WASHINGTON (CMC) – The International Monetary Fund (IMF) has warned Suriname about the country’s heavy reliance on commodity exports.
The international lending agency says while it welcomes the country’s strong growth, supported by “sound policies and buoyant commodity prices,” the practice has exposed fiscal and external vulnerabilities.
“Directors stressed the need to build up buffers, promote fiscal sustainability, strengthen the financial sector, and enhance competitiveness,” said the Washington-based financial institution after concluding the 2013 Article IV Consultation with Surinamese authorities.
“Adjustment efforts should aim to streamline expenditure on goods and services, moderate public wages, improve the targeting of subsidies, and prioritize capital projects,” said IMF officials.
“It will also be important to ensure that the planned social security scheme is fiscally sustainable.”
IMF directors commended the authorities’ plans to strengthen the fiscal framework, stating that the public financial management law, when completed, would provide a “sound basis for a fiscal anchor and medium-term expenditure ceilings.”
They also lauded efforts to establish a sovereign wealth fund and strengthen customs and tax administration, and recommended intensifying efforts to implement a properly designed value-added tax.
They, however, urged caution regarding plans to purchase minority stakes in two gold mining ventures financed by a sovereign bond issue.
The directors supported monetary tightening in case fiscal measures prove inadequate to contain demand pressures, and urged the authorities to press ahead with plans to establish open market operations.
The IMF directors underscored the importance of prudent macroeconomic policies to support the fixed exchange rate, urging the Surinamese government to remove the remaining multiple currency practices when the opportunity arises.
They also welcomed progress made in overhauling the banking sector regulatory framework and strengthening the Anti-Money Laundering /Combating the Financing of Terrorism regime.
Plans by the Government of Suriname to upgrade the insurance sector regulatory framework, establish a credit bureau and a deposit insurance scheme, and reduce state ownership in the banking sector, were lauded by the IMF officials.
The directors also urged officials in the country to continue efforts to reduce “dollarization.”
