An IBC could

be registered in less than 2 hours, which is

the minimum reported time for

registration.

During 2000, 1,351 new International

Business Companies (IBCs) were

registered with the Seychelles offshore

authority. This represented an increase of

11 relative to the aggregate figure for

1999, when a total of 1,340 IBCs were

registered. Since 1995, there has been an

increasing trend in the number of

registered IBCs (see chart 7.1), bringing

the aggregate number of IBCs registered

with SIBA to a total of 6,159 at the end of

the year under review.

During the first quarter, SIBA set a new

record in international business company

registration, with 416 IBCs being licensed.

This performance is an indicator of SIBA's

established position as an offshore centre.

Things were slower as far as activity in the

international trade zone (ITZ) was

concerned with only 3 new companies

licensed to operate within the Zone. In

fact a total of four licenses were issued,

with one company being allocated two of

those. As already noted there was one

trust that was registered, bringing the total

number to 21 by the end of the year.

ANNUAL REPORT 2000 OFFSHORE AND INVESTMENT DEVELOPMENTS

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Chart 7.1. Number of IBCs registered per year and their cumulative totals

335

909

1134

1090

1340

1351

335

1244

2378

3468

4808

6159

1995

1996

1997

1998

1999

2000

Total yearly registration Cumulative total

During the first quarter, there was a new

SITZ Company that entered into an

agreement to supply cans exclusively to

the Indian Ocean Tuna (IOT) canning

factory. Impress Packaging Limited,

based in Amsterdam, entered into a

partnership with Heinz seafood for a metal

packaging supply agreement.

Planus Dental Technology, a German-

based company already operating in the

SITZ, received ISO certification with the

help and advice of the Wiatrek-Qualitats-

Systeme Company. The ISO certification

was for quality management and for

manufacturing and servicing medical

devices. The company has plans to further

expand through a new-patented dental

implant and a patented electrical technique

using light-emitting diodes (LEDS). It

intends to triple its current workforce of 40

to cater for expected demand for the new

products. The ISO include certification

for the new implant abutment and LED

electro technique patented by Planus,

aimed at the US and Canadian markets.

The LED electro technique process is

designed to fabricate electrical circuits

within billboard advertising letters and

logos, providing back lighting for the

advertisements. German insurance

company Allianz donated 7,000 sets of the

company name and logo, plus some for its

insurance brokers. The implant abutment

was to be introduced in January 2001 by

the 3I company in Miami.

In August a licensed registered agent and

trustee, Mayfair Trust Company Limited

opened its offices in Seychelles. The

company specialises in the provision of

offshore services and has a representative

office in London. It also has a strategic

alliance with Fortress Management in the

ANNUAL REPORT 2000 OFFSHORE AND INVESTMENT DEVELOPMENTS

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Isle of Man. The company, which is

foreign-owned, is committed in having its

headquarters in Seychelles. With a sound

legal framework and infrastructure,

Mayfair highlighted Seychelles' potential

as a growing offshore centre with further

development in the IBC market. The

company also identified further scope for

expanding into more value-added offshore

areas of international trusts, mutual funds

and insurance.

2000 saw SIBA successfully host its first

offshore conference entitled 'Future of

Offshore Centres in the Cyber Age' at the

Casino Des Iles on Praslin in September.

The conference focused on the growing

influence of e-commerce on the

International Financial Services Industry.

SIBA invited a selection of expert

speakers from various jurisdictions within

the offshore industry, including two from

Seychelles to add depth and diversity to

the central theme. Initiatives from the

Organisation for Economic Co-Operation

and Development (OECD), the Financial

Action Task Force on Money Laundering

(FATF), the Financial Stability Forum

(FSF) and International Monetary Fund

(IMF) were comprehensively debated,

covering the combined effects of modern

technology and the new regulatory

environment.

A new modern Telecommunications Act

(2000) was enacted during the year, with

the anticipation of a progressive Electronic

Transactions Act later during the year.

This was followed by the launching of a

second Internet Service Provider (ISP)

under the name of Kokonet. The ISPs

offer shared or dedicated bandwidth to the

Internet backbone and have access to a

variety of key services on the web.

Kokonet would be making use of the latest

state-of-the-art technology, combining the

best of Dell and Cisco. This would

provide a reliable and performing

connection to Internet customers. The

introduction of Kokonet sparked a

competitive price readjustment for the ISP,

namely Kokonet and the existing ISP,

ATLAS. Nonetheless, ATLAS intends to

retain its market share by providing

increased value added services including

international roaming to its customers.

Meanwhile, the SITZ was encouraging a

number of high tech and

telecommunications oriented companies to

take advantage of the presence of well-

qualified personnel, plus an excellent

regulatory framework for e-commerce.

These include SeySAT and Station

Africa's Network Management operation,

which would be upgraded during the first

months of 2001.

