Devaluation is now a reality of life in 2007

Devaluation is now a reality of life in 2007

In mid 2006 the Government of President Michel made as much noise as it could about the liberalisation of foreign exchange. That was just before the presidential election. The impression given was that soon our foreign exchange problems will be no more. One would walk up to the foreign exchange counter in any bank in Victoria and his/her demands in hard currencies will be met without any major difficulties.

Shortly after his appointment, the new Minister of Finance made grand declarations “a la Fidel Castro”, on the eventual “liberalisation” of laws which govern local dealings in foreign exchange. Expectation was sky high, but it was soon to be the biggest anti-climax ever. The Minister of Finance, Danny Faure, in late October, 2006, addressed the National Assembly with new measures for foreign exchange management locally. In effect it was devaluation in the guise of liberalisation. Minister Faure by strict instruction from his boss had dubbed it ‘liberalisation’ for obvious reasons. Everyone else was calling it ‘devaluation’ in disguise. The Seychelles rupees previously pegged to the US $ was allowed to float against a basket of major currencies, including the American Dollars.

We now have the evidence for you to judge for yourself who was trying to pull the wool over the people’s eyes - the Opposition or the Minister of Finance in collaboration with President Michel. The Central Bank has duly obliged and provided us with samples of ‘Authorised Foreign Exchange Rates’ for comparison (see below). It is obvious, even to the amateur observers that the rate of exchange before Faure’s ‘liberalisation’, October 2006, compared to current rates, January 2007, that the Seychelles Rupees has lost significant value against almost all major currencies.

According to a reliable source, Central Bank is targeting a 30% drop in value of the rupee by the end of the year. People travelling overseas on holiday, business or for medical treatment are finding that they now require more rupees than before to buy the 400 dollars allowance. A quick look at the table below will show you that on October 3, 2005, local banks were selling a U.K Pound at 9.97, US Dollar at 5.63 and Euro at 6.79. This rate has been consistent up until the so-called ‘liberalisation’. When compared to the current rates, say January 17, 2007, U.K Pound is selling for 11.98, a loss of 2.01 rupees in value to the Pound. The US Dollar is now selling at 6.03 a further loss in value for the rupee, and the Euro is now selling at 7.89, another loss of 1.1 rupees against the Euro for the Seychelles Rupee.

CBS Exchange rates for 2003

CBS Exchange rates for 2005

CBS Exchange rates for 2006

CBS Exchange rates for 2007