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Seychelles set to benefit from buy-back of Paris Club debt |11 March 2016

Seychelles is set to benefit immensely from the recent buy-back of US $21.4 million of its Paris Club debt and the launch of a partnership to protect the country’s marine resources and build resilience against the effects of climate change.

In an interview with the press this week, the Minister for Finance, Trade and the Blue Economy Jean-Paul Adam elaborated on how the country will benefit from this deal.

Seychelles bought back 100% of the maturities falling due to participating Paris Club creditors through to mid 2022 at a discount to face value, as per the agreement reached with the Paris Club in February 2015.

The buy-back has been possible through generous grants from a group of international marine conservation foundations and a loan from The Nature Conservancy (TNC).  The Nature Conservancy provided a low interest loan and helped the government of Seychelles secure US $5 million in private grants to set up the buy-back vehicle from the Leonardo DiCaprio Foundation, the Wait Foundation, Oak Foundation, China Global Conservation Fund, Jeremy and Hannelore Grantham and the Turnbull Burnstein family Charitable Fund among others.

Government will then repay the same amount of debt bought back from the Paris Club on concessional terms to a local specially-created organisation under national legislation, the Seychelles Conservation and Climate Adaptation Trust (SEYCCAT). SEYCCAT will use this cash flow to fund critical marine conservation and climate change adaptation work in Seychelles and to service the loan.

Apart from environmental aspect, the buy-back of the Paris Club debt will also smooth out the repayment profile of Seychelles’ official bilateral debt which stands at approximately US $63 million of our Gross Domestic Product (GDP), while increasing the proportion of debt that can be serviced in local currency.

Simply put, repaying the debt through SEYCATT means what Seychelles owes to Paris Club donors including the interest rates will remain in the country  and will be directed through SEYCATT where the Seychelles government will get better conditions and enjoy certain concessions which will now benefit the Seychelles through the marine conservation and climate change initiative.

This initiative involves the creation of new protected areas and zones under enhanced marine management in the Seychelles’ Exclusive Economic Zone which will protect important species like the hawksbill sea turtle, safeguard the country’s most important natural resource, and become the largest network of marine protected areas in the Indian Ocean.

It will also provide the framework for long-term locally owned sustainable fishing effort and eco-tourism opportunities that contribute positively both to economic growth and sustainability.

SEYCATT has been formed under a legislation consisting of a board. It has the participation of the government with Minister Adam as chairman and Minister Didier Dogley as vice-chairman. It has local and one non local non-governmental organisations (NGOs).

“The SEYCATT fund has got a soft loan of US $21.4 million from TNC under an attractive interest rate of 3% which is much more advantageous than the actual one. We will use the loan to buy back the equivalent of the debt with Paris Club,” said Minister Adam.

He noted that TNC has previously carried out such transactions across the world as it is the conservancy’s mandate. It looks at the best ways to support sustainable developments in fragile and sensitive zones and Seychelles is a country that puts such development at the forefront of its development.

Minister Adam remarked as Seychelles is classed a middle and high income country, it does not have access to much financial modalities.

“For example if we were to borrow money, we will not get access to concessionary benefits. For large countries lack of such benefits does not affect them due to their market size which guarantees them access to a good deal. As for Seychelles it is not easy because we are small and therefore the risks are high. In recognition of such constraints, they allow us a mechanism to buy back a loan in bid to reduce our vulnerability, both economic and environmental,” the minister explained.

He noted that contrary to the interests paid on such loans as that of the Paris Club which go to creditors, through the buy-back process such as the SEYCATT one, the money is reinvested in local projects which benefit the people of Seychelles,” the minister explained.

At a time when threats to the marine and coastal environment and its natural resources are on the increase, this new financing mechanism is critical in providing reliable and additional financing to build resilience and sustain livelihoods.  Instead of simply waiting for financing under the global climate change financing mechanism, which has been very slow in happening, Seychelles has once again taken the initiative.

 

 

 

 

 

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