Suriname to get IMF help to close budget deficit

18 Apr 16

The South American nation of Suriname is set to receive a support package worth $478m from the International Monetary Fund intended to help its economy pull out of recession.

 

The programme will support government efforts to reduce the public spending deficit and also help the country create new sources of non-mineral revenue and strengthening its fiscal policy.

Daniel Leigh, who led the IMF mission to Suriname, explained that the country’s economy had been hit hard by the decline in oil and gold prices, which had pushed the economy into contraction when combined with the closure of an aluminium refinery late last year,

Cutting public spending would therefore be a “clear and critical” part of the economic restructuring programme, he said, combined with reforms to the monetary policy framework, increasing resilience and building foreign reserves.

Since August last year, the government had cut public spending from a budget deficit from 12.5% of gross domestic product to 3.5%, and also begun phasing out electricity tariff subsidies.

The programme will build on these “important steps”, including supporting the government’s plans to introduce a value-added tax in 2018.

Reforms to strengthen monetary policy framework will also be introduced, including the establishment of a sovereign wealth fund for mineral revenue management, the creation of a procurement department and the creation of a modern treasury.

The World Bank and the Inter-American Development Bank, as well as other partners, will provide technical assistance and build capacity. Both these institutions, as well as the Caribbean Development Bank, are also considering financial assistance for Suriname.

The programme also entails substantial structural reforms to improve the business environment, encourage economic diversification and enhance the productivity and competitiveness of agriculture.

Stronger safety nets will be also be implemented to ensure the poorest do not suffer.

“This is a challenging programme that will require great efforts from the Surinamese society as a whole,” Leigh warned. 

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