PARAMARIBO, Suriname, (Xinhua) — The International Monetary Fund (IMF) last Friday approved an economic programme for the South American country of Suriname to support the government’s economic reform programme.

A loan of some US$478 million will be made to the country over a 24-month term, while the immediate disbursement will be US$81 million, according to the IMF.

The reform programme called “home-grown” aims to deal with the fall in the prices of major commodity exports, restore confidence, and pave the way for economic recovery, the IMF said.

Suriname has been hit heavily by declines in the prices of oil and gold on international markets, which are its main exports. The closure of alumina refinery facilities, which was an important source for the government’s revenue, worsened the fiscal deficit, and the external current account deficit. The country imports more goods, services and capital than it exports.

“Fiscal consolidation is a critical ingredient of this programme to reduce imbalances. The authorities’ fiscal reforms include elimination of electricity price subsidies and the introduction of a value added tax,” said Mitsuhiro Furusawa, the acting chair of the IMF executive board.

With a recent move to form a market-determined currency exchange rate, the programme will help rebuild Suriname’s international reserves, according to the IMF.

“Together with the expected expansion in gold export and the programme’s catalytic effect on external financing, this step will improve the current account balance and contribute to raising reserves to prudent levels,” said Furusawa.

Meanwhile, the programme includes measures to tighten liquidity conditions to reduce inflation, which reached 37 per cent in March 2016.

“The start of T-bill (treasury bill) auctions and the planned roll-out of open market operations will support the goal of bringing the inflation rate to a single digit,” Furusawa said, adding the Central Bank of Suriname needs to stand ready to address banking sector risks.

The IMF expects the approval of its loans will catalyse support from other multilateral institutions, including the Caribbean Development Bank, the Inter-American Development Bank, the Islamic Development Bank, and the World Bank Group, to the embattled economy.

In light of negative conditions of the external market, the IMF forecasts that Suriname’s economy, which depends heavily on main export commodities, will witness a two per cent contraction in 2016.