With regard to other developments, it was

officially announced in October that

Seychelles is eligible for benefits under

the provisions of the Africa Growth and

Opportunity Act (AGOA). This Act is

collaboration between the United States

and Africa in the President's Partnership

for Economic Growth and Opportunity in

Africa. This development would facilitate

ANNUAL REPORT 2000 OFFSHORE AND INVESTMENT DEVELOPMENTS

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Africa's integration into the global

economy. The AGOA, also referred to as

their 'Africa Act', was signed into law in

May and took effect in October. The law

offers eligible African nations duty and

quota-free entry of their goods into the US

market, especially textiles and apparel.

Eligibility involves African governments'

commitment to open-market reforms and

willingness to free their private sectors.

3. Investment

3.1 The Investment Desk

During the period under review, activity in

the on-shore sector in Seychelles picked

up relative to the previous year. The

investment desk accorded 14 new

businesses the Investment Promotion Act

(IPA) status compared to 8 in 1999. Of

these companies, 5 were ‘tourism

development’ investment, 5 were

‘agriculture and marine resources’

investments, 2 were ‘industrial and

manufacturing sector’ and 2 were

‘professional services’ investment. Out of

the ‘tourism development projects’ one

belonged to the ‘boat charter’ category.

The other four were classed as ‘special

growth status’ investment, that is,

investment relating to tourism

development activities in Outer Islands,

yacht marinas and golf resorts.

This brings the number of Certificates of

Approval issued since the IPA came into

effect in 1995 to 98. The bulk of these

certificates have been issued to tourism

related investments with a total of 55,

which reflects the government’s persistent

attempt to provide incentives to develop

and promote the country’s main service

industry. The other 43 companies issued

with certificates were as follows: 17 were

‘professional services’; 12 were ‘industrial

and manufacturing sector’ investments;

and 14 were in the ‘agriculture and marine

sectors.

3.2 SIDEC

3.2.1 Young Enterprise Scheme

The Small Business Bureau (SBB), which

manages the Young Enterprise Scheme

(YES), under the patronage of the

Seychelles Industrial Development

Corporation (SIDEC), received a total of

1,031 applications for financial assistance

in 2000. The Loans Committee reviewed

428 viable cases, of which only 88 were

approved for assistance for a total value of

R1.8 million. However, a total of R1.9

million was disbursed during the year,

which comprised partly of loans approved

during the year and outstanding loans

approved prior to 2000.

Since it was launched in 1996, loans to the

value of R42.4 million for 1,232 small

enterprises have been approved. Out of

this total amount, R39.9 million has

already been disbursed. In terms of

financial assistance, the "fishing" sector

has been the major beneficiary with a

share of 20 per cent of the aggregate

borrowing. This reflected the

government's efforts to enhance the

artisanal and semi-industrial fishing

ANNUAL REPORT 2000 OFFSHORE AND INVESTMENT DEVELOPMENTS

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sectors. The other major beneficiaries of

the YES scheme were the "retailing",

"social services", "maintenance" and the

"agricultural" sectors with shares of 14 per

cent, 11 per cent, 10 per cent and 9.0 per

cent respectively.

3.2.2 European Union Credit Line

Project

Under the European Union Credit Line

Project a total of R573,500 in loans were

sanctioned, whilst disbursement stood at

R506,650. Since the project was

inaugurated in 1995, a total of R3.5

million has already been disbursed out of

the R7.0 million grant available under the

credit line at a concessionary rate of 3.0

per cent per annum.

Tailoring, handicraft, and carpentry

businesses have received the bulk

of the assistance under the project's

financing scheme with a combined share

of 54 per cent of all total loans under the

project. The districts of English River and

Anse Boileau has benefited the most under

the project each with an 8.0 per cent share

of total loans.

SECTION EIGHT

Operations and Administration

of Central Bank1

1. Overview

The Central Bank continued to assist the

government in assessing and running the

economy through advice and

implementation of economic measures and

at the same time ensure full compliance to

the Financial Institutions Act. With the

continuous decline in the foreign exchange

reserves, new measures were being

considered along with the existing ones,

with the aim of boosting the inflows of

foreign exchange reserves.

As part of the new monetary and fiscal

policy measures implemented by the

government, there was the introduction of

two new bonds. Due to the decline in

interest rates on savings and other time

deposits, there were remarkable sales of

these new issues.

During the year 2000, Barclays Bank PLC

was locally incorporated and was granted

a domestic licence.

In aid of the small business and export-

oriented companies the government

provided new schemes, which constitute

better credit facilities.

2. Banking Services

2.1 Currency and Banking

Operations

The Currency and Banking Operation

Services Division is responsible for the

issue of currency, the management of

accounts held with the Bank on behalf of

the government, commercial banks, other

local financial institutions, foreign

government agencies and international

agencies. It is accountable for the daily

financial transactions of the Bank and

administers temporary advances made to

the government whilst closely monitoring

the external reserves. It is also responsible

for the sale of numismatic coins.

2.1.1 Government Accounts

Over the past years, the government relied

to some extent on the Central Bank for

______________________________ 1 All the data presented in this section is actual.

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ANNUAL REPORT 2000 OPERATIONS AND ADMINISTRATION OF THE CENTRAL BANK

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finance to meet its budgetary shortfalls.

