(IMF press release) The Executive Board of the International Monetary Fund (IMF) today approved a 24-month Stand-By Arrangement (SBA) for Suriname, in an amount equivalent to SDR 342 million (about US$478 million or 265 percent of quota), to support the government’s economic reform program. The Board’s approval of the arrangement enables the immediate disbursement of an amount equivalent to SDR 58 million (about US$81 million).
The home-grown program supported by the arrangement aims to facilitate Suriname’s adjustment to the fall in the prices of major commodity exports, restore confidence, and pave the way to economic recovery. A critical ingredient of the program is fiscal consolidation, to restore fiscal and external current account stability. The program also includes reforms to the exchange rate and monetary policy framework, to enhance Suriname’s resilience to the current and to possible future shocks, and allow a steady rebuilding of foreign reserves. It contains a comprehensive set of structural reforms to support private-sector led growth. Crucially, the program includes support measures to protect the most vulnerable during this period of economic adjustment. The program will also catalyze support from other multilateral institutions, including the Caribbean Development Bank, the Inter-American Development Bank (IDB), the Islamic Development Bank, and the World Bank Group, as well as from bilateral creditors.
Following the Executive Board’s discussion, Mr. Mitsuhiro Furusawa, Deputy Managing
Director and Acting Chair of the Board, issued the following statement:
“Suriname has been hit hard by the drop in the international prices of its main exports and the closure of the country’s alumina production. Combined with a delayed policy response in the context of an election cycle, these developments have caused substantial fiscal and external current account deficits, a run-down of international reserves and an economic downturn. In the second half of 2015, the authorities started to tighten fiscal policy and prepared a comprehensive reform program to address Suriname’s challenges.
“The main objectives of the authorities’ program are to restore macroeconomic stability and confidence, and to pave the way to economic recovery while protecting the most vulnerable during the adjustment process. Fiscal consolidation is a critical ingredient of this program to reduce imbalances. The authorities’ fiscal reforms include elimination of electricity price subsidies and the introduction of a value added tax. To soften the impact of the adjustment on the poor, the authorities’ agenda emphasizes a strengthening of the social safety net.
“The program aims to rebuild Suriname’s international reserves. The authorites’ decision to move to a market-determined exchange rate will strengthen the economy’s resilience to commodity price shocks. Together with the expected expansion in gold exports and the program’s catalytic effect on external financing, this step will improve the current account balance and contribute to raising reserves to prudent levels.
“To reduce inflation and stabilize expectations, the program includes steps to tighten liquidity conditions. The start of T-bill auctions and the planned roll out of open market operations will support the goal of returning inflation to single digits. The Central Bank of Suriname also needs to stand ready to address rising banking sector risks.
“Implementing the structural reform agenda is essential to ensure a prosperous future for Suriname. To support the recovery and to raise medium-term growth, the authorities’ program includes reforms to improve the business environment. These reforms will promote economic diversification and encourage foreign direct investment. The reforms will be supported by technical assistance from the IMF and other development partners.”
