Assembly approves amendments to CBS laws to allow for emergency economic measures |28 March 2020

Members of the National Assembly yesterday approved amendments to two pieces of legislation that govern the functions and operations of the Central Bank to allow it to implement emergency economic measures.

The amendment to sections 2, 41 and 40A (2) of the Central Bank of Seychelles Act, 2004 (Cap 26) and the insertion of a new section – section 29A – aims to give certain powers to the Central Bank of Seychelles (CBS) so that in the event of a force majeure, the CBS may make loans, advances and rediscounts to banks and other financial institutions in Seychelles for periods not exceeding 3 years and to purchase or acquire treasury bills and other securities guaranteed by the government.

Force majeure includes:

- an unforeseeable or unavoidable natural event, circumstance or cause;

- a disaster as per the Disaster Risk Management Act, 2014 (Act 15 of 2014);

- an external economic event, circumstance or cause;

- a state of emergency declared under the Constitution;

- a public health emergency declared under the Public Health Act, 2015 (Act 13 of 2015); or

- a spread of an infectious disease affecting or likely to affect the majority of the population within a short period, which substantially and materially disrupts or is likely to substantially and materially disrupt the stability of the economy and financial system of the country.

An amendment to the Financial Institution Act (Cap 79) is intended to give power to the CBS so that, in the event of a force majeure, it may exempt or grant exception to one or more Financial Institutions from the application of one or more provisions of the Financial Institutions Act. A new section viz., 74A, is proposed to be inserted for that purpose.

When he presented the Bills to amend the two Acts, finance and trade minister Maurice Loustau-Lalanne noted that since the COVID-19 had been declared a pandemic affecting countries worldwide, Seychelles has foreseen its negative economic impact on the global economy in view of the adverse effects that it was having on trade and travel.

Minister Loustau-Lalanne pointed out that as Seychelles depends entirely on tourism as the principal source of revenue as well as on importation of almost all of its commodities, the impact of COVID-19 on our country has become more evident following the detection of positive cases of the virus on our soil, a situation that is putting more pressure on our heath system.

He went on to highlight all the different sectors that are being hardest hit by the impact of the pandemic not to forget our workforce which is being hit in different ways.

“More importantly is the impact the effect of the pandemic is having on our economy not only in the immediate but in the mid and long-term. It is necessary therefore that the country takes certain measures to counter these negative effects,” Minister Loustau-Lalanne stated.

He went on to stress that these measures are important to continue ensuring importation of essential commodities, to maintain a stable exchange rate and support the sectors that are being heavily affected.

“It is not a normal situation that we are facing but one that we have never experienced which requires some urgent adjustments. The government has already proposed some measures and the Central Bank as the institution with the mandate to ensure financial stability as well as maintain stability in prices are all working to put in place the necessary policies and measures to help the country face the situation,” the minister said.

He explained that to ensure the implementation of these measures, the laws that govern the CBS has to be amended and modified to include provisions for an element of force majeure that addresses   situations that could have severe adverse impacts on the economy as well as financial institutions. These include a state of emergency on public health.

Amendments are also being proposed in the law that guides the establishment and supervises financial institutions to allow the CBS to issue directives which facilitate the implementation of measures being introduced to address the impacts of COVID-19.  

The measures include the setting up of an Emergency Relief Facility of R500 million to support the private sector at an interest rate of 1.5% with a six-month moratorium repayable over a period of three years to be managed by commercial banks, the DBS and the Seychelles Credit Union.

Members who intervened on the principles and general merit of the Bill said while they understand the need for the CBS to take those measures, as nobody has any control over force majeure, they insisted that the CBS sets a limit and control on the sum it can lend and should not spend money it does not have.

Some members argued that the government should allow for a national participation of various other actors in this search for the best solution for the problems being caused by the COVID-19 and the CBS should not bear all the expenses alone. But rather should seriously consider its reserves and ensure the country will be able to bounce back once the crisis in over.

Marie-Anne Lepathy