Letters to the Editor

Another case of borrowing from Paul to pay Peter?

Sir – Two weeks ago Minister of Finance Danny Faure belatedly explained to the National Assembly why the government had to borrow an extra 30 million US dollars in the form of capital market bonds which Lehman Brothers issued at an arrangement fee of a million dollars or 3.34% of the total loan. In keeping with his style of Cuban secretive democracy, the Minister further indebted the Nation and then reluctantly felt compelled to explain to the elected representatives why he had done it. His answers do not add up.

The exorbitant arrangement fee reflects the weak negotiating position that our Country finds itself in. Such a fee would normally average 1% of the borrowing requirement. In this case, the high fees extends the debt to 31million dollars at an annual interest rate of 9.125% giving rise to yearly accrued interest of nearly 3 million dollars. This is on top of the 19 million dollars yearly accrued interest on the 200 million dollar bond issued last year.

The reason for the new loan we’re told is to help the Central Bank of Seychelles clear its commercial arrears. This is news because the Minister had never made an issue of the Central Bank having unsustainable commercial arrears. The Central Bank itself in its Q1 report did not make an issue about its commercial arrears. If anything, everyone has been bullish about the increase in Central Bank liquidity and net reserves which is why this latest bonds issue stinks.

The Ministers latest explanations are not substantiated by documents in the public domain. It begs the questions; (1) Is the Minister of Finance lying to the elected representatives or has the central bank and its governor massaged their last set of published figures? What is the real reason for borrowing $31 million dollars? Can it be that some of it is required to pay pending interest on the previous $200 million dollar loan?

Jess