Political sketch
Formerly part of Mauritius. Independent from the United Kingdom on 29 June 1976.
An expedition of the British East India Company made the first recorded landing on the Seychelles in 1609. The islands were uninhabited. France explored and later annexed the islands, in 1756. The British captured the islands in 1810, during the Napoleonic Wars, and retained it by the Treaty of Paris in 1814. The Seychelles were part of the colony of Mauritius. The United Kingdom's abolition of slavery in its colonies in 1833 disrupted the plantation economy. The European colonists of the Seychelles switched from raising cotton and grains to less labor-intensive crops such as coconut, vanilla, and cinnamon. On 31 August 1903, the Seychelles were detached from Mauritius to become a separate colony. During the Second World War the Seychelles were quite isolated from the rest of the world because of the danger German submarines posed to communication by ship. The Seychelles gained a legislature in 1948 and a new constitution granting more autonomy in 1970. They became independent from the United Kingdom on 29 June 1976. In June 1977 a coup took place and the Seychelles became a one-party socialist state under France-Albert René, who is still in power today (2005). Multiparty elections were first held again in 1993. The government has allowed considerable foreign investment in tourism, which has become the motor of the economy, generating considerable prosperity; tuna fishing is also important.
Wars since 1500
Napoleonic Wars (1810); Second World War, 1939-1945 (no battles, but affected by danger to shipping).
Convertibility
During the First World War, Seychelles prohibited the unauthorized export of Indian rupees, the main currency in use (Seychelles, Exportation of Rupees Ordinance, Ordinance No. 35, 24 July 1918).
The sterling area:
On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914 gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925 the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.
The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973 the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong had abandoned sterling as its anchor currency. The United Kingdom abolished exchange controls on 24 October 1979, ending the sterling area.
Seychelles alone:
The Seychelles left the sterling area perhaps on 23 June 1972, and at any rate sometime before it joined the IMF on 30 June 1977.
Other
Defaults on or restructurings of debt to the private sector (mainly from Purcell and Kaufman 1993 and Standard & Poor's 2004): 2000-2002 (foreign currency bank debt).
Banking crises (data since 1970s mainly from Caprio and Klingebiel 1999 and Frydl 1999): None.
Frankel and Rose (1996) list of currency crashes: None.
No exchange rate data in Reinhart and Rogoff (2003).
References
Primary sources:
--Laws and decrees:
British Indian Ocean Territory. Gazette. 1965-present? The British Indian Ocean Territory Official Gazette. Victoria, Seychelles; later London? (Successor to Mauritius gazette; succeeded by Seychelles gazette.)
Great Britain (United Kingdom). Gazette. 1665-present. Oxford Gazette (1996-1666); London Gazette (1666-present). Oxford (1665-1666); London (1666-present): His/Her Majesty's Stationery Office from 1903. Online at <http://www.gazettes.online.co.uk>; as of September 2005, gazettes since 1900 are available.
Mauritius. Gazette. 1820?-present. New Mauritius Gazette / Nouvelle gazette de Maurice (1820-?); Gazette de Maurice / Mauritius Gazette (?-1832); Mauritius Government Gazette (1832-1915); The Government Gazette of the Island of Mauritius (1916-1932, may have continued under this title to 1947); The Government Gazette of the Colony of Mauritius (1947-1968); Government Gazette of Mauritius (1968-present). Port Louis: Government Printer.
Seychelles. Gazette. 1876?-present. Seychelles Government Gazette (1876?-1976); Official Gazette (1976-present). Victoria, Seychelles: Government Press.
--Publications of monetary authorities:
Central Bank of Seychelles. Annual report. 1983-present. Annual Report. Victoria, Seychelles: Central Bank of Seychelles.
Central Bank of Seychelles. Bulletin. 1983-present. Quarterly Review. Victoria, Seychelles: Central Bank of Seychelles.
Seychelles Monetary Authority. Annual report. 1978/1979-1982. Annual Report on the Period 1st December 1978-31st December 1979 (1978/1979); Annual Report (1980-1982). Victoria, Seychelles: Seychelles Monetary Authority.
Seychelles Monetary Authority. Bulletin. 1979-1982. Quarterly Review. Victoria, Seychelles: Seychelles Monetary Authority.