However, since 1999 the government has

been committed to a gradual reduction in

its deficit and also changing the way it

finances the deficit. It has been moving

away from the Central Bank to obtain

finance from commercial banks and also

non-financial institutions through the

issues of securities. This movement away

from advances from the Central Bank was

significantly evident in 2000, with a lower

average stock outstanding of R58 million

(Table 8.1 & Chart 8.1). Commensurate to

that, the stock advances at the end of the

year stood at R396 million, indicating a

marked drop of 37 per cent compared to

the previous year. Both on average and

end of period basis advances were the

lowest ever recorded over the past five

years.

Table 8.1

CBS Advances to government; 1995-2000 1995 1996 1997 1998 1999 2000 (R million) Advances1 345.9 542.4 734.6 874.8 547.2 58.3 Advances2 452.4 503.6 923.2 469.0 623.9 395.9 1 Yearly averages of monthly data compiled on an end-of-period basis. 2 End-of-period data.

Chart 8.1 Advances to Government

0

200

400

600

800

1000

1995 1996 1997 1998 1999 2000

YEAR

Am

ou

nt

(R

mill

ion

)

Yearly average End of period

ANNUAL REPORT 2000 OPERATIONS AND ADMINISTRATION OF THE CENTRAL BANK

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2.1.2 Currency Issues

The total currency in circulation continued

to increase during the year to reach an

amount of R282 million which was 6.8 per

cent higher than the preceding year (Table

8.2 & Chart 8.2). However, the rate of

increase was much slower indicating a

partial success of the measures to control

liquidity.

Of the two components of currency, notes

increased by 7.0 per cent, which was 14

per cent less than the previous year’s

increase, whereas the rate of growth in the

amount of coins in circulation rose by 3.9

per cent. In addition, the share of notes

increased, whereas that of the coins fell by

0.2 percentage points.

Table 8.2 Circulation of Notes and Coins;1 1995-2000

1995 1996 1997 1998 1999 2000 (R million)

Total 154.20 174.20 202.97 219.24 264.27 282.23 Notes 141.60 160.50 189.07 204.29 247.94 265.27 Coins 12.60 13.70 13.90 14.95 16.33 16.96

(per cent) Share Notes 91.8 92.1 93.2 93.2 93.8 94.0 Coins 8.2 7.9 6.8 6.8 6.2 6.0 1 End-of-period data

Chart 8.2. Currency in Circulation

0

50

100

150

200

250

300

1995 1996 1997 1998 1999 2000

Year

(R m

illio

ns)

ANNUAL REPORT 2000 OPERATIONS AND ADMINISTRATION OF THE CENTRAL BANK

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2.1.3 Numismatic Issues

During the year 2000, revenue generated

from the sale of numismatic coins, locally

and abroad, totalled R87,117. The Central

Bank issued only one series of coins to

commemorate the 100th birthday of Queen

Elizabeth, the Queen mother. The coins

were issued in silver and cupro-nickel both

having a face value of R25.

2.1.4 Accounts of Commercial Banks During the year under review the

mandatory cash reserve ratio that

commercial banks have to maintain with

the Central Bank remained unaltered at 2.5

per cent of all eligible deposits. At this

rate, all six commercial banks currently

operating in Seychelles were able to meet

this requirement.

The activities of the bankers' clearing

house remained under the ambit of the

Central Bank. Consistent to recent trends,

the total amount cleared continued to rise

reaching an all time high of R1.9 million

in 2000, which was 13 per cent higher than

the value reported in the previous year

(Table 8.3). Notwithstanding the rise in

the amount cleared, the number of items

cleared dropped by 3.7 per cent totalling

620,492 compared to the 644,593 items

reported in 1999.

Table 8.3 Bankers’ Clearing House Activities; 1995-2000

1995 1996 1997 1998 1999 2000

(Total) Number of items cleared 517,862 577,923 591,415 623,749 644,593 620,492 Amount (R’000) 906,373 1,161,269 1,327,170 1,543,457 1,641,388 1,861,626

(Daily average) Number of items cleared 2,097 2,309 2,394 2,536 2,568 2533 Amount (R’000) 3,670 4,621 5,373 6,274 6,539 7598

2.1.5 Other Accounts

In addition to the accounts of government

and those of banks, the Central Bank

continued to administer two other groups

of accounts on behalf of the government.

The first set of accounts was those of local

and international financial institutions,

foreign government agencies and accounts

in respect of the pipeline scheme. The

second group consisted of several interest

bearing “special funds” of the government

(labelled special deposits). At the end of

the year, these accounts showed a balance

of R774,971, an increase of 3.9 per cent

relative to the previous year.

