PARAMARIBO, Suriname– The Central Bank of Suriname ( CBS) says it will tighten its supervision of foreign exchange traffic to stabilize the exchange rate and bring calm to the foreign exchange market.
In a statement, CBS said that the aim is to stabilize the exchange rate and bring calm to the foreign exchange market.
“The exchange rate of the US dollar and the Euro has been under increasing upward pressure since May 2022 due to increased demand in the foreign exchange market, while the supply of foreign currencies does not increase accordingly.
“On the other hand, Suriname’s imports have gradually started up again after the coronavirus (COVID-19) period,” the CBS said, adding that the situation is also compounded by the increase in prices for oil and food internationally because of the war in Ukraine.
“The latter means that oil companies, among others, need more US dollars every month to import the same fuel. The exchange rate is, therefore, the result of supply and demand in the foreign exchange market.”
The CVBS said that the demand side of the foreign exchange market is mainly dominated by importers who need foreign exchange to import goods and services. It said these goods and services are consumed by the public, exerting demand with Surinamese dollars.
“The monetary policy of the CBS focuses on controlling the liquidity in circulation and thus indirectly on controlling the exchange rate,” the statement said, adding that the supply side of the foreign exchange market is in principle outside the Bank’s sphere of influence. However, CBS has decided to contact the banks under its supervision, given the scarcity of foreign exchange.
“After a constructive discussion, it has been decided that banks will sell part of their currency positions to the market this week. They will also ensure that currency positions are more closely aligned with the currency risks associated with holding high funds and other public liabilities in the foreign currency sphere.
“This policy of the CBS will increase the foreign exchange supply concisely. Banks will sell US dollars to importers. In addition, the Bank will resume its Euro cash shipments, discouraging the phenomenon of couriers exchanging euros abroad for US dollars. This practice leads to extra price-formation margins, pushing up exchange rates. The whole society is harmed as a result. Cash transports will resume shortly.”
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