Caribbean & Central America - October 2023

On 30 August, Suriname’s government and the International Monetary Fund (IMF) reached a new staff-level agreement, with both sides saying measures to improve fiscal discipline “are starting to bear fruit”.

The original 36-month extended fund facility (EFF) had been signed in December 2021, and involved an economic stabilisation programme and loan support package worth approximately US$688m. Amid high inflation and a heavy foreign debt burden, implementation has been controversial – austerity measures and reduced petrol subsidies were a factor in major public protests in February this year [SSR-23-03]. However, the authorities now say the situation is improving. If endorsed by the IMF board the staff agreement reached on the EFF’s third review will unlock US$53m in disbursements, bringing the total released so far under the IMF programme to US$212m.

In a press release published on 30 August, IMF team leader Anastasia Guscina said the economy is stabilising, pressures on the exchange rate have eased, and inflation, while still high, is “on a downward path” (in recent years inflation has been in a 50%-60% range). Fiscal and monetary measures are now expected to bring inflation down to around 40% by the end of this year. The government is “on track” to achieve a primary fiscal surplus equivalent to 1.7% of GDP this year. Overall the economy contracted sharply in the years of the coronavirus (Covid-19) pandemic (2020 and 2021) beginning a recovery in 2022. The IMF now says the economy will expand by 2.1% this year and will “converge to 3% over the medium term”.

There are a number of risks to this scenario of modest improvement. The IMF itself recognises a “challenging socio-political environment” and calls for action to shelter poor and vulnerable groups from fiscal austerity and the high cost of living. It also calls for governance and anti-corruption reforms. It recognises the possibility of unfavourable shifts in the terms of trade (key exports include gold, rough wood, rice, and petroleum).

Meanwhile the country is struggling to reschedule foreign debt owed to various creditors, including China. Over a year ago the government of President Chandrikapersad Santokhi sought to reschedule US$545m owed to China, one of the largest creditors, but progress has been slow. In September President Santokhi said he hoped a rescheduling of China-held debt might be completed in November.

Regional context- low growth

Suriname’s economy will be influenced by low growth across the Latin American region. In its latest update published on 5 September the United Nations Economic Commission for Latin America and the Caribbean (Eclac) says the regional growth rate for Latin America and the Caribbean will drop from 1.7% this year to 1.5% in 2024, marked by high financing costs, limited fiscal space, reduced dynamism in job creation, and growing social demands. Growth in the Caribbean (including Suriname but excluding Guyana) is projected to drop from an average of 4.2% this year to 2.8% in 2024. Eclac also notes that the regional is vulnerable to growth-reducing climate change.