Inflation forecast to decline to 26 per cent by end of year

The International Monetary Fund (IMF) has assessed that the Surinamese economy is expected to gradually recover during the course of 2022.

Real Gross Domestic Product (GDP) growth is projected to reach 1.8 per cent with an unwinding of fiscal and external imbalances and a stabilisation of the macro economy. Over the medium term, the growth could reach three per cent, supported by growing private demand and public investment.

Inflation is forecast to decline to 26 per cent by end-2022 and to 12 per cent by end-2024. The IMF staff team and Surinamese authorities have just reached a staff-level agreement on the first review of the authorities’ economic recovery programme supported by the extended fund facility (EFF).

During the review, the parties conclude that Suriname’s economic recovery programme is on track with all quantitative targets assessed at end December 2021 having been met. 

According to the review, “the Surinamese authorities’ homegrown economic recovery plan (“Herstelplan”) is charting a course toward debt sustainability, declining inflation, and economic recovery. There has also been an important emphasis on social stability”.

The government plans to submit a revised 2022 budget to the National Assembly in the coming weeks with an envisaged primary surplus of 1.7 per cent of GDP and revenue and expenditure measures to achieve that goal. The IMF reports that social cash transfers will be increased to support society’s most vulnerable.

Electricity tariffs will be further increased towards costs recovery levels within the energy sector financial and operational reform framework.

Discussions on debt relief with private and official creditors.

The government is also working to advance discussions on debt relief with private and official creditors. Fiscal and external imbalances have been reduced, the 2021 primary fiscal deficit is estimated at 1.3 per cent of GDP, and usable reserves have been rebuilt to around three months of imports.

Public debt is estimated to have fallen from 148 per cent of GDP at end-2020 to 125 per cent of GDP at end-2021 due to the authorities’ fiscal measures and an appreciation in the real exchange rate. The monthly economic indicators point to a nascent economy recovery. Inflation, while still high at 60.6 per cent (y-o-y) as of December, has fallen substantially since August on a month-on-month basis.

In December 2021, the IMF approved a $688-million extended fund facility for Suriname scheduled to be disbursed from 2022 to 2024. In its assessment, the IMF says structural benchmarks have also been implemented, albeit some with minor delays. Spending on cash-transfer programmes has fallen modestly short of the authorities’ goals but corrective measures are under way to accelerate the expansion in coverage of these programmes.

“The Central Bank of Suriname has made important progress in implementing the new reserve money targeting framework. They have shown their commitment to achieving a firm downward path for inflation and to maintaining a free-floating, market-determined exchange rate. These efforts will strengthen the economy’s resilience to external shocks and increase foreign reserves to prudent levels,” the IMF reports.

The IMF asserts that, “the Central Bank is taking proactive steps to enhance banking system compliance with prudential regulations while strengthening the central bank’s crisis management capabilities. “Important measures have been taken to strengthen central bank governance. The authorities remain committed to enhancing transparency and accountability in public procurement processes and to addressing shortcomings in the anti-corruption and AML/CFT framework.