Suriname monetary policy tightened

(De Ware Tijd) PARAMARIBO – Monetary policy was tightened in the first six months of 2011. Among other things, the Central Bank of Suriname increased the interest rate for advance credit from 7.5 to 9% in May. The interest rate for exceeding the allowed credit limit was set at 12%. Besides that, the required foreign current cash reserve was raised in the beginning of this year to 40% of assets held by the bank for third parties. This is written in the half-year report over 2011 issued by the Hakrinbank today.  Due to the tightened monetary policy and the weakening of the liquidity position in Surinamese dollars, banks have been forced to slightly raise both their credit and debit interest rate for this currency. This has contributed to the return of calm to the foreign currency market after the devaluation of the SRD on January 20, and the disappearance of the difference in rates on the free currency market. “To maintain this situation, it is important to preserve public confidence in the government’s financial policy by, among other things, restraining the creation of liquidity out of local sources for both the public and private sector, conducting a restrained wage policy, maintaining monetary reserves and curbing inflation”, the Hakrinbank writes. The bank is concerned about inflation which has increased considerably compared to 2010. The Hakrinbank points to the devaluation of the SRD, the implementation of part of the measures of the Structural Improvement Program and considerable pay raises, among other things, as contributing factors to this increased inflation. Yet there is a bright spot: since May, the rate of inflation has been decreasing somewhat and the bank hopes this trend will continue.