IMF Reaches Staff-Level Agreement with the Republic of Suriname on a $690 million Three-Year Program Under the Extended Fund Facility
IMF News, April 29, 2021
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- Published: April 29, 2021
Program overview and objectives
- Agreement reached on a new medium-term program supported by IMF resources of SDR 472.8 million (about US$ 690 million) under the Extended Fund Facility (EFF).
- Program duration: 36 months, over 2021-2024.
- Immediate availability if approved by the IMF Executive Board: SDR 39.4 million (about US$ 57.5 million).
- Program aims:
- Lay the foundation for a strong, resilient, and inclusive economic recovery.
- Protect the poor.
- Lower inflation.
- Restore debt sustainability.
- Invest in the future.
Macroeconomic context and challenges
- Pre-existing conditions at the time the government assumed office: high inflation, low international reserves, a large fiscal deficit, and significant fiscal and BOP financing needs.
- Economic situation worsened by the Covid-19 pandemic and volatility in the terms of trade.
- Debt and financing requirements:
- Debt relief from Suriname’s official bilateral partners and additional financing from multilateral partners will be required to help ensure debt sustainability and close financing gaps.
- Progress toward a restructuring of commercial debt is needed to achieve sufficient creditor participation to restore debt sustainability and close financing gaps.
Key policy components and prior actions
- Fiscal policy:
- A substantial reduction of the fiscal deficit is included in the program.
- Increase in fiscal resources provided to the most vulnerable members of society.
- Exchange rate and monetary policy:
- Immediate shift to a flexible exchange rate.
- Realign the official exchange so as to eliminate the current parallel market premium.
- Adoption of a sound monetary regime to reduce inflation and ensure monetary policy is effective in bringing down the current high rates of inflation.
- Rebuilding of international reserves to protect reserves and increase capacity to adjust to external shocks.
- Public debt and banking sector:
- Broad restructuring of public debt to restore the country to a sustainable debt position.
- Prioritize garnering a clearer picture of the financial situation of the banking system and returning it to robust capitalization, liquidity, and profitability.
- Institutional and governance reforms:
- Modernizing both the monetary and fiscal policy frameworks.
- Improve governance and strengthen the framework to counter money laundering.
- Tackle corruption.
Conditionality, financing assurances, and expected external support
- IMF Executive Board consideration is conditional on:
- Complete implementation of a set of important policies by the authorities, referred to as prior actions.
- Receipt of the necessary financing assurances.
- Role of external partners:
- IMF financial support is expected to help catalyze financial support from other international financial institutions.
- Debt relief from creditors and additional financing will be needed to close financing gaps and restore debt sustainability.
Expected outcomes and policy rationale
- Authorities anticipate that expansive policy efforts combined with IMF financial support and an inclusive consultative process with key stakeholders will:
- Catalyze external financial support and debt relief.
- Result in a sustained economic development path with strong growth and job creation.
- Lead to a reduction in poverty and improved living standards for all of Suriname’s citizens.
Press Release No. 21/116, April 29, 2021 — IMF Communications Department
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