IMF Executive Board Concludes 2018 Article IV Consultation with Suriname
IMF News, November 16, 2018
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- Published: November 16, 2018
Overview
- On November 16, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Suriname.
- Key summary findings:
- Suriname’s economy has stabilized and is expected to further improve.
- Real GDP grew by 1.7 percent in 2017 after two consecutive years of contraction, supported by higher gold production and a pickup in commodity prices.
- The unemployment rate has declined.
- Inflation has subsided to single digits as the exchange rate has stabilized.
- The current account deficit fell to almost zero in 2017 from its 2015 peak.
- Financial soundness indicators point to an improvement in the banking system, although important vulnerabilities remain.
- Recent indicators point to further improvements in economic activity in 2018.
- Real GDP growth is projected at 2 percent in 2018, followed by a gradual acceleration to 3 percent over the medium term.
- Consultation focus:
- Policies to assure fiscal sustainability.
- Strengthen the monetary framework.
- Improve the resilience of the banking system.
- Boost potential growth through structural reforms.
Executive Board Assessment
- Directors agreed with the thrust of the staff appraisal and welcomed ongoing economic recovery underpinned by increased commodity exports.
- Main concerns identified:
- Weak fiscal position and rising public debt.
- Underdeveloped monetary policy framework.
- Vulnerable banking sector.
- Heavy dependence on the mineral sector.
- Directors encouraged using the current environment to build policy buffers, enhance resilience, and promote diversified and sustainable growth.
Policy recommendations and priorities
- Fiscal policy:
- Priority should be given to strengthening the fiscal position and reducing public debt.
- Recommended adjustment measures:
- Reducing energy subsidies.
- Containing the public wage bill.
- Implementing a broad‑based value‑added tax.
- Continuing to improve tax and customs administration.
- Strengthen the social safety net to protect vulnerable groups.
- Strengthen revenue administration, improve public financial management, and strengthen the public investment system.
- Adopt a fiscal framework focusing on the non‑resource primary balance to help safeguard long‑term fiscal sustainability.
- Monetary policy and central bank:
- Current monetary policy stance considered broadly appropriate.
- Need for quick absorption of excess liquidity in the banking system.
- Strengthen the monetary framework by:
- Adopting reserve money targeting.
- Developing open market operations and standing facilities.
- Strengthen institutional and financial settings of the Central Bank.
- Maintain a flexible exchange rate to support adjustment to external shocks.
- Financial sector:
- Develop a robust contingency plan and bank resolution framework to strengthen financial stability.
- Further strengthen the AML/CFT framework in line with the 2012 FATF standards to mitigate risks regarding the withdrawal of correspondent banking relationships.
- Structural reforms:
- Focus on boosting productivity and diversifying the economy.
- Enhance the business climate and improve the environment for private investment.
- Invest in education and increase labor market flexibility while providing a meaningful safety net for the unemployed.
- Strengthening governance to support investor confidence and promote growth.
Economic projections and key statistics (Table 1: Suriname: Selected Economic Indicators)
- Real sector (Period average percentage change, unless otherwise indicated)
- Real GDP: 2016: -5.6; 2017: 1.7; 2018: 2.0 (Proj.); 2019: 2.2; 2020: 2.5; 2021: 2.1
- Nominal GDP: 2016: 20.6; 2017: 16.5; 2018: 11.6; 2019: 9.0; 2020: 8.7; 2021: 12.0
- GDP deflator: 2016: 27.7; 2017: 14.6; 2018: 9.4; 2019: 6.6; 2020: 6.1; 2021: 9.7
- Consumer prices: 2016: 55.5; 2017: 22.0; 2018: 7.5; 2019: 6.5; 2020: 5.7
- Consumer prices (end of period): 2016: 52.4; 2017: 9.3; 2018: 7.2; 2019: 6.7
- Money and credit (End of period percentage change, unless otherwise indicated)
- Broad money (constant exchange rate): 2016: 5.9; 2017: 8.6; 2018: 7.6; 2019: 8.2
