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Since independence in 1976, per capita output in this Indian Ocean archipelago has expanded to roughly seven times the old near-subsistence level. Growth has been led by the tourist sector, which employs about 30% of the labor force and provides more than 70% of hard currency earnings, and by tuna fishing. In recent years the government has encouraged foreign investment in order to upgrade hotels and other services. At the same time, the government has moved to reduce the dependence on tourism by promoting the development of farming, fishing, and small-scale manufacturing. A sharp drop illustrated the vulnerability of the tourist sector in 1991-92 due largely to the Gulf war, and once again following the 11 September 2001 terrorist attacks on the US. Other issues facing the government are the curbing of the budget deficit, including the containment of social welfare costs, and further privatization of public enterprises. Growth slowed in 1998-2002, due to sluggish tourist and tuna sectors. Also, tight controls on exchange rates and the scarcity of foreign exchange have impaired short-term economic prospects. The black market value of the Seychelles rupee is half the official exchange rate; without a devaluation of the currency the tourist sector should remain sluggish as vacationers seek cheaper destinations such as Comoros, Mauritius, and Madagascar.
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