CENTRAL BANK OF SEYCHELLES ACT, 2004

(Act 12 of 2004)

PART VI – OFFICIAL FOREIGN RESERVES, FOREIGN EXCHANGE RATE REGIME AND FOREIGN EXCHANGE OPERATIONS

25. (1) The Bank shall hold and manage the official foreign reserves of Seychelles.

(2) The official foreign reserves shall be composed of all or any of the following assets on such terms and conditions as the Board may determine -

(a) gold;

(b) foreign exchange in the form of currency or bank balances denominated in foreign currencies and held abroad on accounts with the Bank for International Settlements and other banks approved by the Board;

(c) internationally recognised assets in foreign currencies, including –

(i) the ability of Seychelles to make a reserve tranche purchase at the International Monetary Fund; and

(ii) the holding of any special drawing rights in the International Monetary Fund by Seychelles;

(d) bills of exchange and promissory notes denominated in foreign currencies payable at any place outside Seychelles specified by the Board;

(e) treasury bills denominated in foreign currencies issued by a foreign Government specified from time to time by the Board; and

(f) securities denominated in foreign currencies and issued or guaranteed by foreign Governments or international institutions specified from time to time by the Board.

(3) The Bank shall maintain the official foreign reserves at a level that would, in the opinion of the Board, enable the Bank to fulfil its functions under various foreign exchange rate regimes. The Bank shall determine, within limits set out by the Board and taking into account the risk levels it considers acceptable, the composition of the official foreign reserve assets so as to achieve the goals determined by the Board on security, liquidity and return, in that order.

(4) In the event of unfavourable developments affecting the official foreign reserves of Seychelles, it shall be the duty of the Board to propose appropriate remedial measures to be taken by the Government.

(5) The Board, in consultation with the President, shall decide the foreign exchange rate regime to be adopted by the Bank. The foreign exchange rate regime so adopted shall be published in the Gazette.

(6) If a foreign exchange rate regime based on a basket of foreign currencies is adopted, the Board shall determine the choice of foreign currencies and their respective weights in the basket, and such other particulars as are pertinent to the regime.

26. (1) The Bank shall, from time to time, determine the rates at which it will buy, sell or deal in gold and foreign currencies. The Bank may publish the rates so determined.

(2) While determining the exchange rates under subsection (1), the Bank may also determine a mid-rate around which purchasing and selling exchange rates maybe established.

(3) In determining the exchange rates under subsections (1) and (2), the Bank shall have due regard to the obligations which Seychelles has undertaken in accordance with the Articles of Agreement of the International Monetary Fund.

(4) A purchase or sale of special or commemorative coins denominated in a foreign currency shall not be treated as a foreign currency transaction for the purpose of this section.

27. (1) The Bank shall –

(a) purchase, sell and conduct any other financial transaction with assets that may be included in the official foreign reserves specified in section 25 (2);

(b) open and maintain accounts abroad with such banks, financial institutions or other depositories and appoint such correspondents or agents outside Seychelles as may be determined by the Board; and

(c) provide banking services in accordance with section 38 (b) and, as may be determined by the Board, open accounts for foreign banks.

(2) The Bank shall, in the conduct of its activities enumerated in subsection (1), aim at achieving security, liquidity and return, in that order.

28. (1) The gains arising from any change in the value of the Bank’s assets or liabilities in, or denominated in, gold, foreign currencies or other units of account as a result of alterations of the parity of the Seychelles rupee, or of any change in the values, parities or exchange rates of such assets or liabilities with respect to the Seychelles rupee, other than gains arising from the normal trading activity of the Bank, shall be credited to a Revaluation Reserve Account and neither they nor the losses arising from any such change other than losses arising from normal trading activity shall be included in the computation of the annual profits and losses of the Bank.

(2) The losses arising from any such change other than losses arising from the normal trading activity of the Bank shall be set off against any credit balance in the Revaluation Reserve Account and, notwithstanding any other provision of this Act, if such balance is insufficient to cover such losses, the Government shall issue to the Bank non-negotiable, non-interest-bearing securities to the extent of the deficiency.

(3) Any credit balance in the Revaluation Reserve Account at the end of each financial year of the Bank shall be applied first, on behalf of the Government, to the redemption of any outstanding securities issued under subsection (2).

(4) One-fifth of the remaining balance or an amount equivalent to one per cent of the demand liabilities of the Bank as at the end of the financial year, whichever is greater, shall be transferred to the Consolidated Fund:

Provided that when the remaining balance does not exceed one per cent of the aforesaid demand liabilities, the entire amount of the balance shall be transferred to the Consolidated Fund.

(5) No credit or debit shall be made to the Revaluation Reserve Account except in accordance with the provisions of this section.