Africa-Press – Seychelles. Seychelles is to complete repayment by 2023 of a long-standing loan granted by Libya in the 1980s.
This follows a mutual agreement between the two authorities.
The US $3 million loan was initially requested by former President France Albert Rene as budgetary support.
With the financial crisis in 2008, Seychelles defaulted on the majority of its loans repayment, leading to renegotiations with creditors to reschedule its debts as part of the IMF reform programme which the country embarked on.
At the time, Seychelles had accumulated arrears and owed the Libyan government US $7.2 million inclusive of interest.
Through the negotiations, the Libyan authority agreed to reschedule the debt and cancel over $2.9 million of accumulated interest and for Seychelles to pay back only US $4.6 million.
As per “Settlement Agreement”, Seychelles was to start repayment in 2010 and finish by 2014.
According to the director general of the Debt Management Office within the Ministry of Finance, National Planning and Trade, Dick Labonte, Seychelles did in fact lodge the first payment amounting to US $977,000 in 2010, but due to instability in Libya at the time, the Seychelles government was advised to hold any further instalments, until the issues had been resolved.
“As such, government decided to set up an account at the Central Bank of Seychelles, and agreed to pay the specified amount annually, until the Libyan authority confirmed their account and receipt of payment,” Mr Labonte noted.
Seychelles tried numerous avenues and channels to communicate with the appropriate authorities to settle and resolve the debt, but opted for the safer option in keeping the funds in the specially-created CBS account. A sum of US $3,655,000 was deposited into the account for settlement of the debt.
It wasn’t until 2018 that the Libyan government contacted the Seychelles authorities to settle the ‘outstanding’ debt, setting off another round of negotiations.
Mr Labonte added that negotiations with the Libyan Ministry of Finance followed over the months through the Ministry of Foreign Affairs.
Despite Seychelles’ efforts and preparedness to clear off the loan over the years, the Libyan authorities on their part considered the debt as outstanding, and requested that a penalty of 4 percent interest should also apply on top of the principal amount, at a sum of US $1,219,380.
In light of the lack of an agreement regarding deposit of the loan amount to the special account and given proof that the payments were made as per repayment schedule in the aforementioned account, following further discussions, the Libyan authorities agreed to apply penalty interest of only 3 percent, at US $885,000.
“As per the Libyan authorities, if we fail to issue payment, they have the right to impose a clause in the initial agreement which states that in the event of default, in addition to the principal amount, Seychelles would have to pay 5 percent penalty interest of the initial loan amount. That is on the amount before the debt was restructured in 2010. Had we dragged on with the negotiations, we could have ended up in a worse situation.
“We already have the US $3,655,000 in the account, and we will be paying the additional US $885,000, the 3 percent interest,” Mr Labonte added.
The principal amount of $3,655,000 is to be paid upfront following the signing of a new settlement agreement. The interest is to be paid off in two payments, the first being in March 2023, and the second in September 2023.
The sum has already been catered for in the 2023 budget and will not affect government’s fiscal targets.
Failure to settle this debt could adversely affect Seychelles reputation with credit rating agencies and also its position on the programme with the International Monetary Fund (IMF), who prefers for countries which it assists to have a clean slate.
For More News And Analysis About Seychelles Follow Africa-Press
