Happy Monday!

This week we cover economic news in Suriname with the third tranche of Suriname receiving IMF funding. The president also announced a goal of further reducing inflation in 2024 while the government also aims to increase VAT on fuel from November 1st.

Suriname’s economic woes are on the way out

• Suriname’s recovery from economic woes continues.

• Last week, the IMF approved the third installment of financial assistance for Suriname, which reached $52 million, as part of the three-year program of monetary assistance.

• Suriname has received around $212 million, so far. The IMF’s funds are supposed to support Suriname in its efforts to reduce inflation, maintain fiscal discipline, and stabilize its economy after succumbing to the commodity crisis and COVID-19’s impact on the economy.

• However, the country has had to implement challenging reforms such as removing fuel subsidies, reducing electricity subsidies, and broadening the VAT (value-added tax) base.

• Suriname is working on debt restructuring agreements with other creditors, with the exception of China. The country was also being granted a waiver for non-compliance with certain criteria by the IMF.

• These agreements will aim to improve relationships with creditors and will aim to improve the economic future of the country.

Increase in VAT on fuel in Suriname

• Suriname initially intended to increase the value-added tax (VAT) on fuel from 5% to 10%. However, while the initial increase was intended to come into effect on October 1, this will be pushed back to November 1, 2023.

• The government held discussions with labor unions which later led to this agreement. The decision was confirmed by the Minister of Finance & Planning, Stanley Raghoebarsing.

• The unions were concerned that increases in VAT would place further burdens on already burdened workers while also leading to increases in inflation.

• They called for a more balanced distribution of the tax burden, including revisiting tax brackets and addressing exemptions for certain sectors like currency trading and casinos.

• The postponement of this increase is supposed to allow time for an evaluation committee to propose a fairer tax structure. The goal of the postponement is to align the government and business community on this matter while ensuring the IMF program remains unaffected.

President Santokhi’s aims to reduce inflation

• Suriname’s inflation is currently at 53.5% but the government will attempt to reduce inflation to 35% by next year. President Santokhi has announced a larger reduction in Suriname’s debt from nearly $4 billion to $3.1 billion.

• Suriname’s IMF program will continue to implement monetary and fiscal policies to stabilize the exchange rate, strengthen the currency's purchasing power, and reduce inflation. As we mentioned earlier, debt restructuring efforts are ongoing with many parties including with India and other creditors while continuing to negotiate with China.

• President Santokhi has emphasized the importance of the IMF program and debt restructuring to build trust in financial markets, reduce budget pressure, and improve monetary parameters.

• Suriname’s successful debt restructuring will positively impact Suriname's credit rating and also lower loan interest rates. If Suriname fails to service debts that exceed $100 million, annually that could lead to creditors demanding payment. This would cause more economic woes for the country and its citizens.

Suriname’s budget for 2024’s fiscal year

• In the fiscal year 2024, total expenditures are set at SRD 60.01 billion, while planned total revenues amount to around SRD 52.70 billion in Suriname’s budget. This is expected to result in a budget deficit of SRD 7.3 billion which is equivalent to 4.1% of the GDP. Notably, the budget assumes a significantly larger GDP compared to previous years.

• Suriname’s revenues are made of donor financing, loan disbursements, budgetary support, non-tax revenues, and tax revenues. Tax revenues, particularly income tax, import duties, and (value-added tax) VAT, account for a significant portion of the total.

• On the expenditure side, a notable portion goes to wages and salaries of government employees, while the majority is allocated to various programs. Of particular interest within the programs are the payments for interest and loan repayments, representing a significant portion of the budget.

• Suriname’s budget highlights the government's efforts to manage finances and reduce the deficit while addressing economic challenges.