2.1.6 Annual Balances

For the financial year ending December

29, 2000, the net operating profit of the

ANNUAL REPORT 2000 OPERATIONS AND ADMINISTRATION OF THE CENTRAL BANK

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Central Bank reached an aggregate of R20

million as against the preceding year. This

showed a R5.0 million increase in profit,

which was attributed largely to the rise in

income through an increase in commission

and fees, interests and other income. In

accordance with the Section 16(1), Section

16(3) and Section 16(4) of the Central

Bank of Seychelles Act, as amended in

1986 and 1999, the net profit was

appropriated to the General Reserve

Accounts in amounts determined by the

Board. By the end of the financial year

the Revaluation and Reserve Account,

showed a credit balance of R8.4 million,

reflecting a gain on the revaluation of

Central Bank external reserves.

2.1.7 External Reserves

Total external reserves held by the Central

Bank at the end of 2000 stood at R271

million, which represented a substantial

increment of R111 million relative to the

previous year.

The Special Drawings Right (SDR)

allocated to the Seychelles by the

International Monetary Fund increased by

R0.3 million to reach an amount of R3

million. The increase in SDR is not

accountable by nominal term but rather in

real terms due to the depreciation of our

local currency. At the end of the year

holdings of SDRs stood at SDR 9,367,

which is equivalent to R75,708, after

accounting for the General Reserve

Account of the IMF. The balance of the

reserve tranche with the Fund was at nil at

the end of December.

2.2 Public Debt

The main function of the Public Debt

Division remains the manager of the

Domestic public debt instruments on

behalf of the government. This is in

accordance with the Local Loans Act,

1960, as amended in 1985 (stocks and

treasury bonds); and the Land Acquisition

Compensation Act, 1997 (land acquisition

bonds).

Major developments during the year 2000

included the introduction of new issues of

treasury bonds. This comprised of a 7.5

per cent, 3-year bond introduced in

February with a limit of R300 and a 6.75

per cent, 2-year bond in September with a

limit of R200 million. In addition, the

6.75 per cent 2-year bond issued in 1998

and the 11 per cent 3-year bond issued in

1997 started to redeem.

ANNUAL REPORT 2000 OPERATIONS AND ADMINISTRATION OF THE CENTRAL BANK

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2.2.1 Treasury Bills

Following the introduction of the tap

system in September 1998 there were no

new issue of 91-day, 182-day and 365-day

bills in 2000. These securities remained

with their actual limits of R700 million,

R650 million and R650 million

respectively.

The annual yield on the 91-day bills, 182-

day and 365-day bills remained unaltered

at 4.5 per cent, 5.0 per cent and 5.5 per

cent respectively, since there was no

change in their rates (Table 8.4).

Table 8.4 Treasury Bill Yields;* 1995-2000

Issues 1995 1996 1997 1998 1999 2000 (per cent)

Tender 91-day 12.15 11.51 - - - - 182-day 12.39 11.67 - - - - 365-day 12.28 11.71 - - - - Tap 91-day - 10.50 10.50 7.96 4.50 4.50 182-day - - - - 5.00 5.00 365-day - - - - 5.00 5.50

* Yearly averages of monthly data, compiled on an end-of-period basis.

Chart 8.3. Stock of Public Debt Instruments

0

500

1000

1500

2000

1995 1996 1997 1998 1999 2000Years

Ave

rag

e S

tock

(R

m

illio

n)

Treasury bills Treasury bonds Government stocks

ANNUAL REPORT 2000 OPERATIONS AND ADMINISTRATION OF THE CENTRAL BANK

- 89 -

Total sale for the year increased by 13 per

cent to reach an amount of R4.6 billion.

The 91-day bills continued to account for

the largest share of total sales as evidenced

by the significant 59 per cent share of total

sales. Nevertheless, its share recorded a

drop of 10 per cent when compared to the

previous year.

The average stock outstanding for the

financial year ending December 29, 2000,

rose further by 36 per cent to reach R1.9

billion at cost value, (Table 8.5). The

main subscribers were the commercial

banks, which saw their holdings increase

by 48 per cent, followed by private

companies and institutions which resulted

in an increase of by 13 per cent whilst that

of the Central Bank fell by 69 per cent.

Table 8.5 Treasury Bills;1 1995-2000

1995 1996 1997 1998 1999 2000 (R million) Stock outstanding 1/3/ 753.3 766.0 757.7 876.4 1388.8 1889.8 91-day bills (tap issue) - 41.8 623.1 628.6 - - 91-day bills4/ 203.8 187.1 - 117.1 599.8 679.3 182-day bills4/ 282.6 271.3 31.7 99.1 474.9 606.6 365-day bills4/ 266.9 265.8 102.9 31.7 314.1 603.8 Stock outstanding 2/3/ 810.0 830.9 788.9 897.1 1424.7 1945.7 91-day bills (tap issue) - 43.0 639.9 644.0 - - 91-day bills4/ 210.0 198.3 - 118.2 606.6 687.0 182-day bills4/ 300.0 291.7 33.3 101.6 486.7 621.7 365-day bills4/ 300.0 297.9 115.6 33.4 331.4 637.0 Held by Central Bank 271.8 158.4 53.5 9.4 59.5 18.6 Commercial banks 423.0 502.9 536.6 675.5 1102.6 1632.0 Savings Bank 32.9 43.2 44.4 49.4 77.6 77.5 Other financial institutions 7.9 9.5 7.9 2.9 8.5 18.0 Others 74.4 117.0 127.3 147.2 176.4 199.7 Citibank NA - - 19.3 12.8 - -

1 At cost value. 2 At face value. 3 Annual and quarterly data are averages of monthly data, compiled on an end-of-period basis. 4 With effect from September 15, 1998, new issues of 91-day, 182-day and 365-day bills were placed on tap.

