Consumer price inflation has finally moved back out of negative territory, rising by 2% year on year in March and by 2.1% in April-the fastest rate for 18 months-because of costlier food and fuel. Food prices (25.5% of the index) rose by 3.1% in April and non-food prices (71.1% of the index) by 1.2%, spurred by costlier transport: fish prices (the remaining 3.3% of the index), which are more volatile, jumped by 14.6%. However, inflation remains very subdued, despite the surge in global food and fuel prices, helped by subsidies on basic foodstuffs imported by a parastatal, Seychelles Trading Company-which amount to about SRs500,000 a month at present-and by the stability of the rupee.

The currency stabilised at SRs12.24:US$1 in the four-month period from November to February, before strengthening a little in March/April. The rupee, in turn, is being supported by an increase in foreign-exchange reserves, which amounted to US$240m in February, 15% higher than a year earlier. Import cover of 2.4 months remains below the recommended three months minimum, but is maintaining an upward trend, helped by buoyant tourism inflows. In spite of recent price rises, the 12-month moving average inflation was still negative in April, at -0.8%, although this is likely to turn positive in mid-year. Further inflationary pressure will stem from the government's move to lower borrowing interest rates at the two state-owned banks in order to boost growth. Interest rates for businesses with turnover between SRs1m and SRs5m fell in April from around 13-16% to under 10%, and loan arrangement fees were slashed. Secured personal loans such as mortgages or for cars have seen rates fall from over 20% to around 5%.