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Paris Club cancels second wave of Seychelles debt

Reuters Translate This Article
27 July 2010

VICTORIA (Reuters) - The Paris Club of creditors has cancelled a second tranche of debt owed by Seychelles to help the Indian Ocean archipelago get its debt on a sustainable footing, Seychelles said on Tuesday.

The islands suffered an acute balance of payments crisis in 2008 that led to the International Monetary Fund stepping in with an emergency $26 million bailout package.

Seychelles is currently implementing sweeping fiscal and monetary reforms to liberalise its once state-controlled economy and bring its external debt under control.

Finance Minister Danny Faure said he had received a letter from the Paris Club's vice chairman, Remy Rioux, confirming the debt write-off, which was based on a 2009 agreement.

'I'm pleased to inform you the second reduction and debt reorganisation referred to in our agreed minutes of April 16, 2009, has come into effect,' the letter said.

Faure said the Paris Club had now wiped off debt of around $70 million after creditor countries last year recommended their governments cancel 45 percent in nominal terms of the total debt owed in two phases.

The remaining debt is to be restructured over 18 years, including a five-year grace period. Faure said the archipelago's improving debt standing would allow creditor nations and agencies to work once again with the Seychelles.

'It also means new opportunities for our private sector and a deepening of bilateral relations with the eight European countries who are members of the Paris Club,' he told reporters.

'We believe we will be able to conclude negotiations with all commercial and Paris Club members by September this year.'

Critics have accused the highly interventionist Seychelles state of years of unsustainable borrowing and over-spending to fund a deeply entrenched socialist legacy.

In late 2008, Seychelles' external debt peaked at just over $800 million. Earlier this month, central bank governor Pierre Laporte told Reuters external debt stood at $497 million.

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