WASHINGTON, CMC – Suriname has requested an extension, until March 2025, of its Extended Fund Facility (EFF) with the International Monetary (IMF), as well as seeking an increase of about US$63 million from the Washington-based financial institution.
The IMF said that its staff and the Surinamese authorities had reached a staff-level agreement on the fourth review of the country’s economic recovery program that the EFF is supporting and that the review is subject to approval by the IMF’s executive board.
However, the IMF noted that the fiscal discipline and tight monetary policy are bearing fruit in restoring macroeconomic stability and that the economy in the Dutch-speaking Caribbean Community (CARICOM) country is growing, inflation is coming down, and investor confidence is returning.
It said that next year, the government intends to use some of the dividends from increased stability to expand social assistance programs for the poor and vulnerable, modestly increase real public sector wages for registered civil servants, and raise spending on growth-enhancing infrastructure.
The IMF mission, which Anastasia Guscina led, conducted virtual and in-person discussions with the Surinamese authorities to complete the fourth review of the 36-month EFF approved by the IMF in December 2021.
”Programme performance has been strong, and all performance criteria for this review were met. Staff supports the authorities’ request for an increase in IMF support to Suriname of about US$ 63 million and an extension of the program to March 2025. ,” said Guscina, adding that this would raise IMF support for Suriname to an estimated US$650 million.
“This staff-level agreement is subject to approval by the IMF’s executive board, contingent on fulfilling all relevant Fund policies. Upon completing this review, Suriname will have access to US$53 million, bringing total program disbursements to US$263 million,” she added.
The IMF official said that Suriname’s efforts to stabilize the economy are bearing fruit, with growth projected at around two percent this year, inflation on a downward trend, and usable international reserves have reached almost five months of imports.
She said prudent fiscal and monetary policies will bring inflation below 20 percent by the end of 2024.
Suriname faces significant near-term risks, including policy implementation challenges stemming from a more challenging socio-political climate and capacity constraints. Over the medium to long term, growth has significant upside risks due to the development of large new oil fields.
“Programme performance during the fourth review has been strong. All quantitative performance criteria and indicative targets under the program were met, except for the spending floor on social assistance. The authorities are on track to achieve the central government primary surplus target of 1.6 percent of GDP (gross domestic product) this year,” Guscina said, adding that the structural reform agenda is progressing, albeit with some delays.
She said the fragile economic recovery and rising social tensions call for a more measured pace of fiscal consolidation in 2024.
“Staff and the authorities agreed to reduce the 2024 primary balance target from 3.5 to 2.7 percent of GDP. The 3.5 percent of GDP primary balance target, which underpins debt sustainability, will now be reached in 2025.”
Suriname is expected to use the additional fiscal space in 2024 to support the recovery, increase support for the poor and vulnerable, prevent further erosion of real wages for registered public sector workers, and scale up growth-enhancing investments.
So far, the expansion of social assistance programs needs to be faster, and particular efforts will be made to address constraints in this area, Guscina said.
“Excellent progress has been made with debt restructuring. The debt exchange with private bondholders has been finalized with a participation rate of over 96 percent, and agreements with remaining official creditors are close to conclusion. The government has also made progress in clearing domestic arrears and restructuring domestic debt and the legacy debt owed to the central bank.”
Guscina said monetary policy has been actively absorbing domestic currency liquidity, which is starting to be reflected in market interest rates and a reduction of inflationary pressures. She said the central bank has also demonstrated its commitment to a flexible, market-determined exchange rate while working to improve the functioning of the foreign exchange market.
“Significant vulnerabilities remain in the banking system, which the central bank is actively addressing. Banks are incorporating the results of their asset quality review into their operations, and those banks that do not meet regulatory requirements have submitted time-bound recapitalization and restructuring plans to the central bank.
“The central bank is also strengthening its oversight over the banks and has submitted enhancements to its framework for bank resolution to the State Council for approval. The central bank has cleared the backlog of financial statement audits and can now normalize the auditing cycle and fully implement the new Central Bank Act.”
Guscina said a recapitalization plan for the central bank is being finalized, and governance reforms are underway in various areas, including anti-money laundering/combating the financing of terrorism, anti-corruption, and public sector procurement,” Guscina added.
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