ANNUAL REPORT 2000 OPERATIONS AND ADMINISTRATION OF THE CENTRAL BANK

- 90 -

2.2.2 Treasury Bonds

For the year under review two new issues

were introduced. This comprises of the

7.5 per cent, 3-year bond in February and

the 6.75per cent year bond in September,

for limits of R300 million and R200

million respectively. Of the two issues,

the 7.5 per cent, 3-year bond proved to be

most successful as evidenced by the full

subscription of the latter within 7 months.

The remarkable buoyancy in sales and

demand for such investment could be

partly explained by the remarkably lower

interest rate on savings and other time

deposits at commercial banks.

The sales of treasury bonds for the year

increased by 35 per cent compared to the

previous year to amount to R438 million.

On the other hand, the value of redemption

fell by 69 per cent on account of the 6.75

per cent, 2-year bond issued in September

1998 and the 11 per cent, 3-year bond

issued in February 1997. The total value

redeemed for the year dropped to R221

million compared to the R717 million in

1999.

Table 8.6

Treasury Bonds;1 1995-2000 Authorised 1995 1996 1997 1998 1999 2000 Date Issued Limit (R million)

Stock outstanding 366.8 347.5 438.9 707.3 1255.8 1141.2 25/09/00 6.75%, 2-yr - - - - - 38.2 07/02/00 7.5%, 3-yr - - - - - 210.1 15/09/99 6.75%, 2-yr 250.0 - - - - 83.3 250.0 01/09/98 6.0%, 1-yr 500.0 - - - 139.7 360.4 - 01/09/98 6.75%, 2-yr 200.0 - - - 44.3 199.6 157.3 01/09/98 7.5%, 3-yr 150.0 - - - 17.5 149.1 150.0 01/09/98 8.0%, 5-yr 50.0 - - - 2.3 34.6 50.0 01/02/97 11.0%, 3-yr 200.0 - - 19.8 159.5 200.0 180.2 01/02/97 11.5%, 5-yr 150.0 - - 13.6 85.3 105.5 105.5 01/10/95 12.0%, 3-yr 250.0 7.8 128.6 250.0 242.2 123.3 - 01/09/93 12.5%, 2-yr 250.0 198.5 64.7 13.4 - - - 15/11/92 12.0%, 5-yr 150.0 150.0 150.0 141.2 16.5 - - 01/08/90 16.5%, 3-yr 10.0 2.0 - - - - - 01/08/90 16.5%, 5-yr 10.0 8.5 4.2 0.9 - - - Held by Central Bank 4.9 23.5 20.0 1.8 0.1 0.1 Commercial banks 207.1 195.4 262.8 485.5 932.3 778.9 Savings Bank 43.6 38.6 55.1 80.1 107.8 124.8 Other financial institutions 30.8 8.1 2.5 1.5 0.0 0.0 Others 80.4 81.9 98.5 138.5 215.7 237.4

1 Annual data are averages of monthly data, compiled on an end-of-period basis.

ANNUAL REPORT 2000 OPERATIONS AND ADMINISTRATION OF THE CENTRAL BANK

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Despite the higher sales, the stock

outstanding for the year declined by 9 per

cent relative to the previous year to

average R1.1 billion (Table 8.6). This was

due to the effect of the higher redemption

in the second half of the year, which

outweighed sales.

2.2.4 Seychelles Stocks

No new issue of Seychelles Government

Stocks was offered during 2000. The 8.0

per cent 2004 and the 8.0 per cent

2005/2007 stocks were fully subscribed.

Thus the only government stock open for

subscriptions for the current year was the

8.0 per cent 2009 stocks, for a limit of R50

million.

A total amount of R4.5 million worth of

stocks was sold, representing a 38 per cent

fall relative to the previous year, (Table

8.7). Similarly, the total value of

redemption for the year 2000 was 48 per

cent lower than the R20 million redeemed

in the preceding year. Despite, total

redemption outweighing sales, the average

stock outstanding for the year increased by

8.7 per cent.

