In the oil sector, the start of operations of the new refinery will all but eliminate oil imports, improving the foreign exchange net inflows by an estimated five percent of GDP from 2015. The new gold mining project in the Merian area in the East is rapidly taking shape and involves investments of almost one percent of GDP per month until the end of 2016. After that, gold exports will increase by around eight percent of GDP. And the government is directly involved in both projects, as the refinery is owned and operated by the state-owned oil company, while the government—through one of its state-owned companies—will own 25 percent of the gold mining venture that is taking shape at Merian.
Both of these projects will have an extraordinary effect on the economy, bringing high-tech jobs, knowledge, income, foreign exchange, and economic diversification to Suriname. “We will have to be careful to manage the significant increases in fiscal revenue and foreign exchange inflows resulting from these projects,” says Minister of Natural Resources, Jim Hok.
The government has successfully begun a process of fiscal consolidation following the slippages of 2013 that coincided with a significant fall in fiscal revenue from commodity exports. In the first eight months of 2014, the deficit was reduced to 2.8 percent of GDP, compared to 4.7 percent of GDP in the same period of 2013. Such improvement was entirely due to cuts in expenditure, as revenue has stagnated with the continued fall in fiscal receipts from the commodity sectors.
The fall in expenditure is even more remarkable as the government has been accelerating payments to its vendors, which had been lagging in 2013. Most importantly, the government has taken the courageous decision to end electricity subsidies over time. These subsidies now amount to more than two percent of GDP and benefit mainly the urban rich.
Measures to enhance revenue have also been taken, but will only start to have an effect in the future due to usual collection lags. “As a small country we have to prioritize our expenditures, that is why we are focusing on investments in sectors like housing, infrastructure, education, agriculture and healthcare. At the same time, we will need to continue avoiding squander and start working more efficiently,” said President Desire Bouterse in his recent Annual Address to parliament.
Inflation fell to less than one percent in 2013, the lowest inflation in more than 25 years. As the Central Bank continues its careful management of supply and demand in the economy, it has managed to maintain inflation at levels of Suriname’s trading partners and managed to defend the exchange rate peg through a period of falling commodity prices and increased fiscal spending.
The Central Bank of Suriname states it “will not hesitate to further tighten monetary policy if needed”. To render monetary policy more agile, the Central Bank is broadening its policy toolkit, and modernizing the domestic payment system and the money and capital markets. “In the coming months, the introduction of open market operations will allow us to better control liquidity,” says a Central Bank official.
Suriname is among the countries in the Caribbean with the lowest debt to GDP ratio. The Government’s external liabilities consist mainly of debt to multilateral creditors and official creditors, while commercial loans are currently negligible. The government remains committed to a low-debt policy to avoid the scourges of high debt burdens befalling countries in the region.
• This article was produced in conjunction with The Washington Times International Advocacy Department.
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