Moody’s places Suriname’s B1 rating on review for downgrade
NEW YORK, United States (CMC) — A major international rating agency here has placed the B1 long-term issuer rating and senior unsecured notes of the Government of Suriname on review for downgrade.
On Wednesday, Moody’s Investors Service said that the decision to initiate the review for downgrade was prompted by “significant deterioration in the Government’s fiscal position, as reflected in debt ratios that are at higher levels than previously expected”, and “the likelihood that fiscal reforms will proceed more slowly in the absence of an IMF [International Monetary Fund] programme”.
Moody’s also said the decision to initiate the review for downgrade was based on “increasing government liquidity risks, because financing has shifted toward short-term domestic debt issuance”.
Moody’s said it expects that Suriname’s Government debt burden will have peaked in 2017 at 70.5 per cent of gross domestic product (GDP), up from 26 per cent of GDP in 2014, and that it will stabilise around 60 per cent of GDP, higher than Moody’s had previously expected.
Without the introduction of measures to increase non-mining revenues, Moody’s warned that Suriname’s fiscal position will remain susceptible to commodity price volatility.
Moody’s said it had viewed the Suriname Government’s Stand By Arrangement with the IMF, initiated in April 2016, as “an anchor for Suriname’s public accounts management and its efforts to repair gov’t finances”.
However, in May 2017, it said the Government’s programme with the IMF was cancelled, “which, along with larger-than-expected fiscal deficits this year, increases the uncertainty around the content, pace and implementation of reforms aimed at increasing fiscal flexibility and resiliency to fluctuations in government revenues”.
Moody’s said it would confirm the rating at B1 if its review were to conclude that the government’s planned reforms, including the introduction of a VAT and plan for electricity tariff increases, among others, will not only increase the revenue base, reduce fiscal deficits and debt levels, but also reduce the fiscal position’s vulnerability to commodity price shocks in the future.
