Seychelles maintains ‘B’ credit standing in signal that tourism is predicted to rebound

According to Fitch Ratings, there are signs of a recovery in tourist flows to the Seychelles. (Joe Laurence)

Photo license

(Seychelles news agency) – Seychelles recently retained a ‘B’ credit rating with a stable outlook Fit ratings released last week, reflecting expectation that tourism and economic growth will rebound.

Finance Minister Naadir Hassan told reporters Tuesday that the assessment was positive news for Seychelles.

“It means that the government has been able to bring stability to the economy. The rating gives us an idea of ​​how to proceed. It also has a direct impact on investors who look at the rating to analyze whether their investments are secure. ” said Hassan.

The economy of Seychelles, an archipelago in the western Indian Ocean, was hit hard when a drop in travel due to the COVID-19 pandemic negatively impacted the tourism industry.

The island nation was downgraded from a ‘B +’ rating to ‘B’ in December last year.

According to Fitch Ratings, there are signs of a recovery in tourist flows to Seychelles, which reopened their borders on March 25, and visitor arrivals in April rebounded to 38 percent of 2019 levels, the highest since the COVID-19 outbreak -Pandemic.

The Finance Minister said the Seychelles recovery “is being driven by non-core tourism markets and should be supported by the return of traditional European tourists as global travel restrictions ease.”

Fitch also predicts a rebound in real GDP to 5 percent growth in 2021, thanks to a robust resumption of tourism activity, favorable base effects and expansive financial and monetary policies, as well as a very successful vaccination program.

However, she warned that the recent surge in daily infections and deaths since late April 2021 could add further restraints that could weigh on recovery, while negative developments in the pandemic around the world also pose a downside risk.

Fitch said funding needs in 2020 were largely met from domestic sources, mainly Treasury bills and SCR 1.5 billion of three-, five- and seven-year bonds.

For 2021, it forecasts a funding requirement of 11.9 percent of GDP, which is to be met mainly by domestic borrowing from banks, while further program disbursements from the International Monetary Fund (IMF), the World Bank and the African Development Bank are currently being negotiated.

Fitch believes that negotiations on a new IMF program are unlikely, given the strong adherence to previous programs in the Seychelles.

Fitch’s debt estimates exclude $ 82 million, which is 6.5 percent of GDP of Air Seychelles’ debt, of which the government is negotiating $ 72 million with the airline’s bondholders to bring it down to $ 20 million – reduce dollars.

Hassan said that given the current economic situation, it is clear that the government cannot continue to subsidize the national airline for its operating losses.

With the aim of getting a better rating, Hassan said the Seychelles need to limit spending in proportion to the revenue collected.

“We also need to reduce current account deficits. This has to do with maintaining a strict balance between incoming and outgoing foreign exchange so that the country’s reserves are not further affected. If we move in the opposite direction, it will result in a downgrade, “he added.