Seychelles to complete long-standing Russian debt repayment by 2027 |28 February 2024
Mr Labonte (Photo: Joena Meme)
Seychelles is set to complete the repayment of a long-standing debt owed to the government of Russia by the year 2027.
As per the new restructuring agreement, Seychelles will settle the USD $2.7 million through a lump-sum upfront payment of $1.9 million this year, with the remaining $800,000 to be settled between 2024 and 2027.
This follows Cabinet’s approval for finance minister Naadir Hassan to sign the settlement agreement on behalf of the government of Seychelles.
Dick Labonte, director general of the Debt Management Division from the Ministry of Finance, National Planning and Trade, yesterday clarified that the funds for repayment would be sourced from the government's accounts.
“During the period when agreement terms were unsettled, interest accumulated. However, with our upfront payment now, it encompasses accrued interest, subject to a 4.5 percent interest rate. Additionally, the remaining balance, to be paid between 2024 and 2027, will incur normal interest rates rather than accumulated interest,” Mr Labonte stated, highlighting the urgency of settling the debt.
The loan, amounting to 4 million Russian Rubles, roughly $6.6 million (2009 exchange rate), was granted in 1987. Despite initially servicing the loan during the 2000s, the Seychelles government would eventually default on all major loan obligations during the 2008 economic crisis.
Negotiations with the Paris Club of creditors in 2009 paved the way for a restructuring agreement with several countries, including Germany, France, Belgium, Italy, the UK, and Russia. However, discrepancies emerged regarding the upfront discount offered by Russia compared to other nations.
While other countries agreed to a 45 percent upfront discount, negotiations with Russia have been ongoing since 2010 as to the percentage of discount applicable.
“After many years of negotiation, we have finally agreed that Russia will give us a 35 percent upfront discount,” Mr Labonte emphasised.
This concession aligns with the terms set forth by the Paris Club agreement.
Reflecting on the challenges faced in resolving the matter, Mr Labonte further highlighted administrative changes and government restructuring in both countries as contributing factors.
According to Mr Labonte, the new agreement means Seychelles has now addressed both cases which were cited as pending in the Auditor General’s report. In 2022, the Seychelles government announced that the Libyan authorities had agreed to restructure a long-standing loan, and that repayment would be completed in 2023.
Seychelles’ debt burden currently stands at R17.5 billion.
Laura Pillay