November 26, 2024
- The International Monetary Fund staff and the Surinamese authorities reached a staff-level agreement on the eighth review of the authorities’ economic recovery program supported by the Extended Fund Facility (EFF). The review is subject to approval by the IMF’s Executive Board. Subject to approval by the IMF Executive Board, Suriname would have access to about USD 61.3 million (SDR 46.7 million).
- Program performance has been solid, demonstrating the authorities’ steadfast commitment to macroeconomic stability. The authorities’ main near-term policy priority is to maintain fiscal discipline in the run up to the elections while protecting the poor and vulnerable.
- Over the medium term, strengthening the fiscal framework, including through the introduction of new fiscal rules and the establishment of the appropriate institutional mechanisms will enable Suriname efficiently and transparently manage its newly found oil resources. It is also essential to boost non-oil GDP growth, including through addressing governance weaknesses and closing gender gaps in employment.
An International Monetary Fund (IMF) team led by Ms. Anastasia Guscina conducted discussions with the Surinamese authorities during October 29-November 12 on the 2024 Article IV and reached a staff level agreement on the 8th review of the 36-month Extended Fund Facility that was approved by the IMF’s Executive Board in December 2021.
At the conclusion of the discussions, Ms. Guscina issued the following statement:
“The IMF team reached a staff-level agreement with the authorities on the eighth review of Suriname’s economic reform program that is supported by the EFF arrangement. All quantitative targets for the eighth review were met except the primary fiscal balance target. The authorities are taking corrective actions to meet the end-year primary balance target. Structural reforms are progressing with a strong impetus. This staff-level agreement is subject to approval by the IMF’s Executive Board, contingent on the fulfillment of all relevant Fund policies. Upon completion of this review, Suriname will have access to SDR 46.7 million (about USD 61.3 million), bringing total program disbursements to date to SDR 383.8 million (about USD 503.8 million).
“The authorities’ commitment to maintaining prudent macroeconomic policies and difficult reforms are showing results in terms of macroeconomic stability and investor confidence. Economic growth is projected to reach 3 percent this year, inflation is on a steady downward trend, donor support is increasing, investor confidence is returning, and international reserves are increasing. The authorities face important near-term risks, including capacity constraints and policy implementation challenges reflecting the increasingly difficult socio-political environment. Suriname’s medium-term outlook has improved significantly with the announcement of the final investment decision (FID) paving the way for offshore oil production beginning in 2028.
“The fiscal path for 2024-25 has been loosened to accommodate unanticipated fiscal needs against the backdrop of the improving medium-term debt dynamics arising from the FID. The end-September primary balance target was missed because the electricity company (EBS) transferred insufficient resources to the state budget and an overrun on social assistance spending. The EBS has been hit hard by the ongoing drought (forcing a switch from hydroelectric to more expensive thermal generation) and weak bill collection. There was also a need to help rice farmers that have lost their crops due to the drought. The government is putting in place new fiscal rules and the supporting institutional arrangements to enable the country efficiently and transparently manage the upcoming oil wealth. Broader structural reforms are necessary to increase the efficiency, transparency, and accountability in the energy sector.
“Protecting the poor and vulnerable remains high on the agenda. The government met the indicative target on social assistance spending for end-September 2024. Stronger efforts are needed to address the challenges in the execution of the social beneficiary program to ensure the benefits reach the intended beneficiaries, particularly in the country’s interior regions. The authorities should promptly implement the recently completed strategic plan to enhance the effectiveness of social protection with the support of development partners.
“Excellent progress has been made with debt restructuring. Agreements have been reached with all official and most commercial creditors and negotiations with the remaining commercial creditors are ongoing. An umbrella agreement with the Paris Club for the second phase of the debt treatment was signed in October and negotiations with individual creditors are ongoing. Domestic debt arrears have been repaid and Suriname should be ready to re-access domestic debt market in the second half of 2025. The authorities are strengthening commitment controls to prevent accumulation of supplier arrears.
“The continued restrictive monetary policy stance has further reduced inflation. The Central Bank of Suriname (CBvS) is monitoring monetary developments and will continue to diligently implement open market operations to maintain the reserve money path consistent with the program targets. The CBvS remains committed to a flexible, market-determined exchange rate and is working to improve the functioning of the foreign exchange market, including through the launching of an electronic foreign exchange trading platform.
“Vulnerabilities in the banking system are being addressed. Timely completion of recapitalization plans of banks with capital shortages, and prudent monitoring of capital adequacy, liquidity and asset quality of banks are essential to preserve stability in the banking sector. The CBvS also needs to increase its monitoring of non-bank financial institutions, particularly with respect to their interconnectedness with the banking system.
“The authorities need to push ahead with their ambitious structural reform agenda to strengthen institutions and governance. A strong CBvS balance sheet is crucial for operational independence and the robust implementation of monetary policy. The central bank recapitalization plan, as required by the Central Bank Act, should be implemented as planned. Looking ahead, it is also important to push ahead with the broader governance reforms in anti-money laundering/combating the financing of terrorism (AML/CFT), anti-corruption, and public sector procurement to prepare the country for the oil wealth.
“The mission would like to thank the authorities for a collaborative and fruitful dialogue. Meetings were held with the President and Vice President of the Republic of Suriname, the Minister of Finance and Planning, the Minister of Agriculture, the Minister of Justice and Police, the Minister of Internal Affairs, the Minister of Labor, the Minister of Transport, Communications and Tourism, the Central Bank Governor, the leadership and the finance committee of the National Assembly, other senior government officials, civil society organizations, women leaders, representatives of the private sector, and development partners.