Suriname

major macro economic indicators

(e): Estimate (f): Forecast

Risk Assessment

Durably sluggish recovery

The deep recession caused by the Covid-19 pandemic has given way to a very moderate recovery, which will continue into 2023. With gold historically accounting for 80% of exports, the persistently high gold price, even if expected to fall, will support export volumes. The latter should narrowly offset the increase in imports caused by high international commodity prices and the increase in imports of capital goods and services related to oil and gas exploration. The discovery of new hydrocarbon fields off the coast by the Total-APA joint venture, most recently in February 2022, and the expectation of further discoveries should boost private investment in 2023, especially foreign investment, and improve the country's economic outlook, with oil production expected to rise sharply from 2025. Inflation has been very high since the surge in 2020, which was caused by the devaluation of the Surinamese dollar following the adoption of a floating exchange-rate regime. It is expected to decline in 2023 thanks to the consolidation of monetary policy, notably with stricter control of money supply, as well as the expected moderation in global food and energy prices. However, continued utility rate adjustments will result in a durably high level of utility costs, which, combined with prevailing uncertainty, will continue to dampen the recovery of domestic consumption. Moreover, the country's dependence on gold exports, as well as on hydrocarbon investments, leaves it highly vulnerable to price volatility and thus to external shocks. Last, as the vaccination rate is still low (40% of the population had received two doses by June 2022), the population remains highly exposed to health risks and the possible appearance of new variants.

Accounts consolidated by international aid

Following the devaluation of its currency, the Surinamese dollar, and the downturn in activity, the country experienced an explosion in debt and defaulted at the end of 2020. In December 2021, the IMF granted the country USD 690 million over 3 years under an Extended Credit Facility, in return for a programme of consolidation measures and structural reforms which is currently being implemented. Debt restructuring negotiations followed, leading notably to a rescheduling agreement with the Paris Club in June 2022. This agreement provides for the payment of only the arrears up to 31 December 2021 by 2024, the rescheduling of the original 2022 to 2024 maturities, and an agreement in principle on the rescheduling of maturities after 2024. The rescheduling concerns only the external public debt owed to bilateral creditors who are members of the Club. This amounted at the time of the agreement to 94% of GDP, or two-thirds of total public debt, and its rescheduled share to 2% of GDP, or 1.4% of total public debt. However, other public and private creditors are being encouraged to grant the same conditions, with agreements already reached with some creditors, notably China, which holds 11.5% of the public debt. The implementation of the agreement signed with the Paris Club is tied to implementing the reforms agreed with the IMF. Budgetary revenues are expected to increase in 2023 through improved tax collection and the introduction of a 10% value-added tax in January 2023. In addition, mineral revenues from gold and increased royalties from oil exploration will help create fiscal space. Moreover, the gold mining royalty rate is expected to increase in 2023, following initial increases already granted to junior gold exporters in 2022. On the expenditure side, improving the efficiency of the public workforce (about 50% of workers) would reduce the wage bill, while fuel and electricity subsidies could be prudently reduced. These developments could lead to a slightly positive public balance that would reduce public debt (as a % of GDP).

The trade surplus is expected to decline and the services deficit to increase as higher mineral and tourism receipts should be more than offset by increased imports of equipment and services required for exploration. Profit remittances by foreign companies will remain sizeable, far exceeding expatriate remittances. External financing will amply exceed the small current account deficit thanks to contributions from the IMF and IDB, and the terms of the rescheduling agreement. Foreign exchange reserves are expected to increase from their already high level to about 8 months of imports.

Hope for normalisation in political life

In the May 2020 parliamentary elections, the Vooruitstrevende Hervormings Partij (VHP), which historically represents the Indo-Surinamese population but has managed to scrap its ethnic dimension, won 20 of the 51 seats in Parliament and thus became the country's largest party, leading a four-party coalition that gave the government an absolute majority. The VHP's victory reflects voter fatigue with the NDP (Nationale Democratische Partij), whose 10 years in office were marked by economic mismanagement and corruption. The new President, Chan Santokhi, is involved in driving structural reforms necessary for the country’s financial health, but at a cost to his popularity. Although the president has so far shown his willingness to implement the various reforms, in September 2022 he expressed his wish to obtain more flexibility from international partners in their implementation, arguing that the country is moving towards a "healthy" economic structure but at a price that is too costly for the population, and that it is necessary to take into account upcoming oil revenues from 2025. Internationally, Santokhi has managed to strengthen its relations with the US and the Netherlands after strained relations under the previous presidency. Moreover, after a century-long border  dispute between Suriname and French Guiana, an agreement was signed in 2021, and Santokhi went as far as to mention, in September 2022, the construction of a bridge linking the two countries and his resolve to enhance Franco-Surinamese cooperation.

Last updated: April 2023