Press Release No. 24/207

IMF Reaches Staff-Level Agreement with Suriname on the Sixth Review of the Extended Arrangement Under the Extended Fund Facility

June 6, 2024

• The International Monetary Fund staff and the Surinamese authorities reached a staff-level agreement on the sixth review of the authorities’ economic recovery program supported by the Extended Fund Facility (EFF). The review is subject to approval by the IMF’s Executive Board. Subject to approval by the IMF Executive Board, Suriname would have access to about USD 61.8 million (SDR 46.7 million).
• The authorities’ strong policy and efforts to stabilize the economy are yielding positive results: the economy is growing, inflation is on a steady downward trend, and investor confidence is returning.
• The main near-term policy priority is to maintain fiscal discipline, particularly in the run up to the elections while protecting the poor and vulnerable and persevere with structural reforms to strengthen institutions and improve governance.

Washington, DC: An International Monetary Fund (IMF) team led by Ms. Anastasia Guscina conducted a mission with the Surinamese authorities during April 29-May 10 to discuss policies to complete the sixth review of the 36-month Extended Fund Facility approved by the IMF Executive Board on December 22, 2021.

At the conclusion of the mission, Ms. Guscina issued the following statement:

“The IMF team reached a staff-level agreement with the authorities on the sixth review of Suriname’s economic reform program that is supported by the EFF arrangement. While some of the quantitative targets were missed, the authorities are taking corrective actions. Structural reforms are progressing with a stronger impetus. This staff-level agreement is subject to approval by the IMF’s Executive Board, contingent on the fulfillment of all relevant Fund policies. Upon completion of this review, Suriname will have access to SDR 46.7 million (about USD 61.8 million), bringing total program disbursements to date to SDR 290.4 million (about USD 384.3 million).

“The authorities’ commitment to a range of difficult policy reforms is showing results in terms of macroeconomic stability and investor perception. Growth is projected to return to its 3 percent potential this 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 policy implementation challenges stemming from a difficult socio-political environment and capacity constraints. Over the medium to long term, there is potential for growth to accelerate owing to the development of large new oil fields.

“The authorities remain committed to achieving the 2024 primary surplus target of 2.7 percent of GDP. Budget execution in the first quarter of the year was characterized by overspending on electricity subsidies and weak revenue collection. To correct the fiscal underperformance the authorities have capped the settlement with the state oil company for the oil it sells to the electricity company and are implementing more stringent measures to strengthen VAT revenue collection. Public sector reforms are also proceeding with unregistered and chronically absent civil servants getting removed from public payroll to create fiscal space for salary increases for those civil servants who are working hard.

“Protecting the poor and vulnerable remains a priority. It is essential to coordinate electricity tariff adjustments with increases in the social assistance payments to ensure that vulnerable households are protected, while energy subsidies are phased out. Stronger efforts are needed to address the challenges in the execution of the social program to ensure the benefits reach the intended beneficiaries, including in the country's interior regions. The authorities’ recently finalized action plan to enhance the effectiveness of social protection will drive the reforms in this area.

“Excellent progress has been made with debt restructuring. With agreements reached with all major creditors, the authorities are in active negotiations with the remaining private creditors. Suriname’s spreads have fallen to record lows, marking significant progress towards restoring market access. Domestic debts to the central bank and commercial banks have been restructured and all outstanding domestic debt arrears have been paid. The authorities are strengthening commitment controls to prevent accumulation of supplier arrears.

“The implementation of a restrictive monetary policy stance has helped reduce inflation. The central bank of Suriname (CBvS) needs to continuously monitor monetary developments and diligently implement open market operations in order to maintain the reserve money path consistent with the program. The CBvS remains committed to a flexible, market-determined exchange rate and is working to improve the functioning of the foreign exchange market.

“The central bank is addressing the vulnerabilities in the banking system. Banks with capital shortfalls have submitted their recapitalization plans to the central bank. Timely completion of these plans is important to preserve banking sector stability. The CBvS also needs to increase its monitoring of non-bank financial institutions, particularly with respect to their interconnectedness with the banking system.

“The authorities should persevere with their ambitious structural reform agenda to strengthen institutions and governance. To strengthen central bank governance, the authorities have constituted the executive council and the executive board of the CBvS. The CBvS is continuing to make progress in clearing the backlog of financial statements audits and continues to conduct special audits of program monetary data. The Ministry of Finance and the CBvS are developing a plan to recapitalize the central bank. Broader governance reforms are well underway in various areas including anti-money laundering/combating the financing of terrorism (AML/CFT), anti-corruption, and public sector procurement.

“The mission would like to thank the authorities for a collaborative and fruitful dialogue. A wide-ranging set of meetings was held with the President and Vice President of the Republic of Suriname, the Minister of Finance and Planning, the Minister of Justice and Police, the Minister of Internal Affairs, the Minister of Spatial Planning and Environment, the Central Bank Governor, the leadership of the National Assembly, other senior government officials, representatives of the private sector, Civil Society Organizations, and development partners.”