This note updates staff’s assessment of Suriname’s exchange rate system and arrears to private external creditors, taking into account additional information that has been brought to staff attention since the Staff Report (EBS/16/42) and supplementary information (EBS/16/42, Sup. 1) were circulated to the Executive Board. It does not alter the thrust of the staff appraisal.
Recent Developments and Staff’s Assessment
Exchange rate system. On May 10, 2016, the Central Bank of Suriname authorized commercial banks and foreign exchange bureaus to freely determine exchange rates, completing Suriname’s transition to a floating exchange rate system. Suriname was previously assessed as maintaining two multiple currency practices (MCPs) that arose from the spread of more than two percent between the buying and the selling rates in the official market for government transactions and also from the possible spread of more than two percent between these official rates for government transactions and those in the commercial markets that can take place within the established band (EBS/16/42, Sup. 1). In light of the recent developments, staff assessment is that these two MCPs have been removed.
Private external creditors. Information provided to staff on May 24 indicates the existence of a sovereign external arrear of US$12.8 million (0.3 percent of GDP) to a private company in the Netherlands. Previously, staff was not aware of any external arrears beyond the arrear to the Government of the People’s Republic of China discussed in the Staff Report (¶37). Staff assesses that the authorities are making a good-faith efforts to resolving the new external private arrear, in conformity with the Fund’s lending into arrears (LIA) policy. In particular, staff has discussed the arrear directly with the private company and has established that the arrear arose in early 2016 in connection with two public works projects; that the creditor then entered into discussions with the government of Suriname on how to reschedule the payment; that the creditor had access to non-confidential information regarding the financial difficulties facing the government; and that they were given an early opportunity to give input on the design of restructuring strategies. The creditor is currently in discussions with the authorities on finalizing an agreement on repayment of the arrear. Accordingly, attached hereto is an amended Stand-By Arrangement, including a financial assurances review clause (¶3d) applicable so long as Suriname has outstanding sovereign external payments arrears to private creditors, which is proposed for approval.1
In the amended arrangement, item (c) there is also a minor correction to clarify that the understandings regarding reviews that will be made are of Suriname with the Fund.