CBS announces relief policy measures to help businesses bounce back in the wake of COVID-19 | 26 March 2020
The Central Bank of Seychelles (CBS) on Monday announced the decision to relax the Monetary Policy Rate (MRP) to 4.0 percent in view of the severe implications of the COVID-19 pandemic on the global and national economy.
In addition to the 1.0 percent reduction in the MPR, relief policy measures to support businesses amid degrading economic activities were also announced by head of the financial surveillance division, Naadir Hassan.
He noted that the measures aim to support the economy and impacted sectors amid the COVID-19 development, highlighting the uncertainty looming over local businesses as visitors become more and more scarce on account of travel restrictions imposed by governments.
“Businesses are being badly affected by the COVID-19 pandemic, and we have seen that in the tourism sector, there have been no tourist arrivals for the past two weeks. The way the industry is structured in Seychelles, when the tourism sector is impacted, so are other sectors because of the links between such businesses and tourism,” he said.
“What the board discussed are relief policy measures to give the businesses some breathing space at this critical moment, so when the situation improves, our businesses have survived and are around to help the economy to pull through. Our core objective is to support private sectors to keep afloat and support the rebuilding of the economy post crisis. The emphasis is on supporting their cash flow and working capital so they can continue to meet critical expenses,” Mr Hassan noted.
Critical expenses include loans obligations, wages and salaries, utilities, rentals and invoices, all of which impact business cash flow and when income is significantly reduced, business organisations often struggle to meet these obligations.
Among the measures which CBS tabled before commercial banks and to which they have agreed are loan repayment deferment and restructuring as well as a line of credit.
With regards to loan repayment deferment and restructuring, a moratorium on loan repayments for at least 6 months, also applicable on interest, has been agreed upon for affected sectors. In addition, business organisations have the option to restructure their loans with their respective banks with the assurance that their Credit Information Reports will not be adversely impacted, on account that CBS has relaxed the regulation requiring commercial banks to provide the reports. More information will be given to the public together with representatives of the respective commercial banks operating in Seychelles over the coming days.
Another measure approved by the CBS Board is a credit line of R500 million, funded by CBS who, although will have oversight of the credit line, will not be managing the credit line. Instead, the credit line is to be managed by commercial banks. The lending rate will be set at 1.5 percent with a 3-year repayment period. In line with the relief policy measure, the 6-month moratorium applies, again in a bid to ensure businesses are not faced with cash flow problems.
As per the CBS Act, the entity can lend to commercial banks with a 6-month repayment period. Therefore, the Act needs to be amended to provide for the three-year repayment period for the credit line. The proposed amendments were presented to cabinet’s extraordinary meeting where it was approved on Saturday and the necessary is being done by the Attorney General’s Office for the said to be tabled before the National Assembly for approval.
CBS also proposed the definition of force majeure be enlarged in the entity’s parent Act, on account that public health emergencies are not provided for and was not considered force majeure so the CBS would be powerless in such instances.The credit line will be implemented once the amendments are approved by the National Assembly
“Credit lines applied to sectors impacted by the pandemic. The tourism sector is being impacted but of course other sectors are impacted too as many businesses are somehow reliant on tourism. The business owner can have a conversation with the bank who will direct them as to whether their loan can be deferred or restructured or whether they qualify for the moratorium. Otherwise, they have the option to take out a loan when the credit line is implemented,” Governor of CBS Caroline Abel concluded.