🏦 Central Bank faces critique from Parliament on Open Market Operations

Happy Monday!

This week we cover the critique of the Central Bank's Open Market Operations, issues regarding cooking gas prices, and Suriname's new role as the chair for the Caribbean Development and Cooperation Committee.

The Central Bank was under fire by the Surinamese community and parliament for the mismanagement of Open Market Operations.

• Despite measures to curb the depreciation of the SRD and talks with the financial sector, the exchange rate continues to drop daily.

• The Central Bank of Suriname's quoted rate for the US dollar is 37.79, but the rate is even higher at cambios and banks.

• The Finance and State Household committees see opportunities to achieve stability in the exchange rate development, but all parties must provide support and perform their tasks properly.

• Discussions have been held with various organizations, including the Minister of Finance & Planning and the governor of the CBvS, but it has become clear that the CBvS is not performing its role properly.

• Correct information will be sent to the National Assembly no later than next week, and the public meeting will be continued after consultation with the government and discussion of comments from various organizations.

The central bank has argued against the accusations with support from the banking association and cambio association

• The Central Bank of Suriname issued a statement defending its Open Market Operations (OMOs) in response to criticism.

• OMOs are a standard monetary instrument used by central banks worldwide and play a role in sterilizing excess liquidity in the macro-fiscal framework.

• Money creation in 2022 was due to net government expenditure and the withdrawal of State assets from the financial institution, leading to a decrease in the effectiveness of OMOs.

• Market-based interest rate transmission at banks has not started yet, but the issue of Central Bank Certificates has caused some movement in deposit rates.

• The bank believes that OMOs are to tighten the money supply and have helped prevent higher exchange rates and inflation levels.

• Billions of Surinamese dollars are always tied up with banks, and this liquidity could have created demand in the foreign exchange market.

• The abolition of government subsidies and import inflation are putting pressure on price levels in Suriname.

Gajadien is not pleased with their response 

• Asis Gajadien, is criticizing the Surinamese Bankers Association and the Association of Cambio holders for not showing enough character and for presenting things differently than they are out of fear of losing their livelihood.

• He claims the banks have made huge sums of money through the OMOs rather than fulfilling their role as lenders to Suriname citizens.

•  Gajadien believes that the Central Bank of Suriname (CBvS) is not fulfilling its role properly in maintaining peace of mind in the exchange rate system, and that the lack of clear instructions to banks and cambios is an obstacle to achieving this. 

• He argues that better consultation and clear instructions can lead to less speculation on the price and that the CBvS has the legal task of pursuing a sound pricing policy and preserving the value of the Surinamese currency.

Cooking gas transporters cancel an earlier planned strike due to low profitability.

• Cooking gas transporters were to take action this Wednesday and not supply gas cylinders to supermarkets

• Negotiations for new rates with EBS/Ogane started in May 2022 as sales prove to be no longer profitable due to exchange rate developments

• While gas transporters believe they should be eligible for a subsidy, government believes EBS should pay for increased costs, and EBS argues there is no money

• A provisional agreement was reached early this week and gas transporters gave EBS/Ogane until April 19 to come up with final proposal

• Gas transporters emphasize that cheap subsidized gas benefits not only households but also other sectors

• Government includes purchasing power boost for weak households when increasing gas price, should not pass on increase to gas transporters

• Announced actions were postponed due to good discussion with EBS/Ogane.

Suriname serves as the new chair of the Caribbean Development and Cooperation Committee.

• Minister Albert Ramdin led the first bureau meeting of the Caribbean Development and Cooperation Committee (CDCC).

• The CDCC was established to promote and strengthen the economic and social cooperation of Caribbean countries.

• The 29th session of the CDCC will be held in Trinidad & Tobago on April 3-4, 2023 to develop a new agenda for the Caribbean region.

• The new strategy will focus on reducing dependence on financing, developing regional exports, and addressing the impact of oil and gas in Guyana and Suriname on the region.

• Suriname took over the chairmanship of the CDCC from St. Vincent and the Grenadines in October 2022.