continues to maintain its own central bank, uses the euro instead of
the Yugoslav dinar as official currency, collects customs tariffs,
and manages its own budget. Kosovo's economy continues to transition
to a market-based system, and is largely dependent on the
international community and the diaspora for financial and technical
assistance. The euro and the Yugoslav dinar are both accepted
currencies in Kosovo. While maintaining ultimate oversight, UNMIK
continues to work with the European Union and Kosovo's local
provisional government to accelerate economic growth, lower
unemployment, and attract foreign investment to help Kosovo
integrate into regional economic structures. The complexity of
Serbia and Montenegro political relationships, slow progress in
privatization, legal uncertainty over property rights, scarcity of
foreign-investment and a substantial foreign trade deficit are
holding back the economy. Arrangements with the IMF, especially
requirements for fiscal discipline, are an important element in
policy formation. Severe unemployment remains a key political
economic problem for this entire region.

Seychelles
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. Growth slowed in
1998-2002, and fell in 2003, due to sluggish tourist and tuna
sectors, but resumed in 2004, erasing a persistent budget deficit.
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 may
remain sluggish as vacationers seek cheaper destinations such as
Comoros, Ma