Seychelles - Overview of economy

Tourism, agriculture and fishing, and industry are the 3 main sectors of the Seychelles economy. The current structure of the country's economy was formed during the 1970s and 1980s and underwent drastic changes in the 1990s. Despite government efforts to encourage agricultural and industrial development, tourism remains the

dominant sector in the country's economy. It provides most of the country's revenue and employment, and it maintains a positive image of the archipelago as an exotic and desirable destination.

France acquired the uninhabited islands in 1756 and populated them with French settlers and slaves from the African continent. In 1814, after the Napoleonic wars in Europe, Great Britain established its control over the Seychelles, administering them from Mauritius. The islands were important to British trade routes, due to their strategic location halfway between the Cape of Good Hope (South Africa) and the Indian subcontinent. This strategic importance diminished somewhat after the opening of the Suez Canal in 1869. In 1903 the Seychelles became a Crown Colony, but its extremely limited resources and remote location isolated the country from the major events of the 20th century.

Since the 1970s, 2 factors have impacted the economic and social life of the Seychelles: mass-market international tourism—an international airport opened in 1971—and independence in 1976, which ushered in a period of centralized planning. A government led by France Albert Rene introduced state control over major sectors of the economy, and the first centralized 5-year plan was introduced in 1985, modeled after the socialist economies of Eastern Europe. This plan created around 30 parastatals (state-controlled enterprises) covering all sectors of economic activities. With the demise of the Soviet Union and of state socialism in the early 1990s, the Seychelles government initiated elements of a free-market economy under the guidance of the International Monetary Fund (IMF) and World Bank. Most state enterprises, with the exception of public utilities and transport, were privatized , and the government attempted to increase foreign investments by developing the country as an international "offshore" financial-services center. The economic development program in the 1980s and 1990s increasingly relied on external borrowing, although the country managed to reduce its total external debt from US$474 million in 1979 to US$166 million in 1989. In 1999 the external public debt was estimated by the IMF at US$188.5 million (31 percent of the GDP), compared with US$153 million (26 percent of the GDP) in 1997. These figures are very high for a small country of 79,000 people, leading to fiscal and external imbalances and to the growing burden of external debt servicing.