On track
THE International Monetary Fund (IMF) and Suriname have reached a staff-level agreement on the second review of the country’s economic recovery programme that will allow for the disbursement of an additional US$55 million in June, subject to approval from the fund’s executive board.
The agreement was reached as the IMF staff, which visited the country between May 9-11, 2022, deemed the programme “remains on track despite delays in some policy reforms.” Under the programme, Suriname is expected to receive a total US$688 million. It received US$55 million at the start of the programme in December and a similar amount after the IMF executive board approved the first review in March.
“Following the completion of the first programme review on March 23, 2022, the Surinamese authorities continue to make good progress in implementing the ambitious set of reforms that underpin their economic recovery strategy, despite the challenging economic environment and capacity constraints,” the IMF staff note released on May 17 said.
It added that the target net international reserves at the end of March “was missed by a small margin due to a shortfall in the net inflows of project financing, and the assessment for the end-March primary fiscal balance (cash basis) against the target is being finalised.” Under the arrangement reached with Suriname last year, the country should have US$673 million in net international reserves at the end of March. The usable reserves were, however, at US$566 million, making up three months of imports.
It, however, said all other quantitative targets were met. “Most structural benchmarks have also been implemented, albeit with some delays,” the fund added.
It, however, pointed out that the target spend for cash-transfer programmes were not being met and corrective measures are being designed to strengthen the safety net and support more of Suriname’s poor households. The Government is also committed to accelerating progress in critical governance reforms.
“The war in Ukraine is expected to have a negative impact on Suriname’s near-term outlook,” the IMF continued. Suriname’s economy, which declined by 15.9 per cent in 2020, recorded another 3.5 per cent decline last year but is projected to grow by 1.8 per cent this year.
However, the IMF notes that rising international food and energy prices and continued global supply chain disruptions are likely to weigh on activity, worsen the external position, and push up inflation which “seems to be declining to around two per cent month-over-month in the most recent data.”
Consumer prices rose by 60.7 per cent in 2020 and then by 58.3 per cent in 2021. This year, Suriname is expected to record inflation at 25.8 per cent – target which should be achieved if prices rise on average by two per cent each month.
“However, higher oil and gold prices will help create some urgently needed fiscal space by boosting government mineral revenues,” the IMF said. The Surinamese Government plans to prudently deploy these additional mineral revenues to increases support to the most vulnerable groups and increase recovery spending after the recent floods in the country .
“The authorities have been courageous in their reform efforts but, despite this, the country faces a range of downside risks,” the IMF warned.
It also told the country that “delays in key fiscal reforms, including in Parliament’s passage of key legislation, or in reaching agreements on debt restructuring could derail the Government’s efforts to restore debt sustainability.”