PARAMARIBO, Suriname, CMC – Suriname Wednesday completed its debt restructuring with international creditors and issued a new bond.
“This operation alleviates debt service by US$972 million over 2020-2026 and allows the government to devote significantly higher spending on society during trying times,” the Ministry of Finance and Planning said in a statement.
“This transaction – that ends complicated negotiations with bondholders – is the first successful sovereign debt restructuring achieved with bondholders since the pandemic,” it added.
Finance and Planning Minister Stanley Raghoebarsing said in 2016 and 2019, at a time of record low interest rates internationally, Suriname took out bonds that carried some of the highest interest rates in the world in both absolute percent and 11.175 percent.
“Today, despite a high-interest rate environment, the new coupon has been reduced in absolute terms (7.95 percent) and only pays a premium or 3.08 percent on US bonds,” he added.
The first coupon payment will be made on January 15, 2024, at a 4.95% interest. The principal payment is due on January 15, 2027.
According to the Ministry of Finance and Planning, on November 3, Suriname obtained the instructions and consents required to exchange and modify 100 percent of the aggregate principal amount outstanding of each series of its 2023 and 2026 Bonds under the terms of its Invitation.
The two Eurobonds, capitalized at high rates of 9.25 percent for the bonds due 2026 and 12.875 percent for the bonds due 2023 and amounting to US$912 million, were exchanged for a fixed-income instrument in the form of a new bond and a “value-recovery instrument” (VRI) in the form of an oil-linked security.
The new bond is issued with a face value of USS660 million, a 10-year maturity, and a coupon of 7.95 percent. Only 4.95 percent will be paid in cash during the first two years, with the remaining three percent capitalized. The new bond represents a 29 percent principal haircut on the original face value and accumulated past-due interest.
The Santokhi administration, when it came to power in 2020, inherited an unsustainable public debt burden, reaching 148 percent of gross domestic product ( GDP) from 41 percent in 2015. The government embarked on an ambitious reform agenda, implemented an International Monetary Fund (IMF)-supported program, and committed to reducing public debt.
But as a result of complex fiscal efforts and debt reduction, the public debt ratio is on track to be around 100% at the end of this year and reach 2018 levels by 2028.
It added that the debt restructuring provides significant fiscal space to navigate the structural reforms and sustainably support economic recovery.
Over 2020-2026, debt servicing, which amounted to US$1,073 million under the previous bonds, will be reduced to US$101 million. The new coupon on the restructured instrument is 7.95 percent against 9.250 percent (2026 bond) and 12.875 percent (2023 bond).
The authorities voiced confidence that the combination of Suriname’s efforts to implement a broad range of economic reforms, strong commitment to fiscal consolidation, comprehensive treatment of the debt issue, and sufficient debt relief will all contribute to ensuring a more prosperous future for Suriname.
After debt rescheduling had previously been agreed upon with countries under the Paris Club’s and India’s umbrella, the bilateral debt rescheduling with China remains.
Last month, Foreign Affairs, International Business, and International Cooperation Minister Albert Ramdin was in Beijing, discussing the debt issue with his Chinese counterpart.
At a technical level, the two countries have already more or less reached an agreement on debt restructuring, but the final decision on the Chinese side still needs to be taken at the highest political level.
During his visit, Ramdin said that a final agreement may be reached between Paramaribo and Beijing before the end of this year.
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