By Rizwan Sayed
· The IMF staff team and Surinamese authorities reached a staff-level agreement on the third 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.
· The authorities’ commitment to macroeconomic stability and fiscal discipline is starting to bear fruit. The economy is stabilizing. Pressures on the exchange rate have eased and inflation, while still high, is on a downward trend.
· The government’s near-term policy priority is to persevere with prudent fiscal policy while protecting the poor and vulnerable and supporting growth-enhancing investment.
WASHINGTON DC: An International Monetary Fund (IMF) team led by Ms. Anastasia Guscina conducted a virtual and in-person mission with the Surinamese authorities during August 7-22 to discuss policies to complete the third review of the 36-month Extended Fund Facility approved by the IMF Executive Board on December 22, 2021.
Suriname and the International Monetary Fund (IMF) have reached a staff-level agreement on the third review of the country’s economic recovery program supported by the Extended Fund Facility (EFF). The review is subject to approval by the IMF’s Executive Board.
According to the IMF, the Surinamese authorities’ commitment to macroeconomic stability and fiscal discipline is starting to bear fruit. The economy is stabilizing, and pressures on the exchange rate have eased. Inflation, while still high, is on a downward trend.
The government’s near-term policy priority is to persevere with prudent fiscal policy while protecting the poor and vulnerable and supporting growth-enhancing investment.
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 157.6 million (about USD 212 million).
The IMF team led by Ms. Anastasia Guscina conducted a virtual and in-person mission with the Surinamese authorities from August 7-22 to discuss policies to complete the third review of the 36-month Extended Fund Facility approved by the IMF Executive Board on December 22, 2021.
The authorities’ commitment to fiscal discipline and macroeconomic stability is starting to bear fruit. Pressure on the exchange rate has eased in recent months, and inflation, while still high, is on a downward trend. Usable international reserves remain comfortable at 4.7 months of imports at end-June 2023. With strong program implementation, growth is projected to recover to 2.1 percent in 2023 and converge to 3 percent over the medium term. Fiscal and monetary tightening is expected to lead to a gradual decline in inflation to 40 percent by the end of 2023.
The authorities face important near-term policy implementation challenges reflecting both capacity constraints and a challenging socio-political environment, as well as external risks from a renewed worsening in the terms of trade. Over the long term, there are significant upside risks to growth due to the development of large new oil fields.
Program performance during the third review was good, with most quantitative targets met. The authorities are on track to achieve a primary central government surplus of 1.7 percent of GDP this year, in line with program commitments. The structural reform agenda continued to progress, albeit with some delays.
It remains critical that poor and vulnerable groups are sheltered from the effects of fiscal adjustment and high inflation. The government is expanding the coverage of social assistance programs and will look at ways to protect the value of payments from inflation. With the support of development partners, the government will take a comprehensive look at the efficiency and effectiveness of the existing social protection programs and develop a strategic plan to guide future reform efforts in this area.
The authorities have made progress with debt restructuring, which is a critical element in restoring debt sustainability. All negotiations with the country’s official and private creditors, except for China, have been concluded. The debt exchange with private external bondholders will be launched next week. The authorities are actively negotiating with China on a debt restructuring agreement in line with program parameters, with the goal of making more progress by the next program review. The government has concluded negotiations on the restructuring of the legacy debt owed to the central bank, balancing the government’s financial constraints and the financial health of the central bank. Domestic debt and supplier arrears are being cleared.
The monetary stance is appropriate and is increasingly reflected in market conditions. Supported by the April increase in local currency reserve requirements and the guidance to contain private sector credit growth, reserve money growth has stabilized, and private sector credit growth has slowed. Median deposit and lending rates, although negative in real terms, are gradually edging up as more banks compete for liquidity. The authorities remain committed to a flexible, market-determined exchange rate.
The central bank is taking important steps to address weaknesses in the banking system and develop modern crisis management capabilities. The central bank has finalized the assessment framework for banks’ time-bound recapitalization and restructuring plans. Banks are implementing the recommendations from the Asset Quality Review and adjusting their loan loss provisioning.
The authorities are implementing reforms to strengthen governance. The central bank is clearing the backlog of audits of financial statements and is working to normalize the auditing cycle. A recapitalization plan for the central bank is being finalized. The government is taking steps to increase transparency in public procurement, as well as strengthen anti-corruption and anti-money laundering and combating the financing of terrorism (AML/CFT) frameworks.
The IMF team thanked 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 Vice President, the Chairman of the National Assembly, the Minister of Finance and Planning, the Minister of Justice and Police, the Minister of Social Affairs and Housing, the Minister of Internal Affairs, the Minister of Natural Resources, the Central Bank Governor, faction leaders and members of parliament, other senior government officials, representatives of the private sector, labor unions, and development partners.
The agreement is a positive step towards Suriname’s economic recovery and will help the country to continue on the path of macroeconomic stability and fiscal discipline.
