IT’S TIME TO PAY THE BILLS
CBS gives Michel easy money further compromising its independence
Despite claims by the Ministry of Finance that it has been posting an important surplus on the budget expenditure so far this year, the Central Bank under Governor Francis Chang Leng, is making moves to give the government more easy money from the
More interestingly, however, local assets will now also include the money government owes the banks under the Government Home Ownership scheme. This scheme, introduced with great fanfare only a few years ago to transfer all home loans previously made by the government to the banks, has virtually collapsed. Matters have gotten worse during the election campaign when President Michel decided to write off big chunks of loans in order to win votes, even though the government did not have the money to refund the banks.
The decision to increase the local asset ratio, it appears, is precisely an underhand way for government to obtain money to pay the banks back the housing loans which have been written off by President Michel as a campaign inducement. This method of raising finance by the government, however, has been strongly criticised by the IMF.
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The order which Chang Leng published in the gazette is called the Financial Institutions (Local Asset Ratio) Regulations 2006. This regulation says “All banks shall, from and after
And the Gazette defines deposit liabilities to include checking account deposits, savings deposits and fixed deposits. It also includes money held by the banks for the Development Bank of Seychelles (DBS), which only in June borrowed SR 55,000,000 from Barclays Bank. It does not include foreign currency and pipeline deposits and even inter-bank deposits, however. Just as well, because while Nouvobanq registered only SR 181,607 of money belonging to other banks in its 2005 Statement of Account, it has SR 50,000,000 deposited in other banks – in fact it is in the Seychelles Savings Banks, which over the years has been unable to fulfil the requirements of the Local Assets Ratio regulations.
In order to fulfil the requirements of the new regulation banks must purchase government debt instruments known as securities. These securities are Government Stocks, Treasury Bills and Treasury Bonds. But local assets can also be debts of parastatals which government have given guarantees to.
In June 2000 the IMF sent a special mission to