Table 8.7

Government Stocks;1/2/ 1995-2000 Authorised 1995 1996 1997 1998 1999 2000 Limit (R million)

Stock outstanding 69.8 73.6 78.7 86.5 91.9 99.9 8.00%, 2009 50.0 - - - - 2.1 9.9 8.50%, 2005/07 30.0 - - 18.7 26.5 29.8 30.0 8.00%, 2004 60.0 55.1 58.9 60.0 60.0 60.0 60.0 9.50%, 1993/97 14.7 14.7 14.7 - - - - Held by Central Bank 3.6 3.6 0.0 0.0 0.0 0.0 Commercial banks 58.7 62.1 74.4 82.0 86.6 91.2 Savings Bank 5.0 5.4 4.3 4.5 5.4 8.7 Other financial institutions 2.5 2.5 0.0 0.0 0.0 0.0

1 Yearly averages of monthly data, compiled on an end-of-period basis. 2 At cost value.

Due to its long time frame to reach

maturity, government stocks proved to be

more popular amongst financial

institutions than with non-financial sector

investments. However, the rate of

increase in government stocks held by

commercial banks was approximately the

same, at 5.0 per cent.

2.3 Banking Supervision

During 2000, the Bank Supervision

Division continued to conduct

ANNUAL REPORT 2000 OPERATIONS AND ADMINISTRATION OF THE CENTRAL BANK

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on-site audits of the commercial banks'

operations in Seychelles. In all, two banks

were fully inspected, namely SIMBC and

Bank of Baroda. Furthermore they

conducted seven spot inspections in all

banks and the Saymore Bureau de change

situated at the Seychelles International

Airport.

The customary bank managers’ meetings,

which involve discussions on banking and

general economic issues, continued to be

held on a regular basis. These meetings

involve the participation of representatives

from the Central Bank and commercial

banks.

2.3.1 Minimum Required Capital and

Investment of Capital Funds

Since May 1999, the minimum required

capital was replaced by the capital

adequacy requirement, which, was set at

8.0 per cent. For 2000 no alteration was

made to this requirement. All banks were

able to maintain it. The capital funds

averaged R205 million, 8.8 per cent higher

than the R188 million recorded last year

(Table 8.8). The capital funds comprise of

assigned capital and reserve fund, which

averaged R111 million and R94 million

respectively against the R104 million and

R84 million in the previous year.

Table 8.8

Capital Fund Ratios of Commercial Banks;* 1995-2000 1995 1996 1997 1998 1999 2000 (R million)

Capital Funds 117.51 127.77 147.77 170.54 188.48 205.16 Assigned capital 76.04 79.04 90.75 100.97 104.45 110.75 Reserve fund 41.47 48.73 57.03 69.57 84.03 94.41 Minimum required capital (5% of A) ** 55.83 57.56 83.67 112.08 124.10 - Memorandum item Eligible deposit liabilities (A) 1116.5 1151.1 1673.3 2241.6 2482.0 -

* Annual averages of monthly aggregates compiled on a monthly basis. ** Figure for 1999 relate to the first four months only.

2.3.2 Minimum Reserve Requirement

and Local Assets Ratio.

The minimum reserve requirement

remained fixed at 2.5 per cent of all

eligible bank deposits, (Table 8.9).

Nonetheless, the outcome was 3.8 per

cent, 0.23 per cent higher than last year’s.

All six commercial banks currently

operational in Seychelles, satisfactorily

ANNUAL REPORT 2000 OPERATIONS AND ADMINISTRATION OF THE CENTRAL BANK

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met the 70 per cent local assets ratio.

However, the real outcome was 96 per

cent, thus indicating that commercial

banks reserves were mostly tied up,

implying a sharp drop in liquidity level at

the banks.

Table 8.9 Minimum Reserves and Local Assets Ratio;1 1995-2000

1995 1996 1997 1998 1999 2000 (per cent) Minimum reserve requirement Statutory limit 20.00 20.00 20.00 14.62 2.50 2.50 Outcome 20.92 21.01 21.49 21.62 3.56 3.79 Minimum local assets Statutory limit 50.00 50.00 50.00 55.83 70.00 70.00 Outcome 59.85 60.41 60.53 71.85 97.11 95.83 1 Yearly averages of weekly data Note: Minimum reserves and local assets in respect of Seychelles Savings Bank has been incorporated with that of other commercial banks.

Chart 8.4 Local Assets Ratio from 1995 to 2000

0

20

40

60

80

100

1995 1996 1997 1998 1999 2000

Years

(Per

cen

t)

Statutory limit Outcome Growth

ANNUAL REPORT 2000 OPERATIONS AND ADMINISTRATION OF THE CENTRAL BANK

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2.3.3 Advances Against Government

Securities.

Central Bank advances to commercial

banks inflated by 53 per cent in 2000,

attaining R485 million, (Table 8.10). The

repayment at the end of the year stood at

R463 million, R22 million less than total

advances. The stock of credit for the year

dropped by 7.6 per cent averaging R6.1

million.