--Web site of the current monetary authority (viewed 20 September 2005):
<http://www.cbs.sc>
--Other publications or Web sites:
Great Britain (United Kingdom). Report on Seychelles. 1920-1937, 1946-1975? Colonial Office, Seychelles: Report for ... (1920-1930); Colonial Office, Annual Report on the Social and Economic Progress of the People of Seychelles (1931-1937); Colonial Office, Annual Report on Seychelles for the Year ... (1946-1965); Commonwealth Office, Annual Report on Seychelles for the Year ... (1966-1967); Foreign and Commonwealth Office, Annual Report on Seychelles for the Year ... (1968-1975?). London: His/Her Majesty's Stationery Office. (This series was called Colonial Reports until the Second World War and Colonial Annual Reports afterwards; it was suspended during the war for most colonies.)
Main secondary sources:
Bradley, John T[homas]. 1940. The History of Seychelles, 3 v. Victoria, Seychelles: Clarion Press.
Central Bank of Seychelles. Undated. (The central bank formerly had a history of Seychelles currency on its Web site in the local language, but it was not there when I last checked on 21 September 2005 and has not been translated into English that I know.)
Chalmers, [Sir] Robert. 1893. A History of Currency in the British Colonies. London: Eyre and Spottiswoode for Her Majesty's Stationery Office. (No specific discussion of Seychelles, but one of Mauritius, to which Seychelles was joined at the time.)
Crossley, [Sir] Julian [Stanley], and John Blandford. 1975. The DCO Story: A History of Banking in Many Countries 1925-71. London: Barclays Bank International. (Concerns Barclays Bank Dominion, Colonial and Overseas.)
Huskinson, Rachel. 1999. "The Bank of Mauritius, 1894-1916: The Star and the Key of the Indian Ocean." Appendix 7 (pp. 213-18) of Edwin Green and Sara Kinsey, The Paradise Bank: The Mercantile Bank of India, 1893-1984. Aldershot, England: Ashgate Publishing. (This appendix contains some information on Mauritus and Seychelles.)
IMF ARER. 1950-present. International Monetary Fund. Annual Report on Exchange Restrictions (1950-1978), Annual Report on Exchange Arrangements and Exchange Restrictions (1979-1988), Exchange Arrangements and Exchange Restrictions: Annual Report (1989-present). Washington: International Monetary Fund. (Contains information on IMF member countries and some of their dependencies.)
Monetary authorities: Seychelles
| Dates | Type | Name | Source | Remarks |
| 1892
-later in 1892 |
dollarization alongside currency board-like (as part of a currency union with Mauritius) [recheck Mauritius classification here and below] | Indian rupee (issued by Indian government [headquarters New Delhi, India]) alongside Mauritius dollar (issued by Mauritius Currency Board [headquarters Port Louis, Mauritius]) | United Kingdom, incorporation papers of New Oriental Bank Corporation, 1884 | The New Oriental Bank Corporation (headquarters London, England) opened a branch in Victoria, on the island of Mahé, in 1892 but the branch went into liquidation later the same year. It was the first bank in the islands. The Seychelles were part of Mauritius at the time. Mauritius had a currency board-like system since 1 September 1849, but in practice, the circulation of its notes in Seychelles seems to have been rare initially, so I have dated the first modern monetary system from the establishment of the first bank. |
| later in 1892
-1903 |
dollarization alongside currency board-like (as part of a currency union) (no banks) | Indian rupee (issued by Indian government [headquarters New Delhi, India]) alongside Mauritius dollar (issued by Mauritius Currency Board [headquarters Port Louis, Mauritius]) | [to come] | The Seychelles were still part of Mauritius. A Government Savings Bank opened in March 1897 (Bradley 1940, v. 2: 353). |
| 1903
-August 1914? |
dollarization (no banks for part of period; see Remarks) | Indian rupee (issued by Indian government [headquarters New Delhi, India]) and Mauritius dollar (issued by Mauritius Currency Board [headquarters Port Louis, Mauritius]) | [to come] | The Seychelles were detached from Mauritius. The Bank of Mauritius (headquarters Port Louis, Mauritius), opened a branch in Victoria on 16 October 1911, becoming the second bank to try to succeed in the Seychelles, but it closed the branch in 1915 (Huskinson 1999: 217). The legal basis for the bank was Mauritius, local charter of Mauritius Bank, confirmed by United Kingdom, Royal Warrant of 10 June 1831, and incorporated by local charter on 20 June 1831; see also Mauritius Government Gazette, 19 November 1831. |
| August 1914?
