Seychelles, best known for its tropical beaches and nature reserves, has revealed plans to channel about $2 billion into a new sovereign wealth fund over the next five years to help upgrade roads, schools, and hospitals across the island nation.

The government wants the fund running by next year once lawmakers pass enabling legislation and appoint management teams, Finance Minister Pierre Laporte said in an interview Monday on the sidelines of an African Union summit in Accra.

Seychelles diverts capital to infrastructure

While private money has steadily flowed into the country’s luxury resorts and clean energy projects, the state now wants to dedicate public savings directly to social services and basic public works.

“We want to focus on health, education and infrastructure, including housing, roads and human capital,” Laporte said. Private investors can still take part, he added, but the state needs to preserve its own limited cash for community needs.

Setting up the fund delivers on a core campaign pledge made by the United Seychelles party before it swept back into power last year, taking the presidency under Patrick Herminie and regaining a parliamentary majority.

The push comes as the Indian Ocean archipelago works through a difficult stretch for its tourism-led economy. Flight cuts by major Gulf airlines following conflict in the Middle East drove visitor arrivals down 14 percent in the first half of the year, cutting into state revenues and forcing officials to trim growth forecasts.

GDP forecast cuts and fund governance

Still, Laporte said the economy is showing signs of stabilizing as travelers slowly return. “We expect economic growth to be lower than last year, but now tourism is picking up quite well, maybe a little bit more than we thought at the beginning of the year,” he said.

Gross domestic product is now projected to expand between 1 percent and 2 percent this year, down from the 3.1 percent rate originally penciled into the national budget. Laporte noted that a stronger finish could push final growth closer to 3 percent. The slower expansion will also shrink the government’s budget cushion, though officials still expect to balance the books.

“We’re just doing the mid-year budget now, and we kept to a small surplus,” Laporte said. “We might do something between 0 percent to 0.5 percent.”

To protect the new $2 billion vehicle from political cycles, the ministry plans to run it as an arm’s-length institution. The fund will be based in Victoria under the Finance Ministry’s oversight, but everyday investment decisions will rest with an independent board, chief executive, and steering committee.

“We set the parameters and set the rules,” said Laporte, who previously served as governor of the central bank. “We want it to be properly run.”