Table 8.10 Temporary Advances against Government Securities; 1995-2000

1995 1996

1997 1998 1999 2000

(R million)

Advances 563.3 315.6 189.5 151.3 318.0 485.4 Repayments 561.6 317.3 189.5 141.3 328.0 463.4 Stock of credit1 8.3 8.4 4.9 3.5 6.6 6.1

1 Yearly data are averages of monthly data, compiled on an end-of-period basis.

2.3.4 Government of Seychelles

Concessionary Re-Finance

Scheme

During the year 2000, the Central Bank

retained the administration of the

concessionary re-finance scheme on behalf

of the Government. In all 4 lines of credit,

worth R7.3 million, were approved by the

Ministry of Finance.

A sharp drop was recorded in the total

value of advances disbursed under the

scheme. Overall, advances for the

year amounted to R6.9 million, which was

84 per cent lower than the amount

recorded in 1999 (Table 8.11). One of the

factors behind the fall was the introduction

of new schemes and incentives providing

better credit facilities for small businesses

and export-oriented companies under the

Small Business Fund (SBF). Secondly, it

was also due to the fact that the 5-year

period for using the scheme is near expiry

for those companies, which are currently

benefiting under the scheme.

ANNUAL REPORT 2000 OPERATIONS AND ADMINISTRATION OF THE CENTRAL BANK

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Table 8.11 Government of Seychelles Re-finance Scheme; 1995-2000

1995 1996 1997 1998 1999 2000 (R million)

Stock of credit1 25.6 25.7 26.1 38.4 21.3 4.9 Of which: Export-oriented: Private sector 0.8 7.7 10.5 23.4 6.3 3.7 Public sector 24.8 18.1 15.7 15.0 15.0 1.3 Advances 53.5 56.4 55.5 89.5 43.1 6.9 Repayments 75.1 52.0 57.7 68.0 71.6 22.6

1 Yearly data are averages of monthly data, compiled on an end-of-period basis.

2.3.5 Advances To Non-Seychellois

The Central Bank continued to request the

submission of all information regarding

advances disbursed to non-Seychellois

investors and private individual by

commercial banks.

The recorded outstanding advances, at the

end of December 2000, amounted to R21

million (Table 8.12). In comparison to the

preceding year, the overall stock

outstanding continued to decline, as

evidenced by the 32 per cent drop reported

over the year as against the 55 per cent in

the previous year. The principal

beneficiary under the scheme was the

tourism-related sector with a share of 62

per cent.

Table 8.12

Commercial Bank Advances to Non-Seychellois;1 1998-2000 1 9 9 8 1 9 9 9 2 0 0 0 Limit Outstanding Limit Outstanding Limit Outstanding R million % R million % R million % Advances 68.5 30.5 20.6 Tourism 16.6 (24.3) 15.9 (52.3) 12.8 (61.9) Wholesale/retail 3.0 (4.4) 0.0 (0.0) .. (0.2) Building and construction 0.1 (0.1) 0.1 (0.2) 0.2 (0.9) Manufacturing 29.0 (42.3) 0.0 (0.0) 0.0 (0.0) Agriculture 0.0 (0.0) 0.0 (0.0) 0.0 (0.0) Fishing 0.2 (0.3) 0.2 (0.7) 0.2 (1.1) Real estate 2.5 (3.6) 0.7 (2.3) 0.0 (0.0) Individuals & households 1.4 (2.0) 1.5 (4.8) 1.2 (5.7) Other businesses 15.8 (23.0) 12.1 (39.7) 6.2 (30.1) 1End-of-period data

ANNUAL REPORT 2000 OPERATIONS AND ADMINISTRATION OF THE CENTRAL BANK

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1.3.6 Advances To Parastatals

The ceiling on credit to parastatals, jointly

determined by the Central Bank of

Seychelles and the Ministry of Finance,

stood at R45 million at the end of the year.

The outstanding advances for the year was

R21million, largely held by the building

and construction sector with an aggregated

share of 57 per cent. The tourism sector

was the second largest beneficiary with an

amount of R6.9 million or 33 per cent of

the total.

Table 8.13

Commercial Bank Advances to Parastatals;1 1998-2000 1 9 9 8 1 9 9 9 2 0 0 0 Limit Outstanding Limit Outstanding Limit Outstanding R million % R million % R million % Advances 79.1 42.8 68.6 27.6 44.9 20.8 Tourism 15.5 2.2 (5.2) 5.5 3.1 (11.2) 11.0 6.9 (33.3) Wholesale/retail 0.0 0.0 (0.0) 0.0 0.0 (0.0) 0.0 0.0 (0.0) Building and construction 35.0 30.6 (71.4) 34.5 20.2 (73.2) 30.0 11.8 (56.7) Manufacturing 2.5 1.9 (4.4) 2.5 1.5 (5.4) 2.5 1.0 (4.7) Agriculture 0.4 0.0 (0.0) 0.4 0.4 (1.4) 0.4 0.4 (2.1) Fishing 1.0 1.0 (2.4) 1.0 0.8 (2.9) 1.0 0.7 (3.2) Transport 13.7 4.3 (10.1) 13.7 1.6 (5.8) 0.0 0.0 (0.0) Communications 11.0 2.8 (6.4) 11.0 0.0 (0.0) 0.0 0.0 (0.0) 1 End-of-period data

2.3.7 Advances To Wholesale and

Retail Trade

During the year 2000 the Central Bank

continued to monitor the trends in

commercial bank lending to wholesale and

retail trade. The total outstanding

advances for the year as at December end

stood at R26 million, R10 million below

the limit of R36 million. All activities

under the scheme were on account of the

private sector.

