France restructures debt owed by Seychelles

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France signed a deal to restructure debt owed by Seychelles worth 44 million euros to help the Indian Ocean archipelago put its debts on a sustainable footing.

The deal enacts an agreement made by the Paris Club of creditors, which in April 2009 pledged to cancel debt worth nearly $70 million. France is the largest lender to Seychelles among the Paris Club. Reuters reports

France said it would write off debts of 20.2 million euros while the remainder would be rescheduled over 18 years, with a five year grace period.
“To obtain (debt sustainability) … it is essential all external creditors, bilateral or private, make efforts similar to those of the Paris Club creditors,” a joint statement from the Seychelles government and the French Embassy in Seychelles’ capital Victoria said.

Seychelles defaulted on a six-monthly interest payment on the 2011 Eurobond in October, 2008. The bond default reflected an acute balance of payments crisis.

The International Monetary Fund stepped in with an emergency $26 million package in November 2008 that was conditional on reforms to liberalise the economy.



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