The Central Bank of Seychelles (CBS) said Thursday it is ready to intervene to stabilise the island nation's currency after the rupee's 25 percent drop against the dollar the last three weeks.
The sharp drop in the value of the rupee, one of the effects of the COVID-caused shut down in tourism, is likely to result in higher prices for imported goods in Seychelles
The governor of the Central Bank, Caroline Abel, told a press conference that the bank wants to see stability in the currency markets.
"There are people who have forex and they are asking for a price to exchange it. When you ask for a price that is above the rate published, you are speculating that the exchange rate should reach this level," said Abel.
"If this speculation becomes more evident, it will create great damage within the market. Our role is to make sure that there is stability in the general price of forex in the country and we are concerned about the situation," continued Abel.
As tourism is the first pillar of Seychelles' economy, the COVID-19 pandemic and travel restrictions brought about because of it has greatly impacted on the income the island nation earns from this sector.
According to figures from CBS, within the period of March 31 to April 22, the rupee has depreciated by 25.8 percent for a dollar and by 23.5 percent for a euro. In terms of value, for the same period, the cost of one dollar has gone up by SCR3.64 costing an average of SCR17.72 on April 22. There has been an increase of SCR3.67 for euro which stood at SCR19.28 on Wednesday.
As of April 22, Seychelles has $582 million, out of which $430 million can be spent. Calculations show that this reserve can sustain the country for 17.8 months
Abel explained that should the foreign exchange market move too violently, this will bring about severe consequences for the country in terms of prices of goods and services and that CBS will have to intervene.
"This is why we continuously say that we all need to take our responsibilities because we are all being affected by this pandemic though not all of us will be affected in the same way," said Abel.
"If we look at the depreciation from March 31, we can imagine its consequences on future prices. If next week I come and say that currencies have depreciated by 30 percent and the next week by 40 percent, we will all feel the consequences but we will each feel it at different levels," she added.
Abel explained that people whose incomes are lower will feel a greater blow and will mean that these individuals might have to ask the government to supplement their income as they cannot get basic commodities for their household.
She added that speculation of forex prices is not in the benefit of the Seychelles, an archipelago in the western Indian Ocean, and can damage the central bank's policy on inflation.
The Central Bank has activated a page on the CBS website, dedicated to all measures revolving around the COVID-19 situation. Called 'Response to COVID-19' the page also contains a public awareness and frequently asked questions section, as well as links to press conferences that the bank has given on the subject of the global pandemic.