Seychelles Cuts Benchmark Interest Rate as Virus Outbreak Rages

Seychelles central bank cut its key interest rate for the first time in a year to support the economic recovery, as the world’s most-vaccinated nation struggles to contain a surge in coronavirus cases.

The monetary policy committee reduced the rate to 2% from 3%, the Central Bank of Seychelles said in a statement on Wednesday. The Indian Ocean island nation’s economy contracted by 24.6% in the first quarter from a year earlier.

It’s the fourth cut by a sub-Saharan African country this year after Uganda, Ghana and the Democratic Republic of Congo. Most peers have kept rates unchanged, while a few have increased them.

Seychelles Cuts Benchmark Interest Rate as Virus Outbreak Rages

“Mindful of the prolonged challenges that threaten economic recovery, this stance is aimed to support domestic economic activity,” the central bank said. “The effects of the Covid-19 pandemic are still being felt across various sectors of the domestic economy and in general, economic activity remains weak.”

The palm-fringed Indian Ocean archipelago has seen a surge in Covid-19 infections since May, even though 70% of its 98,000 people are fully inoculated with either Sinopharm or AstraZeneca Plc vaccines.

The country quickly moved to administer shots and reopen its tourism-dependent economy. The government, however, decided to extend curbs imposed on movement and gatherings indefinitely last week due to the persistent community transmission of the virus.

Economic recovery will depend on the revival of global travel and the response to vaccination, particularly in key tourism markets, as well as fiscal and debt sustainability, the central bank said.

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