-1936 |
government issue | government of Seychelles (headquarters Victoria, Seychelles) | Seychelles, Paper Currency Ordinance, 1919, cited in [to come] | The government established a note issue, apparently to gain seigniorage. The first notes were dated 11 August 1914, though they were not necessarily issued then. The Seychelles continued to use Mauritius coins. |
| 1936
-30 November 1978 |
currency board | Seychelles Treasurer / Seychelles Currency Commissioners from 1974 (headquarters for both Victoria, Seychelles) | Seychelles, Currency Notes Ordinance, Ordinance No. 2, 30 January 1936, cited in Great Britain, report on Seychelles 1946: 15; Seychelles Currency Act of 1974, cited in Seychelles Monetary Authority annual report, 1978/1979: 21 | The Seychelles had no offices of commercial banks until Barclays Bank (Dominion, Colonial and Overseas) (headquarters London, England) opened a branch in Victoria on 24 August 1959 (Crossley and Blandford 1975: 320). The next bank was the Standard Bank (headquarters London, England), which opened a branch in Victoria in 1968 [source to come]. However, by 1952 the Standard Bank of South Africa (headquarters London, England) and Barclays Bank (Dominion, Colonial and Overseas) both had local agents (Great Britain, report on Seychelles, 1951 and 1952: 12-13). The 1974 act institutionally formalized the previous policy of a fixed exchange rate for the Seychelles rupee. The first coins were issued in 1939, by the currency board. The Seychelles joined the IMF on 30 June 1977. |
| 1 December 1978
-31 December 1982 |
monetary institute | Seychelles Monetary Authority (headquarters Victoria, Seychelles) | Seychelles Monetary Authority Decree, 1 December 1978 cited in Seychelles Monetary Authority annual report 1978/1979: 21 | Established a monetary institute following independence to gain greater flexibility in monetary policy. An IMF mission had recommended comibining the currency board, the Registrar of Banks, and the compilation of monetary statistics in a single entity. The Seychelles Monetary Authority was required to hold foreign reserves of at least 70% of demand liabilities at the close of each month, although in special circumstances, with presidential approval, it could reduce the minimum to 50% for up to 3 months (Seychelles Monetary Authority annual report, 1978/1979: 23) |
| 1 January 1983
-present (2005) |
central bank | Central Bank of Seychelles or Labank Santral Sesel (headquarters Victoria, Seychelles) | Central Bank of Seychelles Act, 29 December 1982, cited in Central Bank of Seychelles annual report, various issues, letter of transmittal page | Recognized the increasing flexibility of the monetary authority by formally naming it a central bank. |
Exchange rate arrangements: Seychelles
| Dates | Official arrangement | Source | Unofficial arrangement, if different | Remarks |
| 27 August 1770
-5 December 1810 |
fixed; used French colonial livre (1.5 French colonial livres = 1 French livre [livre tournois]) | [to come] | This was the period of French rule, which began with the first permanent habitation of the islands. Commenting on the nearby island of Mauritius, Chalmers (1893: 361) says that "the real metallic standard of the 18th century was the Spanish [silver] dollar," also known as the piastre. Notes often circulated at a discount to gold and silver coins. By 1800 the local Mauritius livre, nominally 10 colonial livres = Spanish silver $1, had depreciated to 10,000 local paper livres = $1. | |
| 6 December 1810
-1817 |
fixed; silver Indian sicca (Calcutta) rupee was effective basis of currency | Mauritius, (British) governor's notice of 6 December 1810, cited in Chalmers (1893: 361) | British rule began in 1810. The ratings established in 1810 undervalued the Spanish silver dollar relative to the Indian rupee and resulted in importation of silver rupee coins. | |
| 1817
-23 December 1824 |
fixed (as part of a currency union); used Mauritius dollar, which had a clean? float | Chalmers (1893: 362) | The Mauritius government issued notes that fell as low as 71% of par value by September 1822. Indian rupees were widely used; it is unclear how widely Mauritius government notes were used in the Seychelles. The Mauritius dollar may have been a decimal currency by this time, though another source places decimalization at 1876 (see the remarks on Mauritius). The government withdrew its notes from circulation at the end of the period. | |
