The World Bank in Seychelles

The Republic of Seychelles lies northeast of Madagascar, an archipelago of 115 islands. The country has a total population of 107,000 inhabitants, three-quarters of whom live on the main island of Mahé. Seychelles has the highest gross domestic product (GDP) per capita in Africa, at $ 15.8 billion (2022). Its economy is highly dependent on tourism and fisheries, and climate change poses long-term sustainability risks.

Political Context

Independent since 1976, the Seychelles is a relatively young democracy. The first multiparty presidential election was held in 1993 after the adoption of a new constitution. The latest presidential and parliamentary elections took place in October 2020, bringing an opposition candidate, Wavel Ramkalawan, to the Presidency for the first time since the introduction of democratic elections. Ramkalawan’s Linyon Demokratic Sesel party also won the most seats in the national parliament. With well-established democratic institutions, Seychelles' political environment is expected to remain stable. The next general election will take place in 2025.

Economic Developments and Outlook

Seychelles is the most prosperous nation in Sub-Saharan Africa. The economy remains highly dependent on tourism, making it highly vulnerable to global macroeconomic developments. Investor interests in the blue economy sector are growing. Fisheries remain the largest sector after tourism.

Growth reached 9% in 2022, before moderating to 4.3% in 2023. Average inflation fell to 2.6% in 2022 and is projected to decline to 1.4% in 2023, averaging 1.7% in the medium-term. This reflects a moderation in global energy and food prices and recovering private consumption. The Seychelles currency Rupee is expected to remain strong and slightly appreciate to SRs13.3 per US dollar by end-2024, supported by modest flows of foreign exchange into the tourism sector. Slower economic growth is also reflected in employment numbers. In the first quarter (Q1) of 2023, total employment increased by 3.7 % while average earnings increased by 0.4 % compared to 2022 Q1, leading to a slight decrease in poverty levels, from 5.9 % in 2022 to 5.6 % in 2023. Ongoing reforms to the social protection system will ensure its sustainability and promote increased labor force participation of working-age beneficiaries, contributing to reducing poverty. Financing needs declined in 2022, due to lower spending on wages and social programs, coupled with delayed capital spending. This in turn has contributed to containing public debt, which has continued to decrease sustainably, reaching 68.3% of GDP in 2023 from 69.9% of GDP in 2022. The banking sector has remained liquid and well-capitalized but with a slight increase in non-performing loans to 7.7% in March 2023 (from 7.3% in March 2022), reflecting the easing off of related COVID-19 pandemic forbearance measures.

Development Challenges

Among Seychelles’ development challenges is a focus on greater productivity, higher labor force participation, and improved performance of the economy as a means to increase shared prosperity. Some of the related institutional challenges are notable barriers to opening and operating businesses; inefficiencies in public sector management, such as limited statistical capacity; scope for a more strategic and sustainable approach to social protection; and the need to broaden access to quality education and skills development. Climate change adaptation, including through strengthened disaster preparedness systems and enhanced coastal management, is also key. Near-term priorities include maintaining debt sustainability, and continued reform to the social protection system to support the most vulnerable. In the medium term, the focus will be on increasing revenues and boosting capital expenditures, to invest on climate change mitigation. As part of the structural reform agenda, revenue administration, public financial management, and governance could be prioritized, including a digitalization strategy and the reform of state-owned enterprises.

Last Updated: Sep 21, 2023

The overarching objective of the World Bank Group’s (WBG) Seychelles Country Partnership Framework (CPF) FY18-FY23, prepared in close consultation with the government, private sector, and other development stakeholders, is consolidating the country’s path to inclusive and sustainable prosperity. To that end, the strategy delineates the two mutually reinforcing focus areas of shared prosperity and inclusion and public-sector performance. This entails retooling the fisheries and tourism core economy for sustainability and inclusion, along the lines of the government’s flagship Blue Economy Program and strengthening the management and resilience of natural resources.

The CPF supports a shift in focus towards building the human capital of the bottom 40% of the population to enable them to participate in new expanding opportunities. Finally, it seeks to consolidate resilience in public finances by increasing their efficiency, improving the regulatory capacity of the state to foster space for the private sector, and setting the foundations for transparency and accountability.

The World Bank portfolio in Seychelles stands at $65 million (including national projects and budget support) as of September 2023. The active advisory and knowledge portfolio includes one Reimbursable Advisory Services (RAS) on Financial Sector Development. The World Bank is also preparing a Public Expenditure Review.

Last Updated: Sep 21, 2023

To support the country’s response to the social and economic fallout caused by COVID-19, the WBG disbursed a $7 million Catastrophe Drawdown Loan (Cat-DDO) in April 2020 and provided an additional $15 million credit from the International Bank for Reconstruction and Development (IBRD) in July 2020. The Development Policy Lending was utilized to enhance the country’s response mechanisms in health, social protection, and the private sector, and to support the country’s post-crisis recovery through strengthened financial systems and climate resilience. Further budget support has been provided through the Seychelles Fiscal Sustainability and Climate Resilience Development Policy Financing series of three operations that aim to (i) strengthen medium‐term fiscal sustainability; (ii) build resilience; and (iii) promote policies for inclusive and sustainable growth. A combined total of $60 million has been disbursed under the first (FY2022) and second (FY2023) operations.

Under the Southwest Indian Ocean Fisheries Governance and Shared Growth Program (SWIOFish3) the Bank is supporting the management and conservation of marine areas and strengthening seafood value chains in the Seychelles. The project is co-financed by a Seychelles Blue Bond ($15 million), which is supported by a $5 million guarantee from the IBRD and a further $5 million concessional loan from the Global Environment Facility (GEF). This first-ever sovereign Blue Bond was issued by the Government of Seychelles in October 2018. The Blue Bond is an innovative financing mechanism to mobilize private sector investment to support the ocean economy. The proceeds are used to capitalize a Blue Grants Fund and a Blue Investment Fund managed by the Seychelles Conservation and Climate Adaptation Trust (SeyCCAT) and the Development Bank of Seychelles (DBS).

Proceeds from the bond will include support for the expansion of marine protected areas, improved governance of priority fisheries, and the development of the Seychelles’ blue economy through activities such as promotion of best practices, implementation of fisheries management plans, stock rebuilding, improvement of value-chains, and aquaculture development.

Last Updated: Sep 21, 2023

The World Bank works in collaboration with other development partners of Seychelles, including the International Monetary Fund (IMF).

Last Updated: Sep 21, 2023