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International Monetary Fund. Western Hemisphere Dept.
This Selected Issues explores ways for strengthening the current fiscal framework in Suriname and considers options for a new fiscal anchor. The paper provides an overview of mineral natural resources and their importance for the budget. It also lays out the current framework for fiscal planning and budget execution in Suriname and discusses the analytical underpinnings of modernizing it to make it more robust. The paper also presents estimates of long-term sustainability benchmarks based on the IMF’s policy toolkit for resource-rich developing countries. Suriname’s fiscal framework can be strengthened through a fiscal anchor rooted in the non-resource primary balance. Given the size of fiscal adjustment required to bring the non-resource primary balance in line with the long-term sustainability benchmark, a substantial transition period is needed to implement it. The IMF Staff’s adjustment scenario—designed to put public debt on the downward path—closes the current gap by less than half, implying that adjustment would need to continue beyond the 5-year horizon.
International Monetary Fund
This 2007 Article IV Consultation highlights that aided by favorable external conditions and an improvement in macroeconomic management, Suriname’s economic performance has improved in recent years. Since 2002, the central government deficit has declined sharply, leading to a substantial decrease in public debt as a share of GDP. Monetary policy has focused on reducing inflation, while the central bank has become more independent. In 2006, macroeconomic performance was better than anticipated, benefiting from a continued favorable external environment. The outlook for 2007 looks broadly positive.
International Monetary Fund. Western Hemisphere Dept.
Suriname is recovering from the deep recession of 2015-16. Growth has turned positive, inflation has reduced to single digits, real interest rates have turned positive, and the external position has on balance strengthened. Nonetheless, the economy remains heavily dependent on the mineral sector, and faces fiscal, monetary, and banking sector vulnerabilities.
Mr. Daniel S Kanda and Mr. Mario Mansilla
This paper first attempts to quantify the natural resource wealth of Suriname from the perspective of its impact on the fiscal position, and then assesses the fiscal sustainability gap in that context. It then presents models to address the question of the optimal path of fiscal consolidation given the outlook for natural resource wealth, macroeconomic conditions, and country authority preferences.
Ms. Lisa Drakes, Ms. Chrystol Thomas, Roland Craigwell, and Kevin Greenidge
This paper addresses the issue of threshold effects between public debt and economic growth in the Caribbean. The main finding is that there exists a threshold debt to gross domestic product (GDP) ratio of 55–56 percent. Moreover, the debt dynamics begin changing well before this threshold is reached. Specifically, at debt levels lower than 30 percent of GDP, increases in the debt-to-GDP ratio are associated with faster economic growth. However, as debt rises beyond 30 percent, the effects on economic growth diminishes rapidly and at debt levels reaching 55-56 percent of GDP, the growth impacts switch from positive to negative. Thus, beyond this threshold, debt becomes a drag on growth.