The IMF and Suriname reached a staff-level agreement on the final review of the Extended Fund Facility program, granting access to USD 61.3 million pending Executive Board approval. Key objectives of the program have been met, with economic growth, reduced inflation, and debt declines. Continued focus on fiscal discipline and governance reforms is crucial for sustainable management of future oil revenues.
The International Monetary Fund (IMF) has reached a staff-level agreement with Suriname on the final review of its economic recovery program supported by the Extended Fund Facility (EFF). This review, pending approval from the IMF’s Executive Board, would grant Suriname approximately USD 61.3 million (about SDR 46.8 million). Notably, significant progress has been made in achieving the program’s overarching objectives.
Suriname’s economic indicators reflect positive changes: the economy is showing growth, inflation rates are declining, and public debt is being managed downwards. The Surinamese authorities are now prioritizing fiscal discipline as they prepare for upcoming elections while continuing to protect the vulnerable segments of society. In the medium term, it’s crucial to address governance weaknesses to proficiently manage future oil revenues, bolstered by newly operational fiscal rules and strong institutional frameworks.
IMF team discussions led by Ms. Anastasia Guscina on the final review took place from February 5-14, following the program’s launch approved in December 2021. Ms. Guscina noted that, despite missing the primary fiscal balance target, the agreement has allowed Suriname to remain on track for a primary surplus of 2.7 percent of GDP by 2025. To date, the total disbursements from the program have reached SDR 430.7 million (around USD 565.4 million)
Pending approval, Suriname is projected to achieve 3 percent economic growth this year, with rising donor support and investor confidence. However, the authorities face short-term risks due to implementation challenges amidst a complicated socio-political backdrop. The announcement of the final investment decision for offshore oil production, set to commence in 2028, significantly enhances Suriname’s medium-term financial outlook.
Fiscal discipline remains a government priority, particularly in light of underperformance in revenues and overspending related to subsidies for electricity and drought-affected rice farmers. The recent amendments to public financial management laws and the establishment of a Savings and Stabilization Fund mark positive steps towards a robust fiscal and institutional framework.
Social protection initiatives remain central to Suriname’s agenda, with significant increases in spending over the program’s duration. Although social assistance targets have been met, improvements are necessary to ensure effective program execution in rural areas. The government is urged to implement a strategic plan to enhance social protection efficacy in collaboration with development partners.
Investor confidence has been boosted by the successful completion of debt restructuring, including an agreement with the Paris Club. Ongoing negotiations with final commercial creditors are also underway. Additionally, the repayment of domestic debt arrears contributes to a favorable financial environment, benefitting from upgraded credit ratings and historically low bond spreads.
A sustained restrictive monetary policy by the Central Bank van Suriname (CBvS) has effectively reduced inflation, with the institution meeting its monetary targets for the review. Following the completion of its recapitalization, the CBvS is focusing on improving the foreign exchange market’s functioning.
Addressing vulnerabilities in Suriname’s banking sector is critical. Timely recapitalization of undercapitalized banks and vigilant monitoring of their performance are necessary for maintaining stability. The CBvS should also enhance its oversight of non-bank financial institutions due to their interconnectedness with banks.
The authority’s commitment to its structural reform agenda is essential for governance enhancement. The IMF supports amendments to anti-corruption laws for public officials to ensure better transparency concerning wealth influenced by substantial oil revenues. Lifting the suspension from the Extractive Industries Transparency Initiative is also vital for governance improvements
The IMF mission expressed appreciation for the cooperative dialogue with the Surinamese authorities, engaging with various officials, including the President, Finance Minister, and representatives from different sectors, to facilitate successful discussions on the economic program.
In conclusion, the staff-level agreement between the IMF and Suriname illustrates significant progress in achieving economic stability through the Extended Fund Facility program. While challenges remain, including maintaining fiscal discipline and effectively executing social protection programs, the medium-term outlook is improving with positive economic indicators and commitments to governance reform. Future efforts should focus on structural reforms and transparency to manage anticipated oil revenues responsibly.
Original Source: www.miragenews.com
