Seychelles is today held up as an example of how to do things right. Boasting one of the fastest growing economies in Africa and a world-class environmental record, it’s hard to believe that just five years ago the country was on its knees, unable to repay debts and spending money it didn’t have.

Just three months ago, an International Monetary Fund (IMF) report declared Seychelles’ recent economic performance as “favourable.” Given that in 2008 the IMF was forced to set economic reforms to rescue the archipelago from near collapse, that muted statement was real praise.

With high living standards, but large fiscal and current account deficits, the islands have moved from being a welfare state to a free market one. It’s the only country in the region without exchange controls.

External debt has been halved after restructuring and tightened monetary and fiscal policy, and the government is on track to shrink public debt to 50 per cent of gross domestic product (GDP) by 2017.

Real GDP grew by 6.7 per cent in 2010 and gained another 5 per cent to reach almost £1bn last year – one of the highest among African states.

Last year, global ratings agency Fitch upgraded Seychelles’ country ceiling to ‘B’ reflecting “outperformance, by a wide margin, of the fiscal targets set by the IMF, for a second consecutive year.”

Ex-IMF economist Pierre Laporte, now heading the Central Bank, notes: “The big one for us is domestic debt. By running a surplus on the budget, we have managed every year to use part to pay down the debt.”

Tourism accounts for a quarter of GDP and an even greater share of employment, with record arrivals attracted by pristine beaches. Direct flights from Europe, where 75 per cent of visitors originate, ended when Air Seychelles became a regional carrier, but other airlines are filling part of the gap and Gulf countries provide hubs to link with Victoria.

The second economic pillar of Seychelles is fishing and it supplies the world’s largest tuna canning factory at an expanding Port Victoria.

Seychelles itself is safe, President James Michel insists, but he’s urging the UK and other large states to find lasting solutions within Somalia to the piracy issue.

Climate change is another international issue Michel is championing, because unchecked it threatens many of its 115 low-lying islands, as with all island states. Mahe is home to 75 per cent of Seychellois, while most others live on Praslin and La Digue.

Two developments will change Seychellois fortunes.

In the summer, a fibre-optic cable to Tanzania will bring the fast internet that Seychelles’ finance centre – as the third and growing pillar of the economy – needs to become a dynamic gateway to Africa for investors. To help develop offshore finance business a stock exchange is being set up this year.

This former French colony – which belonged to Britain until 1976 – also has potential offshore oil reserves as large as Saudi Arabia’s, which could be landed by 2015.

Seychelles, with its low tax rates, offers attractive investment opportunities in every area of the economy from a strategic Indian Ocean location. The government is acting as a facilitator, giving the private sector space to grow.