2.3.8 The Pipeline Foreign Exchange

Payment Scheme

As noticed in recent years, the focus of the

monetary authority during 2000 remained

the abiding foreign exchange shortage.

The notable decline in foreign exchange

receipts through the official channels and

the arguable resurgence of parallel market

activity in foreign exchange remained a

major issue confronting the authorities.

As a result of the increase in parallel

market transaction in foreign currencies,

the total inflows through commercial

banks continued to decline. At the end of

2000 total inflows stood at R755 million

compared to R818 million at the end of the

1999, a 7.7 per cent drop.

Despite the fall in inflows at commercial

banks, at the end of 2000 the balance

under the ‘Pipeline Management System’

ANNUAL REPORT 2000 OPERATIONS AND ADMINISTRATION OF THE CENTRAL BANK

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stood at R132 million, 11 per cent lower

than the R148 million recorded at the end

of 1999.

2.3.9 Banking Licences

Under the Financial Institutions Act 1984,

as amended and the Licences Act 1986,

and in accordance with the Financial

Institutions (Domestic Banking Business)

Regulations, 1996, all banking licences are

renewable annually. Altogether a total of

six banks were operational in Seychelles

during the year 2000 and during the course

of the year all of the banks renewed their

licences.

Barclays Bank PLC was granted a

domestic banking licence on September 29

as it announced its intentions to be locally

incorporated and is now incorporated as

Barclays Bank (Seychelles) Ltd.

3.0 Research and Statistics

The focal point of this division is to advise

the government on monetary, exchange

rate and fiscal measures and policies and

like it has been in the previous years the

publication of the Bank’s Quarterly

Reviews and Annual Report. The

Research and Statistics Division is also

assigned the responsibility of compiling

statistics and the furnishing of macro-

economic and statistical information to

multilateral organisation such as the

International Monetary Fund (IMF) at

regular intervals.

4. Administrative Matters

4.1 Higher Education and Training

4.1.1 General

Ms Jennifer Morel, Director General Bank

Supervision, resumed duty on September

27 after completing her Master’s

programme in Banking and Finance in the

Sheffield Hallan University in UK.

4.2 Courses, Workshops and

Seminars

Miss Maryline Joseph, Bank Supervision

Officer, and Miss Caroline Abel, Research

Officer, participated in a workshop on the

“Legal and Operational Framework of

SADC Central Banks”, held in South

Africa from March 21 to 23.

Mrs Marylene Simeon, Public Debt

Supervisor, attended the 32nd Central

Banking course held in Pakistan from

February 28 to April 29. This course is

aimed at providing participants with a

broad knowledge of the principles of

central banking and its relationship with

the changing socio-economic problems of

developing countries.

Mr Pierre Laporte, Director General of

Research and Statistics, participated in the

SADC Payment Systems Harmonisation

Workshop on Payments System held

Pretoria, South Africa, from May 8 to 10.

This was a follow up of the meeting held

in February.

Mr Norman Lucas, Director Banking and

Currency Operations attended the

ANNUAL REPORT 2000 OPERATIONS AND ADMINISTRATION OF THE CENTRAL BANK

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Operations Management held in Pretoria,

South Africa, from August 14 to 18. The

course was organised by the Information

Technology Forum of SADC.

Mr Phillip Moustache, Bank Supervision

Officer attended the International

Conference of Banking Supervisors and

seminars on Co-operation and Information

Sharing-Principles and Practices. The

conference was held in Switzerland from

the 17 to 21 September.

4.3 Official Meetings

Mr Pierre Laporte, Director General of

Research & Statistics, attended, a meeting

associated with the SADC Payment

System Project held in Pretoria, South

Africa, from February 17 to 18.

Mr Norman Lucas, Director Banking &

Currency Operations, attended the

Common Market for East and Southern

African countries (COMESA) Monetary

Co-operation meetings held in Mauritius

from the 20 to 25 March. There were

altogether three meetings at the ministerial

level, central bank governors' level and for

experts from central bank/ministry of

finance.

Mr Francis Chang-Leng, General Manager

and Mr Pierre Laporte, Director General

Research and Statistics, attended the

International Monetary Fund (IMF)

/World Bank Annual Meetings which was

held in Czech Republic from September

26 to 28.

5. Board of Directors

During the year 2000, the Board of

Directors held six meetings. The board of

Directors comprised of Mr Norman

Weber, Governor of the Central Bank, Mr.

Errol Dias, as a Director, Mr. Francis

Chang Sam as a Director, Mr. Francis

Chang Leng, the General Manager of the

Central Bank and Mr. Patrick Stravens as

the Secretary to the Board.