(Seychelles News Agency) - The Central Bank of Seychelles (CBS) has approved an advance of SCR500 million ($23.6 million) for the government to help with its budget expenditures for 2021, a top finance official said on Friday.

The governor of the Central Bank, Caroline Abel, told a press conference on Friday that since Seychelles' economic reality is still difficult, "we recognise the challenges that the government has in terms of revenue."

Abel said that the advance is new money being put into the system and hence has not been produced by economic activities.

"This is why the central bank has to do so prudently as it can cause inflation and affect our main objective which is stability in prices," she added.

The Seychelles' 2021 budget is a little over SCR 11 billion ($519 million), around SCR 1.8 billion more than the 2020 budget. The Minister of Finance is expected to deliver the budget address in the National Assembly on February 9.

Meanwhile, Abel said that the Central Bank is observing a period of stability in the movement of the forex rate.

"Last year, I said that before we begin this year, we need to have stability in our foreign exchange rate. If this does not happen we all know the consequences of the rise in commodities and cost of living," she added.

As of January 29, $1 was worth SCR21.62 and €1 stood at SCR26.40 on average.

"On a positive note, until the end of this month, supply of foreign currencies will remain a little bit higher than demand. This means that we would end this month with a small surplus," said Abel.

She said that Seychelles, an archipelago in the western Indian Ocean, has a reserve of $538 million, out of which $397 million can be spent and calculations show that this reserve can sustain the country for 18 months.

"Since the beginning of this year, we have not auctioned our reserve, but what we did is paid $300,000 to the Seychelles Trading Company (STC) as part of a demand made last December," said Abel.

With the downturn in tourism, which is the top economic contributor to the island nation, this is impacting heavily on various businesses and several financial measures were put in place last year.

One of them was a credit line laid out by banks to assist businesses. 

Statistics released by Abel show that most of the credit is going to big businesses in transportation, commerce and tourism, which have been the most affected by the impact of COVID-19. She said that at least SCR79.3 million have been approved as credit for big businesses.