April 21 2011 -- China has agreed to let Seychelles pay the R321 million debt we owe that country in 20 years, with a grace period of 10 years.

Vice-President Danny Faure - who is also the Minister for Finance and Trade - announced this on his return from China where he led our negotiations to seek a rescheduling of the debts.

He was accompanied to China by his technical adviser Bertrand Belle and the director for public debt in the Ministry of Finance Brian Charlette.

During the 10 years' grace period Seychelles will need to pay 2% interest or about R500,000 per month which adds up to R6 million per year.

"Within the next 24 months, the government will receive an injection of US $3 million budget support from China as part of a package that is comparable to the treatment we have received as part of our negotiations with commercial banks, bond holders and countries belonging to the Paris Club group," he said in an interview yesterday.

Mr Faure said the agreements for the restructuring were signed on Monday in Beijing, adding Seychelles is happy with the outcome.

He noted Seychelles has a good relationship with China, which has financed through grants many of our social projects such as the Baie Lazare and Au Cap  schools, the Anse Royale hospital.

He noted we expect another grant soon to help build a new school at Glacis and another to refurbish the national swimming pool in readiness for the coming Indian Ocean Games.

"Even though China is the second largest economy in the world, it remains a developing country and it has a principle to help other people in the world, and this is how we as a small nation are getting the money to invest in social infrastructure which help our country's development from China," he said.

Mr Faure said the reform programme includes a plan to negotiate with the countries we owe, and to cap our borrowing at a maximum of US $47 million per year so as to make our debts sustainable.

Today the economy is on the right track and all the economic pillars are solid and will help us repay our debts, he said.

Progress towards reaching a debt rescheduling agreement with India was kick started by President James Michel who has already met the country's prime minister, he said.

An agreement with Abu Dhabi, which is also giving us a number of grants, is also expected to be reached soon, said Mr Faure.