Suriname Concluding Statement of the 2016 Article IV Mission


1. Surinarne Is In an economic crisis triggered by a significant commodity terms of trade shock and exacerbated by Inadequate buffers and an insufficient policy response. The drop in international gold and oil prices and the cessation of alumina production resulted in large fiscal and current account deficits and the onset of a deep recession in 2015. Fiscal policy was loosened significantly in the context of an election cycle and, with limited fiscal savings and few financing options, the government resorted to central bank financing of the budget deficit. The resulting injection of liquidity put pressure on the currency peg. This was met with currency market intervention which, together with the trade shock. led to a rundown of international reserves to precariously low levels.

2. The authortdes launched an ambitious adjustment plan In late 2015. which subsequently received financial support from the international community. The government reined in spending, cutting the budget deficit from more than 13 percent of GDP (annualized) during January-July 2015 to below 4 percent of GDP during August-December 2015. The authorities also began to phase out electricity tariff subsidies. To facilitate adjustment to the terms of trade shock. and to support a rebuilding of foreign reserves, the authorities floated the exchange rate, which, together with the tightened fiscal policy, contributed to an improvement in the external current account. Critically, to soften the impact of the macroeconomic adjustment on the poor, the authorities' program envisaged an increase in targeted support for the most wlnerable. To create additional sources of non-mineral revenue. the government envisaged introducing a value added tax (VATI by January 2018. and increasing taxes on fueL. Suriname's adjustment efforts received support from the international community in the form of a 24-month Stand-By Arrangement with the IMF of US$478 million approved in May 2016, as well as financing commitments from the Caribbean Development Bank, Inter-American Development Bank, and World Bank.


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