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Seychelles signs loan restructuring agreement with India’s Exim Bank |07 September 2013

Seychelles has restructured another of its outstanding loans and will start repaying its 100 loans from 27 creditors in 2018.

Finance, Trade and Investment Minister Pierre Laporte yesterday signed a debt reduction agreement on behalf of the government of Seychelles with the Export-Import Bank of India (Exim Bank).

Indian high commissioner to Seychelles Thanglura Darlong was present to witness the signing of the agreement that had already been signed by the Indian authorities.

The agreement marks an important milestone as it was the last outstanding one to be signed in the context of ongoing efforts by Seychelles to restructure old external debts that existed prior to the commencement of the reform programme in 2008.

In 2009, the Paris Club granted Seychelles a 45% debt cancellation and under the agreement Seychelles had to obtain similar terms with all other creditors.

The agreement covers a US $8 million loan which the government of Seychelles took with Exim Bank in 2006. The old debt will be restructured as follows:

Of the total loan amount, US $3.95 million has already been disbursed to Seychelles by Exim Bank. From this US $3.95 million amount, Exim Bank has written off 45% of the loan (which amounts to US $1.7 million) and the government of Seychelles has agreed to pay back the remaining 55% (US $2.1 million) over a 20-year repayment period, including a five-year grace period. This US $2.1 million is to be repaid at a fixed-term concessionary interest rate of 0.875%, which is significantly lower than the interest rate originally agreed at (Libor rate plus 0.5% margin).

The remaining US $4.1 million of the original loan amount which was not previously disbursed to Seychelles has also been re-structured under similar terms. The loan will be repaid over a period of 20 years including a five-year grace period, and the interest rate will be fixed at 1.75%.

The as-yet undisbursed funds will be released by Exim Bank and used by the government of Seychelles for health and transport projects as from early next year.

With the signing of this loan agreement Seychelles completes the debt restructuring exercise with the Paris Club, and which covers both Paris Club and non-Paris Club members.

Upon completion of the signing both Minister Laporte and Mr Darlong praised the excellent relations that exist between the governments and peoples of Seychelles and India.

As of June 2013, Seychelles public debt stock stood at an estimated 70% of gross domestic products (GDP). The Seychelles government has targeted a public debt-to-GDP ratio of 50% by 2018.

Before the start of the reform programme, Seychelles owed US $800 million in different loans and after the 45% restructuring exercise with the Paris Club covering Paris Club and non-Paris Club members, the sum owed to foreign lenders now stands at below US $440 million.

Thanks to the five-year grace period, the country will start repaying the loans in 2018 and over 20 years instead of eight as per the original agreements.

Minister Laporte and Mr Darlong shake hands after the signing

 

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