With a population of just over 91,000, Seychelles is an island nation located off the eastern coast of Africa in the Indian Ocean. Seychelles gained its independence from the United Kingdom in 1976, at which time the population lived at near subsistence level. Today, Seychelles’ main economic activities are tourism and fishing, and the country aspires to be a financial center. Although the World Bank recently designated Seychelles as a “high income” country, its wealth is not evenly distributed. Indeed, the United Nations Development Programme’s Human Development Report for 2015 found that Seychelles has the highest income inequality in the world, with a Gini coefficient of 65.8. http://hdr.undp.org/sites/default/files/2015_human_development_report.pdf.
In 2014 and 2015 Seychelles saw GDP growth of 3.3 and 3.5 percent. The International Monetary Fund (IMF) has predicted GDP annual growth between 3.5 and 3.7 % through 2018. The IMF assesses the principal domestic economic risk in Seychelles as potential losses in state owned enterprises, which could endanger the public debt reduction achieved by the central government. The IMF sees external risks stemming from weakness in the tourism market.
Seychelles experienced a socialist coup in 1977 which resulted in a centrally planned economy and, in the short term, rapid economic development. However, serious imbalances such as large deficits and mounting debts contributed to persistent foreign exchange shortages and slow growth that plagued Seychelles through the first decade of the 21st century. After defaulting on interest payments due on a USD 230 million bond in 2008, the government of Seychelles (GOS) turned to the IMF for support. To meet the IMF’s conditions for a stand-by loan, the GOS implemented a program of reforms, including a liberalization of the exchange rate regime, devaluing and floating the Seychellois Rupee (SCR) and eliminating all foreign exchange controls. Seychelles completed its five-year reform program in late 2013.
Despite GOS attempts to diversify the economy, it remains focused on fishing and tourism. Seychelles’ vast Exclusive Economic Zone (EEZ), which encompasses 1.3 million square kilometers of the western Indian Ocean, is a potential source of untapped oil reserves and represents potential business opportunities for U.S. entities. Seychelles also has a small, but growing, offshore financial sector. There is also scope for U.S. investment in renewable energy as Seychelles seeks to reduce its heavy dependence on imported fossil fuels while preserving its naturally beautiful environment.
Seychelles welcomes foreign investment. The country’s investment policies encourage the development of Seychelles’ natural resources, improvements in infrastructure, and an increase in productivity levels, but stress that this must be done in an environmentally sound and sustainable manner.
Since multi-party elections began in Seychelles in 1993, the ruling Parti Lepep has traditionally won elections by large margins. However, the December 2015 presidential elections led to a run off and a very narrow victory for the incumbent President James Michel. The opposition has filed legal challenges to the election, asserting that it was fraught with corruption. At the time of drafting this document, the legal challenges are ongoing.