Washington, DC:
An International Monetary Fund (IMF) team led by Ms. Anastasia Guscina
conducted virtual and in-person mission with the Surinamese authorities
during May 8-16 to discuss policies to complete the second review of
Suriname’s economic recovery program supported by the IMF’s
Extended Fund Facility
.
At the conclusion of the mission, Ms. Guscina issued the following
statement:
“The IMF team and the Surinamese authorities have reached a staff-level
agreement on the second review of Suriname’s economic reform program
supported by the
36-month EFF
arrangement. This agreement is subject to approval by the IMF’s Executive
Board, contingent on the implementation by the authorities of prior actions
and fulfillment of all relevant Fund policies. Upon completion of this
review, Suriname will have access to SDR 39.4 million (about USD 53
million), bringing total program disbursements to date to SDR 118.2 million
(about USD 159 million).
“Assuming concerted implementation of Suriname’s reform program, recovery
will continue amid moderating inflation. Growth is projected to recover to
2.3 percent in 2023 and converge to the 3 percent potential next year, with
real GDP remaining below its pre-pandemic level until 2028. Fiscal
consolidation and monetary tightening will facilitate a gradual decline in
inflation to 36 percent by end-2023. The authorities face important
near-term risks including policy implementation challenges, both due to
capacity constraints and a more challenging socio-political climate, and
external risks from a renewed worsening in the terms of trade. Over the
longer horizon, there are significant upside risks to growth due to the
development of large new oil fields.
“In an effort to re-establish macroeconomic stability, the government has
passed a conservative 2023 budget, which incorporates critical spending
measures, including removing fuel subsidies, phasing out electricity
subsidies, containing the public wage bill, while expanding social
assistance spending and growth-enhancing infrastructure investment.
“Recalibrating the fiscal policy is key to protect the recovery and to
support the most vulnerable. For 2023, the program targets achieving a
primary surplus of 1.7 percent of GDP, about
half of what was envisaged in the first review, allowing the authorities to
increase spending on social programs and critical infrastructure. In 2024,
the program targets a primary surplus of 3.5 percent of GDP, which is the
medium-term anchor consistent with debt sustainability.
“Completing the ongoing debt restructuring negotiations with Suriname’s
official and private creditors is a critical step in restoring the
country’s debt sustainability. An agreement was reached with Paris Club
(PC) creditors for a two-step debt treatment in June 2022, and bilateral
agreements with most of the PC creditors have been completed. An
agreement-in-principle with bondholders was reached on May 4, 2023. The
authorities are actively negotiating in good faith with China and India on a
debt restructuring agreement. On domestic debt, the government has
completed the audit of supplier arrears and committed to clearing them,
while strengthening public financial management to prevent accumulation of
future arrears. In addition, the government has prepared a concrete action
plan to complete ongoing domestic debt restructuring in 2023. There has
been a good progress in negotiation on the restructuring of the legacy debt
owed to the Central Bank of Suriname (CBvS), balancing the government’s
financial constraints and CBvS’s financial health.
“The central bank has continued to implement the new reserve money
targeting framework. However, the large increase in government spending and
structural features of Suriname’s financial system, including uneven
distribution of system’s liquidity, has made meeting the central bank’s
monetary targets challenging, and interest rate transmission remains weak.
To better absorb liquidity and help improve monetary transmission, the CBvS
has increased reserve requirements on local currency deposits and provided
guidance to contain the credit growth in the near term. The authorities
remain committed to a free-floating, market-determined exchange rate. The
central bank is taking important steps to improve its knowledge on the
financial position and asset quality of the commercial banks and address
any shortcomings, strengthen oversight, and develop modern crisis
management capabilities.
“The authorities are making effort to strengthen central bank governance
and address shortcomings in the anti-corruption and AML/CFT framework. The
central bank is working to clear the backlog of audits of financial
statements and to normalize the auditing cycle. A recapitalization plan for
the central bank is being finalized and will have a clear target of the
level of capital and a timeline for completion. The government intends to
accelerate implementation of governance reforms in AML/CFT,
anti-corruption, and public sector procurement.
“The authorities are working on critical structural measures including
submitting to the National Assembly an amended VAT act to broaden the
tax base, publicly announcing the planned reforms to electricity
tariffs, and finalizing the roadmap for financial sector
recapitalization and restructuring.
“The mission would like to thank the authorities for a collaborative and
fruitful dialogue. A wide-ranging set of meetings was held with the
President of the Republic of Suriname, the Chairman
of the National Assembly, the Minister of Finance and Planning, the Central
Bank Governor, the Minister of Justice, the Minister of Social Affairs and
Housing, the Minister of Home Affairs, the Minister of Natural Resources,
other senior officials, representatives of the private sector, civil
society organizations, and development partners.
