Russian-Ukrainian conflict: Seychelles braces for economic impact, rising commodity prices and falling tourism revenues

The Minister of Finance of Seychelles, Naadir Hassan, made a statement on this subject to the members of the National Assembly. (National Assembly)

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(Seychelles News Agency) – The Seychelles government is considering several measures to limit the impact of rising global commodity prices following the ongoing conflict between Russia and Ukraine, a senior government official said on Tuesday. government.

Seychelles Finance Minister Naadir Hassan made a statement on the matter to members of the National Assembly, given the potential repercussions of the ongoing conflict between the two Eastern European countries.

Hassan said two key factors that will hurt Seychelles’ economy are “a reduction in the stock of certain commodities globally and this will affect prices due to demand. Commodity prices will be influenced by the constantly increasing cost of transportation.”

He said the Ministry of Finance was meeting with key local partners to assess and monitor the impact of the conflict.

“We recognize that the low-wage population group will be more affected. As I said last year in my speech, we are working on reforms in social welfare services. The government is now accelerating reform in the purpose of ensuring that those who really need help will get it,” the minister said.

Possible increase in public sector wages and more social assistance

He added that the government is also discussing and evaluating various measures including the reform of the contribution to the Pension Fund on which an announcement will be made later.

the Seychelles Pension Fund had announced plans to increase the mandatory monthly contribution from April 1 to keep the pension fund paid, amid concerns over its solvency given the island nation’s rising life expectancy.

The minister said an assessment is underway to see the possibility of a salary increase, as announced in his budget speech in December.

“This measure will have to take into account the budgetary constraints in which we are, because we are in an economic reform supported by the International Monetary Fund”, he added.

Seychelles, an archipelago in the western Indian Ocean, relies heavily on the tourism industry, the main contributor to its economy.

Hassan said rising fuel prices will lead to higher airfares and this uncertainty will discourage people from travelling.

“The arrival of tourism which was very promising at the beginning of the year, will go down and the income taxes that the government collects will also go down,” he said.

At the end of February, visitor arrivals to Seychelles according to the National Bureau of Statistics (NBS) stood at 48,508 compared to the same period last year when only 1,551 tourists came to the island nation.

“The amount of foreign currency in our domestic market for January and February was $130 million in total. This is a significant increase from the $68 million recorded for the same period last year,” Hasan said.

Seychelles was already on the road to recovery following the Covid-19 pandemic with positive projections for the rest of the year. The conflict between Russia and Ukraine has again cast new doubts on the economic stability of the country.

Seychelles’ dependence on the Russian tourist market

A direct impact of Russia’s invasion of Ukraine on Seychelles is that Russia’s national airline, Aeroflot, has halted all international operations and this is expected to directly affect the island nation’s current largest tourism market. .

Russia leads the Seychelles tourism market with 32,000 of the total visitor arrivals of 182,849 in 2021, mainly due to the availability of direct flights.

Additionally, with Russia being the world’s second-largest oil producer, this is also expected to impact oil prices, and as of March 8, the price of crude oil had reached $122 per barrel, according to oilprice.com.

Hassan concluded by saying that “like the Covid-19 pandemic has shown us, the uncertainty in the world means that as a country we have to be ready to depend more on ourselves.”

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