| 24 December 1824
-31 December 1825 |
fixed (as part of a currency union); used Mauritius dollar, itself fixed at Mauritius $1 = 2 Indian sicca (Calcutta) rupees | Mauritius, governor's notice of 10 December 1824, cited in Chalmers (1893: 363) | With the end of government issue, Mauritius currency ceased to be depreciated. Indian rupees were widely used. | |
| 1 January 1826
-31 August 1849 |
fixed (as part of a currency union); used with Mauritius dollar, itself fixed at Mauritius $5 = UK£1 | Mauritius, Ordinance No. 3, 25 November 1825, cited in Chalmers (1893: 364) | The Mauritius dollar was the principal unit of account in practice, though the pound sterling was official unit of account and Indian rupees were widely used in trade. By convention at the time, Mauritius $1 = 2 Indian sicca (Calcutta) rupees = UK 2 shillings (24 pence), though by law 2 rupees were only worth UK 1 shilling 10 pence (22 pence). Sterling coins predominated from about 1851 to the early 1860s as a result of the depreciation of gold against silver, then Indian coins came back in early 1860s as gold appreciated. Mauritius was hence awkwardly caught between the gold and silver standards for the second half of this period. | |
| 1 September 1849
-31 December 1876 |
fixed (as part of a currency union); used Mauritius dollar, pegged at Mauritius $5 = UK£1 | Mauritius, Ordinance No. 7 of 1848; Ordinance No. 6, 28 August 1849; Ordinance No. 9 of 1849, cited in Chalmers (1893: 367) | A currency board-like system replaced free banking, so the exchange rate changed from fixed to pegged. | |
| 1 January 1877
-August 1914? |
fixed (as part of a currency union); used Mauritian rupee, pegged at 1 Mauritian rupee = 1 Indian rupee; also used Indian rupee | Mauritius, Order in Council and Proclamation of 12 August 1876; governor's proclamation of 25 November 1876; Ordinance No. 28, 25 November 1876, all cited in Chalmers (1893: 368) | Mauritius unambiguously affirmed its adherence to the Indian rupee standard. The Mauritian rupee replaced the Mauritius dollar as the unit of account at a conventional rate of 2 Mauritian rupees = Mauritius $1. The Indian rupee was a silver currency at the start of this period, but on 26 June 1893 it began a transition to a gold basis. Indian government notes later became legal tender in Mauritius (Mauritius, Ordinance No. 30, published 31 July 1920, cited in [to come-Lagesse 1988?]). The name for the currency came from the Indian rupee. | |
| August 1914?
-1934 |
fixed; 1 local rupee = 1 Indian rupee | Seychelles, Paper Currency Ordinance, 1919, cited in [to come] | The Seychelles began its issuing own notes, but its rupee did not officially exist as a separate currency from Indian rupee until 1934. The Seychelles rupee was a decimal currency, having inherited decimalization from the Mauritian rupee. The name of the currency came from the Indian rupee. | |
| 1934
-31 January? 1936 |
fixed; 1 Seychelles rupee = 1 Indian rupee | [to come] | The Seychelles rupee became an officially distinct currency from the Indian rupee. | |
| 1 February? 1936
-30 November 1978 |
fixed; 13-1/3 Seychelles rupees = UK£1, or 1 Seychelles rupee = UK 1 shilling 6 pence (18 pence) | Seychelles, Currency Notes Ordinance, Ordinance No. 2, 30 January 1936, cited in Great Britain, report on Seychelles 1946: 15 | Switched to the pound sterling as the anchor currency at the prevailing cross rate with the Indian rupee (which itself had was pegged to the pound sterling). During the Second World War, problems with obtaining its own notes and coins by ship led the Seychelles to make the notes and coins of Ceylon, India, Mauritius, East Africa, and South Africa legal tender. After the war their legal tender status was withdrawn. Silver coins of India and Mauritius were demonetized even earlier, on 30 June 1940 (Bradley 1940, v. 2: 354). The Seychelles never registered a gold parity with the IMF, since by the time it joined the system of gold parities was unused. The system was abolished by agreement of IMF members effective 1 April 1978 (International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ["Second Amendment"]). | |