- Reserve money (constant exchange rate): 2016: 8.1; 2017: 22.2; 2018: 24.7; 2019: 12.7; 2020: 10.8; 2021: 14.1
- Reserve money (percent of GDP): 2016: 15.2; 2017: 16.0; 2018: 17.9; 2019: 18.5; 2020: 18.9; 2021: 19.3
- Private sector credit (constant exchange rate): 2016: -5.7; 2017: 0.9; 2018: -3.9; 2019: 2.9; 2020: 5.0
- Private sector credit (percent of GDP): 2016: 38.1; 2017: 33.1; 2018: 28.6; 2019: 27.4; 2020: 26.8; 2021: 26.2
- Central government (Percent of GDP, unless otherwise indicated)
- Revenues and Grants: 2016: 17.6; 2017: 23.0; 2018: 22.7; 2019: 22.9; 2020: 25.0
- Expenditures: 2016: 23.9; 2017: 29.7; 2018: 30.2; 2019: 31.9; 2020: 32.0; 2021: 31.8
- Of which: Primary expenditures: 2016: 22.1; 2017: 25.9; 2018: 26.5; 2019: 28.0; 2020: 27.3
- Statistical discrepancy: 2016: -1.8; 2017: -1.3; 2018: 0.0
- Overall balance (net lending/borrowing) 1/: 2016: -8.1; 2017: -8.0; 2018: -7.5; 2019: -9.2; 2020: -9.0; 2021: -6.8
- Primary balance: 2016: -6.2; 2017: -5.0; 2018: -4.1; 2019: -5.2; 2020: -4.8; 2021: -2.3
- Non-resource primary balance: 2016: -9.4; 2017: -11.8; 2018: -12.3; 2019: -12.9; 2020: -12.5; 2021: -10.1
- Net acquisition of financial assets 2/: 2016: 13.1; 2017: 0.3; 2018: -9.8
- Net incurrence of liabilities: 2016: 21.2; 2017: 8.3; 2018: -2.4; 2019: 9.2; 2020: 6.8
- Net domestic financing: 2016: -2.7; 2017: 5.2; 2018: -1.5; 2019: 4.3; 2020: 2.6; 2021: 1.6
- Net external financing: 2016: 3.1; 2017: -0.9; 2018: 4.9; 2019: 6.4
- Public (central government) debt 3/: 2016: 78.5; 2017: 77.2; 2018: 69.8; 2019: 72.7; 2020: 77.3; 2021: 78.0
- Domestic: 2016: 21.1; 2017: 21.8; 2018: 22.6; 2019: 23.6; 2020: 23.1
- External: 2016: 57.4; 2017: 54.2; 2018: 48.0; 2019: 50.1; 2020: 53.7; 2021: 55.0
- External sector
- Current account balance: 2016: -5.3; 2017: -0.1; 2018: -3.4; 2019: -2.5; 2020: -1.6
- Capital and financial account: 2016: 16.2; 2017: 5.8; 2018: 3.5; 2019: 3.7; 2020: 3.8
- Overall balance: 2016: 1.4; 2017: 0.1; 2018: 1.3
- Change in reserves (- = increase) 4/: 2016: -1.4; 2017: -3.7; 2018: -2.2
- Memorandum items
- GDP at current prices (SRD billions): 2016: 19.7; 2017: 25.6; 2018: 27.9; 2019: 30.4; 2020: 34.0
- Terms of trade (percent change): 2016: 9.5; 2017: -3.2
- Gross international reserves (USD millions): 2016: 381; 2017: 424; 2018: 552; 2019: 555; 2020: 606; 2021: 700
- In months of imports: 2016: 2.3; 2017: 3.0
- Real effective exchange rate (percent change, + = appreciation): 2016: -12.6; 2017: -3.8
- Exchange rate (SRD per USD, period average): 2016: 6.2
- Exchange rate (SRD per USD, eop): 2016: 7.4
- Gold price (USD per troy ounce): 2016: 1,248; 2017: 1,257; 2018: 1,261; 2019: 1,218; 2020: 1,255; 2021: 1,304
- Oil price (USD per barrel): 2016: 42.8; 2017: 52.8; 2018: 69.4; 2019: 68.8; 2020: 65.7; 2021: 63.1
- Notes from the table:
- Sources: Surinamese authorities; and IMF staff calculations and projections.
- 1/ The overall balance is computed using net financial transactions, and therefore, includes statistical discrepancy.
- 2/ Includes acquisition of stake in gold mine and loans to state-owned enterprises.
- 3/ The debt-to-GDP ratios are based on IMF's 2014 Government Financial Statistics Manual. They would be different if computed using the definition in the Government Debt Act of Suriname.
- 4/ Includes valuation changes.
Risks and vulnerabilities
- Fiscal risks:
- Large fiscal deficits and a projected rise in public debt unless strong fiscal consolidation is implemented.
- Slow pace of reforms and a recent step-up in current public expenditures could worsen the fiscal situation in 2019-2020.
- Public financial management framework remains weak, though authorities are taking steps to strengthen it.
- Monetary and financial sector risks:
- Monetary framework lacks standard instruments.
- Pockets of vulnerability remain in the banking sector despite improvements since 2016.
- Need to guard against risks to correspondent banking relationships by strengthening AML/CFT in line with the 2012 FATF standards.
- Structural concentration risk:
- Heavy dependence on the mineral sector, underscoring the need for diversification.
IMF Executive Board Concludes 2018 Article IV Consultation with Suriname (Press Release No. 18/432, November 16, 2018).