60 second interview

Face to face | 22 August 2016
Caroline.Abel_.jpg

Clarissa Dann catches up with central banker Caroline Abel on her home turf of Mahé, Seychelles, at the Afreximbank annual general meeting 2016

How has the Seychelles banking sector contributed to the country’s economy?

It has been supportive but right in recent years, the banking sector has been reluctant to extend financing to SMEs. Two years ago, the government came up with a guaranteed scheme for SMEs which has improved things, but banks are not necessarily the right sources of finance. The Seychelles Development Bank, on the other hand, has been very active here and we have been talking to the banks about changing their models so they have dedicated departments dealing with small business credit. We are also working on legal reforms so that non-bank institutions can support SMEs.

What are the main changes you have seen in the central bank?

When I joined in 1994, the population thought it was a department of the Ministry of Finance, even though the Bank had its own statute. In 2004, the government decided we needed to have an independent central bank and in 2005, a new board was constituted. 
In 2008, the whole country reformed and the Central Bank saw an enhanced independence. Policy is announced every quarter to the media and is available on its website.

How have you maintained price stability and financial system soundness?

With the reforms we did a lot of changes and tried to understand the dynamics affecting the economy in general. We are forward looking in our policy and we communicate with the market. In 2007, the Central Bank of Seychelles requested the IMF to assess capacity and a tier programme was put in place. For the first 18 months, this comprised a programme to enhance various areas such that we would be better prepared for the future. Two years ago, this moved on to more of an emphasis on payments systems oversight. The board has also stipulated that we become more active on consumer protection and work has started in that regard.  We anticipate that by the second half of 2017, a new framework will be in place.

As a net importer, Seychelles has gained from falling commodity prices, but what does this mean for the ‘blue economy’?

For us, oil prices are a major issue as they affect tourism and now more so the blue economy, particularly utility prices and transportation cost. With a small population like ours (just over  90,000), the other challenge is labour as we don’t have enough to be able to generate the value addition such that exports can be enhanced. Anything we make involves a proportion of salaries leaving the country on foreign labour. This is a huge challenge for us.

Where do you think the African banking sector is heading?  

Development finance institutions such as Afreximbank and PTA Bank have been going out to pull the funds that have been generated in Africa to return to Africa. Central banks and governments are supporting them in this with capital raisings and where they put their reserves.  

Tell us about the offshore banking sector

If you don’t put your house in order we can’t provide services. African countries, particularly the banking sector, must improve their compliance and without this we cannot link up with the world. De-risking has been a huge challenge. In 2014, BMI Offshore Bank lost its correspondent bank. We intervened, took over the management, looked for a new correspondent bank, restructured it, and returned the bank to its management in May this year. To bring confidence, new laws are being brought in and there is more collaboration between the Ministry of Finance, Trade and the Blue Economy, 
the Central Bank, the Financial Services Authority and the Financial Intelligence Unit.

What are the priorities for Seychelles as an offshore financial centre?

After the event of BMIO in 2014, we went to each bank and did a full AML assessment and gave our recommendations on what gaps needed closing. We are also getting assistance from the IMF on oversight framework and this is already in place. With all the legislation covering offshore activity, adjustments are being proposed. We are also getting a new Companies Act as the last one was in 1972. 

What keeps central bankers like you awake at night? 

Given that we are an open country in terms of trade and economic shocks – both domestic and internationally, one is always wary something might happen. We used to have a fixed exchange rate and all controls were removed in November 2008. At the beginning of the process there were concerns on the extent of the adjustment. In 2012, 
we had a severe drought and the government had to import desalination plants and this put pressure on the foreign exchange demand. With the tourism industry relying on Europe as the main source market, there was speculation on the parity of the domestic currency vis-à-vis the euro. 

In 2014, we had another episode of depreciation but this time round we did not intervene even though the market wanted us to. It adjusted and now we are trading at a stable 13.2 rupees to the dollar. Another major event was when BMIO lost its correspondent bank, we had to move fast and got the support in place quickly.

 

Her Excellency Caroline Abel is Governor 
of the Central Bank of Seychelles and is on the board of directors of Afreximbank

Already registered? Login to access premium content

Give Feedback