Happy Monday!

This week we cover a rise in electricity costs and the response to those increases and the 5th review of the IMF program in Suriname.

A massive increase in electricity costs as a result of the phasing out of electricity tariffs as part of the IMF program and fiscal restructuring.

• During a press conference with multiple ministers from the Ministers of Economic Affairs, Entrepreneurship and Technical Innovation, Social Affairs and Housing, Natural Resources (NH), Foreign Affairs, International Business, and International Cooperation, explained the phasing out of electricity subsidies.

• This measure, though difficult, is deemed essential to improve the government's financial health and save significant funds. It is also an important factor in the IMF program that the country has participated in.

• The government has stated its inability to continue to keep costs (artificially) low. While the government will subsidise the most vulnerable groups, the rates will increase by 26%.

• Challenges faced by the energy company EBS), such as low water levels affecting the reservoir contributing to energy generation, impacted this decision. Minister David Abiamofo of Natural Resources announced a 40% increase in household energy tariffs, with further increases planned every two months.

• Consumer categories have been adjusted, with subsidies phased out for those using over 1,500 kWh per month. Most users fall into the subsidized brackets, with the government aiming to reduce subsidies gradually rather than eliminate them.

• The government has stated its goal to reduce subsidies to a manageable amount rather than eliminate them.

Criticisms of plan

• The government has received criticism from the National Party of Suriname (NPS) who criticized how the subsidy is being phased out and the lack of care for the larger society.

• He also critiqued the plan as it would make it harder on the production sector in Suriname.

• The Association of Surinamese Manufacturers (ASFA) has also critiqued the plan arguing that it would economic competitiveness, social well-being, employment, investment opportunities, and local production. The group argued that the subsidy should be phased out more gradually.

5th IMF review of Suriname’s economic reform program.

• After reaching a technical agreement on the fifth review of Suriname's economic reform program, the International Monetary Fund (IMF) and Surinamese authorities have reached a staff-level agreement.

• Suriname is waiting on IMF board approval, but they would receive access to approximately US$62.5 million, which would bring the total received to about US$326 million.

• The IMF praised Suriname's efforts to stabilize the economy, with expected 3% growth and declining inflation. The IMF also commented on returning investor confidence and increasing international reserves.

• The goal of the program is to reduce inflation to below 15% by the end of 2024.

• Short-term risks include policy challenges due to a complex socio-political climate. The social program also remains a priority, aiming to protect the poor and vulnerable while phasing out electricity subsidies.

• Reforms in the public sector progress, with plans to remove unproductive civil servants will also aim to better fiscal and budgetary space for the government.

• Debt restructuring also shows significant progress as agreements have been reached with major creditors. The IMF stresses the need for better controls to prevent arrears accumulation with suppliers.

Staatsolie and Further Oil Exploration

• Suriname’s national Oil Company (Staatsolie Maatschappij Suriname) plans to participate with a 20% stake in the inaugural field development in Block 58.

• This decision follows confirmation from the company's CEO, Annand Jagesar. Staatsolie anticipates significant government revenues from the project which are estimated to be between $16 billion and $26 billion over the twenty-year production lifespan.

• The development, led by TotalEnergies and APA Corporation, targets two large reservoirs with approximately 700 million barrels of oil combined.

• The project involves drilling around 30 wells over 2.5 years, with the first oil production expected in 2028. Additionally, TotalEnergies announced plans to cover part of APA's capital expenditure for the project.

• Staatsolie has also signed a Letter of Agreement (LoA) with Petronas and ExxonMobil regarding further exploration of a gas discovery made in 2020 in Block 52.

• While the gas find was initially small, discussions between Staatsolie and Petronas have led to the LoA, outlining agreements, principles, and conditions to investigate and potentially develop a commercial gas field in Block 52.

• A key aspect of the deal will include a ten-year tax-free period from the start of production, subject to government approval.

• The LoA will serve as the basis for negotiations on a 'Gas Addendum' to the existing Production Sharing Contract (PSC) for Block 52, specifying procedures and conditions for evaluating and developing the gas discovery.