Vice-President Danny Faure announced the cancellation at State House yesterday and showed the media a letter from the club’s vice-chairman Remy Rioux confirming it.

Mr Faure – who is also the Minister for Finance – was accompanied by principal secretary for finance Ahmed Afif and Central Bank of Seychelles governor Pierre Laporte.

“The debt cancellation means we can deepen our bilateral relations with these countries that we had arrears with, and they will be ready to work with us again,” said Mr Faure.

“It also means that we can invest money in social programmes, and that more foreign exchange will be available for importers and traders as well as tourism operators.

“And it will bring new opportunities for our private sector and a deepening of bilateral relations with the eight European countries who are members of the Paris Club.”

Mr Faure said it is a big achievement for Seychelles and shows that the economic reform programme is solid and on track.
“This has taken place because Seychelles has complied with all its economic reform obligations and reached the targets we aimed for,” he added.

The move forms part of the debt restructuring agreement signed by Seychelles and the Paris Club on April 16, 2009 for debt cancellation in line with the economic reform programme supported by the International Monetary Fund since October 2008.

Mr Faure said the cancellation will strengthen Seychelles’ negotiation process with non-bilateral creditors and commercial banks for further debt restructuring.

“We believe that before the end of September this year we will conclude negotiations with all commercial and Paris Club members,” he said.

“Our reform programme is on track, and we are ensuring the economic sustainability of the country. We have restricted government borrowing to a maximum of US $35 million a year, and we will only borrow on concessionary loan terms.”

Mr Faure thanked the people of Seychelles for supporting the programme and President James Michel for launching it in October 2008.

Messrs Afif and Laporte said Seychelles’ external debt was in excess of US $800 million and accounted for 171% of gross domestic product (GDP) before the reforms.

Following the debt cancellation and restructuring agreements with the Paris Club, as well as other bilateral partners, the external debt now stands at nearly US $460 million. The intention is to reduce sovereign debts to 50-60% of GDP in the medium to long term.