since independence in 1976, per capita output in this Indian Ocean archipelago has expanded to roughly seven times the pre-independence, near-subsistence level, moving the island into the upper-middle-income group of countries.
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 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.
In July 2008 the government defaulted on a Euro amortizing note worth roughly US$80 million, leading to a downgrading of Seychelles credit rating.
In an effort to obtain loans to service its debt, Seychelles in November 2008 signed a standby arrangement with the IMF that mandated floating the exchange rate, removing foreign exchange controls, cutting government spending, and tightening monetary policy.
In response to Seychelles' successful implementation of these policies, the IMF upgraded Seychelles to a three-year extended fund facility (EFF) of $31 million in December 2009.
In 2008, GDP fell more than 1% due to declining tourism and the initial effects of liberalization, but the economy recovered in 2010-11 after the reforms took hold and tourism increased.
Growth slowed again in 2012 with flagging tourism from Russia and the United Arab Emirates.
Seychelles is attempting to implement further structural reforms, including overhauling the tax system, reorganizing of state enterprises, and deregulating the finance and communications sectors.