Resource IDB Group Country Strategy with Suriname (2016-2020)
Type Policy Paper
Last update: 03/03/2019
Type: Policy Paper
Language English
Year of publication: 2015
Download: 715kb
Suriname is a small, open, commodity-based economy that is vulnerable to external shocks. Exports are concentrated in the extractive sector (mainly gold, oil) that generates approximately 90% of foreign exchange earnings and 45% of government revenues. Suriname relies on imports (more than 80% of consumption) to satisfy most domestic demand for goods. The transmission mechanism of the wealth generated in the extractive sector relies highly on public spending, which drives aggregate demand.
The domestic private sector is small, and expands or contracts to changes in public spending. Suriname’s robust growth performance from 2001 to mid-2014, when real GDP per capita expanded over 65%, came to an abrupt end when international prices of gold and oil dropped. Macroeconomic imbalances rapidly accumulated when export earnings fell and correcting these imbalances is costly as it will entail a reduction in real purchasing power. The Government responded to the crisis with a plan that focuses on stabilizing the economy. The plan includes support from the International Monetary Fund, the Inter-American Development Bank Group (IDBG) and other development partners. In addition, the Government is implementing reforms to modernize the country by modifying incentives frameworks that added to the current, and previous, crises.

The IDBG is Suriname’s most important development partner with average annual approvals of US$73.34 million from 2011 to 2015. During this period, IDBG financial support accounted for about 15% of external financing and around 90% of the country’s total multilateral financing. The IDBG’s activities spanned more than ten sectors with investment and policy-based lending, investment grants and technical co-operation projects, and it is progressively focusing on core public sector reforms and institutional strengthening.

The Country Strategy will support economic stabilization, complemented by a longer-term view on modernization of the public and private sectors. Support for an economic stabilization program is linked to specific policy reforms, including introducing VAT, reducing subsidies, and lowering public spending while protecting the social safety net, and strengthening public administration. The longer-term priorities focus on modernization of the state, private sector development and strengthened human capital. The IDBG will emphasize the coordinated use of policy and investment instruments to support the reform processes and provide technical and financial resources geared towards knowledge generation for developing consensus around evidence based policies.

In a scenario steered by the stabilization plan, the IDBG estimates average approvals of US$78 million of SG loans each year, totaling US$320 million over the 4-year period. This would result in average annual disbursement of US$68.6 million and average net cash flow of US$32.9 million. Given the participation of other development partners, IDBG debt as a share of total multilateral debt would decrease to 68.4% compared to 92% in 2015. The share of IDBG debt to GDP would average about 12.3% and IDBG debt to external debt would decrease between 2015 and 2020 from 51% to 37.9%. An alternative scenario consistent with macroeconomic instability would trigger lower SG approvals of about US$190 million.

The Strategy is exposed to three main sources of risk:
- the influence of macroeconomic factors on the time it would take to stabilize the economy. The longer that process takes, the higher the risk that Government would not be able to implement long- term programs designed to modernize institutions and prevent the recurrence of economic crises.
- implicit political difficulties of introducing reforms where long-standing business and political arrangements need to evolve or to be transformed.
- institutional challenges faced by Government and the private sector to implement the modernization agenda.
The Country Strategy anticipates a proactive approach accompanying Government and the private sector with technical assistance to lower all sources of risk, including others related to portfolio execution and natural disasters.
Role Organisation
Author Organisation organisation details Inter-American Development Bank
Network Organisation organisation details Food & Nutrition Security-Suriname netwerk
List Keywords
1.1 Socio- economic Sector (OECD) 311 Agriculture
150 Government and civil society
322 Mineral resources and mining