Durrant Pate/Contributor

The International Monetary Fund (IMF) has just completed its third staff-level agreement with Suriname under its Extended Fund Facility (EFF), which confirms that the economy of the South American country is stabilising.

In its report, the IMF team led by Anastasia Guscina is reporting that pressures on the exchange rate have eased and inflation, while still high, is on a downward trend. In fact, the IMF says Suriname’s “commitment to fiscal discipline and macroeconomic stability is starting to bear fruit,” noting that the government’s near-term policy priority is to persevere prudent fiscal policy while protecting the poor and vulnerable and supporting growth-enhancing investment.

Based on the third review of Suriname’s economic reform programme, supported by the 36-month EFF arrangement, the Caribbean/South American country will have access to Special Drawing Rights (SDR) valued at 39.4 million (about US$53 million), bringing total programme disbursements to date to SDR 157.6 million (about US$212 million).

The IMF commented in its assessment that “pressure on the exchange rate has eased in recent months, and inflation, while still high, is on a downward trend. Usable international reserves remain comfortable at 4.7 months of imports at end-June 2023. With strong programme implementation, growth is projected to recover to 2.1 per cent in 2023 and converge to 3 per cent over the medium term”.

Fiscal and monetary tightening

The IMF observed that fiscal and monetary tightening is expected to lead to a gradual decline in inflation to 40 per cent by the end of 2023. The Washington-based lending institution highlighted that Suriname “faces important near-term policy implementation challenges reflecting both capacity constraints and a challenging socio-political environment, as well as external risks from a renewed worsening in the terms of trade. Over the long term, there are significant upside risks to growth due to the development of large new oil fields”.

Programme performance during the third review was good, with most quantitative targets met. The government is on track to achieve a primary central government surplus of 1.7 per cent of GDP this year, in line with programme commitments. The structural reform agenda continued to progress, albeit with some delays.

Importantly, the IMF emphasised that “it remains critical the poor and vulnerable groups are sheltered from the effects of fiscal adjustment and high inflation. The government is expanding the coverage of social assistance programs and will look at ways to protect the value of payments from inflation. With support of development partners, the government will take a comprehensive look at the efficiency and effectiveness of the existing social protection programs and develop a strategic plan to guide future reform efforts in this area”.

The mulitlateral lender acknowledged that the government has made progress with debt restructuring, which is a critical element in restoring debt sustainability. “All negotiations with the country’s official and private creditors, except for China, have been concluded,” the IMF said. The debt exchange with private external bondholders will be launched next week.

The administration is actively negotiating with China on a debt-restructuring agreement, in line with programme parameters and the aim of making more progress by the next programme review. This is in addition to implementing reforms to strengthen governance.