PARAMARIBO, Suriname, CMC –Finance Minister Stanley Raghoebarsing says the country’s program with the International Monetary Fund (IMF) is in danger of being stopped, as the government has not yet paid off the national debt of approximately SRD$8 billion (US$275 million) at the Central Bank of Suriname (CBvS). The Energy Companies Suriname (EBS) is still being subsidized too heavily.
Speaking on Thursday, the Finance Minister said that in order to pass the upcoming seventh IMF review Positively, the government will have to present a plan on how the bank’s debt will be paid off, and the EBS will have to deposit the funds collected in the past three to four months with the increase in electricity tariffs into the state treasury.
“If these actions are not taken, the IMF program will stop,” said Raghoebarsing, speaking during a press conference at which IMF representative Anastasia Guscina and CBvS governor Maurice Roemer also presented information on the status of the implementation of the recovery program and the economy.
In recent days, an IMF mission has held talks with the government and other stakeholders in Paramaribo about implementing the economic recovery plan.
The statements at the press conference also revealed that the government’s budget has seriously derailed, with expenditures much higher than income, resulting in a gap of over SRD$1.8 billion.
According to Guscina, this gap must be closed quickly. On a positive note, she also stated that the macroeconomic situation has stabilized, inflation is steadily decreasing, the exchange rate is stable, and international donors are increasingly doing business with Suriname.
“These are good signs of economic recovery,” Guscina said.
Raghoebarsing noted that although macroeconomic stability exists, it is still vulnerable and needs to be protected.
“It is something that we will have to protect and guard permanently.” He argued that at the beginning of this year, the government had the budget well under control, but that government spending got out of hand from March onwards. In June, there was a gap of approximately SRD 1.8 billion. That gap will grow, the minister believes, if not everyone cooperates in curbing government spending and increasing income. Ministries will have to stay within the limits of the planned expenditure.
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The minister acknowledged that the EBS subsidies still cause problems. He said that this year, between January and June, Staatsolie received US$60 million in advances and dividends, which went directly to the EBS as a subsidy. In addition, the government had to add another US$10 million to guarantee the power supply.
“That situation cannot continue,” said Raghoebarsing.
In the meantime, consultations have started with the EBS to deposit the additional income that the company has due to the increased rates into the state treasury. This is set as a condition, prior action, by the IMF for obtaining the next tranche. If this is not done, Suriname will not receive a seventh payment from the loan agreed with the Fund, “and the program is in danger of stopping.” That must not happen, the minister stated, because the economy will once again derail with sky-high exchange rates and inflation. The EBS is, therefore, called upon to transfer the intended resources to the state more quickly. The company still has to pay for May, June, and July. “Those payments really must come on time.”
Another condition is that the government must start paying off the national debt to the CBvS. Meanwhile, the minister and the governor have drawn up a plan, which means that from 2025 onwards, a start will be made with paying the interest on this national debt. At the moment, there is no money to pay off the principal.
The implementation of the recovery program is nearing its end, and the IMF is satisfied with its progress overall. All monetary targets have been met, and the social program targets for fiscal measures have finally been met. “This is a good and important development. We have been waiting for this kind of results for a long time,” the IMF representative said.
She added, however, that while the quantitative targets have been met, the government is spending more on social benefits, but much work still needs to be done to improve efficiency. Social benefit expenditure must increase, but more importantly, the money should go to people who need it and not to those who do not qualify. “People who do not need social assistance should not get it,” she said.
Although progress has been made, “the fiscal picture is not so good,” Guscina said. The target for the central government’s primary budget balance has not been met.” Much will have to be done to correct this so that the targets are met. There is insufficient collection of non-tax revenues and taxes. On the other hand, government spending needs to be sufficiently curbed.
The IMF official also warned of significant wage increases for civil servants. The civil service should first be restructured, removing all ghost civil servants who receive salaries without working from the system. The money saved in this way can be used to pay other civil servants better, especially academically trained staff. Guscina said public sector reform is moving in the right direction but still needs to be faster.
“This reform should be more ambitious so that public sector employees who work hard can receive a decent compensation. It is impossible to protect ghost workers and offer good salary increases to the rest of the population.” The IMF representative said that meeting the wage demands of civil servant unions is not only a threat to the recovery program but also to macroeconomic stability. At least 2,500 civil servants could be taken off the payroll immediately.
“With an economy that is still below its potential, a very high salary increase in the public sector, which is relatively large, will only fuel inflation and exchange rate depreciation. And that is not what we want to achieve. The sacrifices that the rest of society has made should not be in vain,” said Guscina. “There is a general risk to macroeconomic stability if salary increases in the public sector are not contained,” she stated.
Raghoebarsing indicated that a recent study by the World Bank, Inter-American Development Bank, AdeK University, and the General Statistics Office on poverty in Suriname has shown that rich people and the middle class also receive welfare benefits, people who do not need them. The study shows that if the high earners do not receive social assistance, the government can reduce the 17.5 percent of the poor population to 2.5 percent within a few years with the same amount now spent on social benefits.
“If we ensure that corruption, inefficiency, abuse from social policy – because there is also corruption and abuse – the errors are removed, we can permanently eradicate poverty in one go.” The minister stated that there are significant advantages when someone who needs a subsidy applies for it themselves. This prevents a lot of abuse. “If you do it automatically, it also goes to people who do not need it. AOV is also paid to me. I do not need it,” the minister stated.
The minister did not specify whether the government will switch to a system in which citizens who believe they need a subsidy or social assistance apply for it themselves, as proposed by Guscina. He is in favor of it because it is “a much better system” and can be made easily accessible. If the government decides to do so, such a measure will have to be well-prepared. “You do not want to affect vulnerable people when taking a good measure,” Raghoebarsing said.
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