The International Monetary Fund (IMF) said Monday it had completed a third review of Suriname’s US$630-million programme, allowing the Government of the South American country to withdraw about US$52 million, most of which will be used for budget support as the country undergoes economic reform to reduce its debt and set it on a path for long-term growth.

The IMF also sees Suriname and China, its only official or private creditor without a debt agreement, advancing in debt talks before the next programme review.

“The authorities have made concerted efforts to advance debt restructuring negotiations, with the agreements in line with programme parameters reached with all creditors except China,” Kenji Okamura, the fund’s deputy managing director, said in a statement. “Both sides expressed commitment to work towards an agreement on comparable terms with other creditors by the next review.”

Suriname defaulted three times on its public debt since 2020.

Debt restructuring talks have been difficult and lengthy. Though the IMF agreed to support the country’s economic reform agenda in December 2021 and a restructuring agreement with the Paris Club followed in June 2022, fiscal slippage and failure to complete reforms of its Value Added Tax (VAT) led the IMF programme to go off-track in the second half of 2022 despite rising commodity revenues which account for about half of public revenues.

Since then though, Suriname and the IMF struck a staff-level agreement late last month after the Government made new efforts to improve the budget of 2023 and comply with the IMF targets and continued debt restructuring negotiations. It has so far managed to reach a restructuring agreement with India and with private bondholders. However, Suriname is still in debt restructuring talks with China.

Currently, Suriname’s public debt stands at a 120 per cent of its gross domestic product (GDP) though it is projected to decline to 107 per cent of GDP by the end of its current fiscal year. Ninety-one per cent of the country’s debt is held by external creditors. With the current negotiations, it is expected to dip to 80 per cent at the end of 2023.

So far, to help raise additional revenues Suriname, which is 95 per cent covered in dense rainforests, announced recently that it will sell carbon credits under the framework established by the 2015 UN Paris Agreement (COP21). The Paris Agreement allows nations and companies to transfer “internationally transferable mitigation outcomes [ITMOs]” through bilateral agreements. With that, nations or companies with high emissions could buy these credits from Suriname to help meet their own goals of reducing emissions. However, currently, there is no extensive market for trading ITMOs. Nevertheless, if Suriname succeeds, this could mark the beginning of climate financing for the country.

The prospective sale is a bid to attract investors with government-backed carbon credits that follow UN guidelines, as companies grow wary of buying from private initiatives in the voluntary carbon market after studies found several projects failed to deliver promised climate contributions.

Kevin Conrad, executive director of the Coalition of Rainforest Nations, told Reuters in an interview that some 30 companies were already studying whether to buy the credits. He did not say how many credits would be issued or what the price would be.

Suriname’s President Chan Santokhi said the approval of carbon credits was integral to the implementation of his country’s economic and environmental policies. “It will mark the beginning of the long-awaited access to climate finance,” he said.

For now, details are rather scant and it is unclear how much financing it would provide and how the financing would be spent, though it is not expected to be the cure for the difficulties that Suriname is facing.

The country’s economy has been contracting sharply. In 2020, Suriname’s economy contracted by 15.9 per cent and by 3 per cent in 2021 before growing by 1 per cent last year. The forecast is for that country’s economy to expand 2.1 per cent this year and 3 per cent in 2024. On the upside, the potential for new offshore oil development could boost the economy as of 2025. Earlier this month, TotalEnergies said it would invest US$9 billion in developing oil and gas fields offshore Suriname which are believed to hold 11 billion barrels of oil and associated gas.

Detailed engineering studies will begin by the end of 2023 before a final investment decision is made by the end of 2024, with a target of having first production in 2028, Total said in a release.