(Seychelles News Agency) - The demand for foreign exchange in Seychelles remains high, a top official said Thursday, as the value of the rupee continues to slowly lose value against the dollar in large part due to the economic downturn amid the COVID-19 pandemic.

The governor of the Central Bank of Seychelles (CBS), Caroline Abel, told a press conference that the demand for forex tends to increase every year ahead of Christmas and New Year, when people tend to spend more. However, the economic situation of the country is not the same as in previous years.

"We have already said that if demand is higher than supply it will have a direct impact on the exchange rate. If we reach that point, there would be a significant depreciation in the foreign exchange market," said Abel.

She added that "we need to take into account that although the Central Bank is using the reserve, it will not bring it down to zero tomorrow morning. The economy is still fragile and the country needs to continuously look at its expenditure."

As of Wednesday, a U.S dollar cost about SCR18.61, and if the exchange rate keeps increasing it will cause a rise in the price of commodities, Abel said. A year ago $1 was worth about SCR13.5, meaning the currency has dropped in value nearly 50 percent versus the dollar.

The Seychelles' economy which depends largely on tourism has been hard-hit by the COVID-19 pandemic amid a global travel downturn, although the island nation has seen no deaths from the virus and has only one active case currently.  

The CBS governor said tourism remains the top contributor of foreign exchange as the majority of what the country is currently using has been accumulated from tourism over the years.  

Abel said that in view of the current economic situation, CBS is "advising workers with loans to have a discussion with their banks to ensure that any compensation they are getting is not going entirely into loan repayment. If this is not done, people will see themselves in dire economic situations if the pandemic persists."

Seychelles, an archipelago in the western Indian Ocean, has a reserve of $571 million, out of which $433 million can be spent. Calculations show that this reserve can sustain the country for 18 months.

Abel explained that the reserve has been able to go up a little after receiving $10 million from the African Development Bank.