The Seychelles government said on Saturday a new $31 million loan from the International Monetary Fund would support a second wave of reforms on the heavily indebted Indian Ocean archipelago. IMF approved the loan in the early hours of Saturday and cancelled an existing two-year standby arrangement (SBA) for $26 million which had a year outstanding. Finance Minister Danny Faure said the new Extended Fund Facility (EFF) would kick in immediately.
"The EFF will bring funds of $31 million to support our medium term reform strategy which is looking at debt restructuring, public sector reform and preserving the macroeconomic stabilisation," he told Reuters in a phone interview from Seychelles' capital, Victoria. An interest payment default last year by Seychelles on its 2011 eurobond highlighted an acute balance of payments crisis and triggered a raft of fiscal and monetary reforms to liberalise the once state-controlled economy in late 2008.
The Indian Ocean archipelago last week launched an exchange offer on the $230 million bond and three other debt instruments to help place it on a more sustainable footing. The impact of the global crisis and decades of unsustainable spending had left Seychelles close to collapse. This year, the tourism-driven economy is expected to contract by 7.5 percent before re-bounding to 4 percent in 2010, although Faure said the recovery in the tourism sector would be vulnerable to external wobbles.
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