Open to foreign partners in financing the path to sustainable growth
Suriname enjoys social and economic stability, and boasts one of the lowest public debt profiles in the region, which is fortunate, as financing the national reconstruction plan will take international teamwork and public-private partnerships.
The government’s plans for much needed infrastructural works were evident in its 2012 budget, which provides for the construction of more low-income housing, as well as the repair and building of roads, bridges and state-owned schools. Suriname’s low level of national debt, at around 28% of GDP, and a steady improvement in its fiscal position, mean that the government can afford to take on more debt to finance new investment in the major infrastructure projects it has in mind.
Fortunately, investor confidence in Suriname has been given a boost by the implementation last year of tough fiscal measures designed to maintain economic stability and establish an attractive, secure environment for international investors.
“We have to look for the financing for all our major, mostly infrastructural projects. We have to build our public-private partnerships (PPPs), and we have to adjust and strengthen our tax system,” says Minister of Finance, Adelien Wijnerman. “We now have a closer relationship with the Central Bank to coordinate the country’s fiscal and monetary policies, and do all those projects that we are now trying to develop.”
There are plans to establish an investment unit within the Ministry of Finance to capitalize on the experience held by some of its employees who were previously part of the former Ministry of Planning and Development Cooperation. The new unit will provide foreign investors with help setting up shop in Suriname, coordinating all the various investments in the country. It will be working with the many international organizations keen to enter Suriname and also be involved in managing PPPs.
According to the national debt law, the Minister of Finance is responsible for the signature and official approval of financing agreements. Applications from ministries for funds to be allocated to their various programs and projects have to be submitted through the Ministry of Finance and, if applicable, then forwarded on to any international financial organizations involved, for example the EU or the Inter-American Development Bank (IDB).
The IDB is one of the organizations providing assistance to the Ministry of Finance in setting up the new investment unit. The two entities are also in collaboration on various other projects. In February, the Finance Minister and IDB President Luis Alberto Moreno signed the contracts for two loans totaling US$20 million to help finance a conditional cash transfers program and the national census and household survey. Suriname’s Social Protection Support Program will benefit from a loan of US$15 million to support the government’s efforts to enhance the effectiveness of spending on social protection programs. The program will finance grants to poor pregnant women, new mothers, and the parents of poor children, benefiting up to 15,000 households by 2015. The aim of the initiative is to invest in children’s nutrition, health and education during their crucial formative years and break the intergenerational transmission of poverty.
In addition, a US$5 million loan is to support the National Population and Housing Census and Household Budget Survey, which will update the demographic, social, economic, and cultural information available on Suriname.
More recently, in June, a US$13.7 million loan to modernize Suriname’s new basic education system and help schoolchildren achieve better learning results was also approved by the IDB.
In addition to being bolstered by collaborations with global entities, investor confidence has also been lifted by the independent technocrats that head the central bank – Centrale Bank van Suriname, CBS – and their closer relations with the Ministry of Finance to create more solid, transparent banking and financial sectors.
“The Central Bank currently is involved in a major process of strengthening and modernizing itself, which means that we have been doing a lot on capacity building,” says Gillmore Hoefdraad, Governor of the CBS, who has advocated new laws that improve the supervision of the country’s financial system, insurance sector, money transfer operators and foreign exchanges. “The Ministry of Finance and the Central Bank work very closely together. We think alike and we remind the government that they cannot spend whatever they want, that they have to live by their means. We have a couple of working rules that are producing very good results. It is very important that the Central Bank knows what the Ministry of Finance is doing, and we, as the cashier of the state, have the full picture of the economy.”
At the IDB’s annual meeting of board governors that was held in Uruguay in March, Mr. Hoefdraad highlighted Suriname’s progress and solid fiscal framework, adding: “Transparency of government operations is a high priority for our government, and we are working with regional partners to strengthen statistical data systems in national accounts, public finance, balance of payments, and monetary statistics. Already, much data can be accessed online on the CBS’s webpage.”
Foreign direct investment (FDI) in Suriname rose from US$163 million in 2006 to US$585 million last year. The combination of a steady improvement in the fiscal position of Suriname, an increasingly stable monetary environment and a more honed supervision of the currency markets should allow for a more conducive environment for investment and production to emerge and FDI to continue to rise.
Michael Martinez McGough and Gonzalo del Rio