February 15, 2022
- The IMF staff team and Surinamese authorities reached a staff-level agreement on the first review of the authorities’ economic recovery program supported by the Extended Fund Facility (EFF). The agreement is subject to approval by the IMF’s Executive Board.
- Suriname’s economic program remains on track, with key quantitative targets met and with continued progress on an ambitious set of reforms. The economic stabilization and recovery are underway and both fiscal and external balances are improving.
- The government’s economic policies aim to build on their fiscal consolidation efforts while enhancing social spending, advancing debt restructuring discussions with creditors, further strengthening the new monetary policy framework, addressing banking sector vulnerabilities, and continuing to tackle money laundering, corruption and other governance shortcomings.
An International Monetary Fund (IMF) team led by Mr. Ding Ding held virtual meetings with the Surinamese authorities on February 7-11 to conduct the first review of the 36-month Extended Fund Facility arrangement approved by the IMF Executive Board on December 22, 2021 ( Press Release no. 21/400 ).
At the conclusion of the discussions, Mr. Ding issued the following statement:
“The IMF team has reached a staff-level agreement on policy measures for the completion of the first review under the EFF arrangement. This agreement is subject to approval by the IMF’s Executive Board.
“Despite difficult social and economic conditions, which have been exacerbated by the COVID-19 pandemic, Suriname’s homegrown economic recovery program is on track. All quantitative targets assessed at end-December 2021 have been met. Structural benchmarks have also been implemented, albeit some with minor delays. Spending on cash-transfer programs has fallen modestly short of the authorities’ goals but corrective measures are underway to accelerate the expansion in coverage of these programs.
“The monthly economic indicators point to a nascent economy recovery. Inflation, while still high at 60.6 percent (y-o-y) as of December, has fallen substantially since August on a month-on-month basis. Fiscal and external imbalances have been reduced, the 2021 primary fiscal deficit is estimated at 1.3 percent of GDP, and usable reserves have been rebuilt to around 3 months of imports. Public debt is estimated to have fallen from 148 percent of GDP at end-2020 to 125 percent of GDP at end-2021 due to the authorities’ fiscal measures and an appreciation in the real exchange rate.
“The Surinamese economy is expected to gradually recover during the course of 2022. Real GDP growth is projected to reach 1.8 percent with an unwinding of fiscal and external imbalances and a stabilization of the macroeconomy. Over the medium term, growth could reach 3 percent, supported by growing private demand and public investment. Inflation is forecast to decline to 26 percent by end-2022 and to 12 percent by end-2024.
“The Surinamese authorities’ homegrown economic recovery plan (“Herstelplan”) is charting a course toward debt sustainability, declining inflation, and economic recovery. There has also been an important emphasis on social stability. The government plans to submit a revised 2022 budget to the National Assembly in the coming weeks with an envisaged primary surplus of 1.7 percent of GDP and revenue and expenditure measures to achieve that goal. Social cash transfers will be increased to support society’s most vulnerable. Electricity tariffs will be further increased towards costs recovery levels within the energy sector financial and operational reform framework. The government is also working to advance discussions on debt relief with private and official creditors.
“The Central Bank of Suriname has made important progress in implementing the new reserve money targeting framework. They have shown their commitment to achieving a firm downward path for inflation and to maintaining a free-floating, market-determined exchange rate. These efforts will strengthen the economy’s resilience to external shocks and increase foreign reserves to prudent levels. The Central Bank is taking proactive steps to enhance banking system compliance with prudential regulations while strengthening the central bank’s crisis management capabilities.
“Important measures have been taken to strengthen central bank governance. The authorities remain committed to enhancing transparency and accountability in public procurement processes and to addressing shortcomings in the anti-corruption and AML/CFT framework.
“There are two-sided risks ahead. Delays in key fiscal reforms or debt restructuring could slow the progress already made to restore debt sustainability. An intensification of banking system risks could have unpredictable consequences for the fiscal position and domestic output. Also, further outbreaks of COVID-19 may result in renewed public health restrictions and headwinds to growth. On the positive side, there are prospects for significant new oil developments which would strengthen growth, investment, and the balance of payments.
“The mission would like to thank the authorities for a collaborative and fruitful dialogue. A wide-ranging set of meetings was held with the Minister of Finance and Planning, the Central Bank Governor, the Minister of Social Affairs, other senior officials, and representatives from the private sector and civil society.