| 1 December 1978
-4 November 1979 |
pegged; 13-1/3 Seychelles rupees = UK£1, or 1 Seychelles rupee = UK 1 shilling 6 pence (18 pence) | Seychelles Monetary Authority Decree, 1 December 1978, cited in Seychelles Monetary Authority annual report 1978/1979: 21 | A monetary institute replaced the currency board, so the exchange rate changed from fixed to pegged. | |
| 5 November 1979
-15 March 1981 |
pegged to rigid basket; 8.3197 Seychelles rupees = SDR 1 | Seychelles Monetary Authority annual report 1978/1979: 16, 23 | Switched to the SDR as the anchor currency at prevailing cross rate with the pound sterling because the pound sterling was a weak currency in 1970s. | |
| 16 March 1981
-12 May 1996 |
pegged to rigid basket 7.2345 Seychelles rupees = 1 SDR | IMF ARER (1982: 378) | Central Bank of Seychelles annual report (1997: 21) cites a pre-existing parallel market. It apparently developed on or after April 1994, when the government introduced a foreign-exchange queuing scheme. | Revalued 15% against the SDR at a time when two of the SDR's component currencies, the US dollar and French franc, were fairly weak. The US dollar soon strengthened dramatically. |
| 13 May 1996
-27 July 1997 |
pegged to rigid basket (see Remarks for weights) | Central Bank of Seychelles annual report 1997: 22; IMF ARER (1997: 744) | A parallel market existed. Seychelles, Foreign Earnings (Regulation) Act, 1996, effective 1 January 1997, required all earnings from nonresidents to be channeled through commercial banks in Seychelles (Central Bank of Seychelles annual report 1997: 21). | Switched the anchor to a basket of currencies of major trading and tourism partners. The composition of the basket was: US dollar, 22.4%; pound sterling, 19.6%; French franc, 16.1%; South African rand, 11.5%; Singapore dollar, 10%; German mark, 8.8%; Italian lira, 7.8%; and Japanese yen, 3.8%. |
| 28 July 1997
-31 December 1998 |
pegged to rigid basket (another type; see Remarks for weights) | Central Bank of Seychelles annual report 1999: 22; IMF ARER (1998: 784) | A parallel market continued to exist; see below. | Revised the basket weights. The new weights were: US dollar, 26.5%; pound sterling, 16.8%; French franc, 14.8%; South African rand, 11.5%; Singapore dollar, 10%; German mark, 8.4%; Italian lira, 8.0%; and Japanese yen, 3.7%. |
| 1 January 1999
-2 January 2001 |
pegged to rigid basket (another type; see Remarks for weights) (IMF: conventional peg) | Central Bank of Seychelles annual report 1999: 61; IMF ARER (2000: 78, 781) | On 14 April 1999, the Exchange Control Bill passed, outlawing the parallel market in foreign currency (cited in IMF ARER 2000: 781). | The European euro replaced the French franc, German mark, and Italian lira in the basket. The new basket weights were: European euro, 31.2%; US dollar, 26.5%; pound sterling, 16.8%; South African rand, 11.5%; Singapore dollar, 10%; and Japanese yen, 3.7%. |
| 3 January 2001
-30 June 2003 |
pegged to rigid basket (another type; see Remarks for weights) (IMF: conventional peg) | Central Bank of Seychelles annual report 2001: 64-5 | A parallel market continued to exist (Central Bank of Seychelles annual report 2001: 51, 67-8). | Revised the basket weights to reflect changes in trade and tourism patterns. The new basket weights were: European euro, 37.7%; US dollar, 25.7%; pound sterling, 15.7%; South African rand, 10.5%; Singapore dollar, 7.7%; and Japanese yen, 2.7%. |
| 1 July 2003
-present (2005) |
pegged to rigid basket (another type, having limit of appreciation of 5.50 Seychelles rupees = US$1) (IMF: conventional peg) | Central Bank of Seychelles annual report 2003: 57 | A parallel market continued to exist, according to press reports from 2005. | An economic reform program began at the start of the period. The central bank announced that from that date it would limit the appreciation of the currency such that the exchange rate would be no fewer than 5.50 Seychelles rupees = US$1. |