The Central Bank of Seychelles (CBS) kept its monetary policy rate (MPR) steady for the fourth quarter, saying the economy has not yet fully recovered from the effects of the COVID-19 pandemic despite a pick-up in economic activity.

CBS left its policy rate at 2.0 percent after cutting it, and the overall interest corridor, by 100 basis points at its last board meeting on June 30, the bank's fourth rate cut since September 2019.

Since then, the rate has been lowered 3.50 percentage points.

At its June meeting, the bank's board also said it had approved lowering the minimum reserve requirement to 10.0 percent from 13.00 percent if liquidity conditions warranted such an adjustment.

In today's statement, following a board meeting on Sept. 27, CBS said the reserve requirement on rupee-denominated deposit liabilities had been lowered to 10 percent as of July 14 and will be maintained at this level in the fourth quarter.

The bank's board said it was disappointed the general reduction in interest rates had not been fully transmitted by the banking sector

While the country's tourism sector had improved since entry requirements for visitors was relaxed on March 25, CBS said visitor arrivals and earnings remain far below pre-pandemic levels.

The Republic of Seychelles is made up of 115 islands of the east coast of Africa and relies heavily on tourism, which has been devastated by the pandemic.

"There are promising signs of a partial recovery, with some improvement in production statistics and overall domestic activity, although the effects of the pandemic are still being felt across various sectors of the economy, CBS said.

In late July the board of the International Monetary Fund approved a 32-month extended arrangement for the Seychelles of US$105.6 million - 323 percent of the country's quota - allowing for the immediate disbursement of $34.26 million.

The IMF forecast gross domestic product growth this year of 6.9 percent after a contraction of 12.9 percent last year, and growth of 7.7 percent in 2022.

Inflation is seen averaging 10.0 percent this year, up from 1.2 percent last year, and 3.7 percent in 2022.