PARAMARIBO, Suriname, CMC – The International Monetary Fund (IMF) says Suriname has met the primary balance target of the 36-month Extended Fund Facility (EFF) that the Washington-based financial institution had approved in December 2021.
In a statement, the IMF said that a mission visited the country of the Dutch-speaking Caribbean Community (CARICOM) earlier this month to discuss economic policies.
“The IMF team reached a staff-level agreement with the authorities on the seventh review of Suriname’s economic reform program that is supported by the EFF arrangement. All quantitative targets for the seventh review were met except the primary balance target,” it added.
The mission, led by Anastasia Guscina, said that Suriname authorities are taking corrective actions to meet the end-year primary balance target. “Structural reforms are progressing with a stronger impetus. This staff-level agreement is subject to approval by the IMF’s Executive Board, contingent on fulfilling all relevant Fund policies.”
The IMF said that upon completing this review, Suriname would have access to US$62.5 million, bringing total program disbursements to US$451.2 million.
“The authorities’ commitment to maintain prudent macroeconomic policies and difficult reforms shows results regarding macroeconomic stability and investor confidence. Economic growth is projected to reach three percent in the year, inflation is on a steady downward trend, donor support is increasing, investor confidence is returning, and international reserves are increasing.
“The authorities face important near-term risks, including capacity constraints and policy implementation challenges reflecting the increasingly difficult socio-political environment. Over the medium to long term, there is potential for growth to accelerate owing to the development of large new oil fields. The final investment decision is expected by the end of the year, with production scheduled to begin in 2028.”
Guscina said the Surinamese authorities remain committed to achieving the 2024 fiscal target. She said budgetary performance in the first half of the year could have been more robust, reflecting underperformance of non-tax revenues and overspending on electricity subsidies due to the low water level of the hydro dam and the electricity company not remitting to the budget resources from the recent tariff increases.
“To correct the fiscal underperformance, the electricity company will return the resources from the tariff increases to the state budget and will now remit directly to the state budget each month resources arising from the increases in electricity tariffs to help finance the social program.
“The authorities are also implementing more stringent measures to strengthen revenue collection, including through improved compliance by imposing penalties and interest for late filing and payment of taxes. It is important to speedily remove unregistered civil servants from the public payroll to create fiscal space for salary increases for those civil servants who are working hard.”
She said protecting the poor and vulnerable remains a priority and that the government met the indicative target on social spending for both March and June 2024.
However, she said more vigorous efforts are needed to address the challenges in executing the social beneficiary program to ensure the benefits reach the intended beneficiaries, including the country’s interior regions.
Guscina said the recently completed strategic plan to enhance the effectiveness of social protection with the support of development partners is expected to guide further reforms in this area.
“Excellent progress has been made with debt restructuring. Negotiations with the Paris Club (PC) for the second phase of debt treatment are scheduled for September, and discussions with the remaining small group of private external creditors are ongoing. Suriname’s spreads have fallen to historical lows, marking a significant uptick in investor confidence.
“Domestic debts to the central bank and commercial banks have been restructured, and all outstanding domestic debt arrears except disputed ones have been cleared. The authorities are strengthening commitment controls to prevent accumulation of supplier arrears,” Guscina said.
She said implementing a restrictive monetary policy stance has been instrumental in reducing inflation.
“However, the limited activity in the interbank market is leading some banks to maintain large precautionary buffers, hamper monetary policy transmission to short-term interest rates.
“The Central Bank of Suriname (CBvS) needs to continue monitoring monetary developments and diligently implementing open market operations to maintain the reserve money path consistent with the program targets.
“The CBvS remains committed to a flexible, market-determined exchange rate and is working to improve the functioning of the foreign exchange market, including through the launching of an electronic foreign exchange trading platform,” said Guscina.
She said the central bank is addressing vulnerabilities in the banking system and that timely completion of recapitalization plans for banks with capital shortages and prudent monitoring of capital adequacy, liquidity, and asset quality is essential to preserving stability in the banking sector.
“The CBvS also needs to increase its monitoring of non-bank financial institutions, particularly concerning their interconnectedness with the banking system,” said Guscina, adding, “The authorities need to persevere with their ambitious structural reform agenda to strengthen institutions and governance.”
She said the authorities have constituted the CBvS’s executive council and executive board to strengthen its governance.
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