Suriname Government Defends IMF Loan In Spite Of Public Protests

PARAMARIBO, Suriname, May 17, (CMC) – The Suriname government says it will continue with the policies outlined by the International Monetary Fund (IMF) after thousands of people took to the streets, last weekend, protesting the government’s economic policy and calling on it to resign.

In a statement, the Desi Bouterse government said “we will continue on the IMF path we are on” and insisted that the standby arrangement it has with the Washington-based financial institution is crucial to dealing with the economic crisis the country is facing.

Last Friday, thousands of workers and opposition legislators took to the streets to protest the latest hike in electricity rates.

The announcement of the increase followed advice from the IMF to the Bouterse administration to cut back on its subsidy to the sector.

The government has provided US$160 million in subsidy annually to the national power company and the announcement said that the new electricity rates went into effect from May 1.

Last month, the IMF announced that it had reached a staff-level agreement with Suriname on the key elements of an economic program that could be supported by a two-year US$478 million stand-by arrangement (SBA).

The IMF has said that the sustained drop in the prices of gold and oil has caused substantial external and fiscal deficits, and international reserves have declined significantly. These negative external developments, combined with the closure of Suralco’s alumina refinery in late 2015, have pushed the economy into a recession.

But in a three-page statement, the government defended the policy, stating that an economic stability program is beyond any discussion and even urgent, given the “precarious situation with vastly diminished income”.

The statement hinted that government has curtailed a host of expenditures in its 2016 budget and placed several acquisitions and capital investments on hold, but still found it important that certain fixed costs were guaranteed, among which salaries and certain social premiums and benefits.

“No government that is facing these difficult economic circumstances will be able to maintain certain subsidies,” the statement said, explaining that general subsidies were being replaced by targeted subsidies.

It said that the general subsidy on energy will be pulled and tariffs were being “improved sustainably for them to be cost sufficient and to prevent waste. By introducing higher energy rates users will be charged to conform the costs, which should make them use energy more efficiently.”

Government said that the support from the IMF will bring several financial and technical benefits.

“It will enable us to execute a more agile budget amendment. The 2016 budget deficit will be approximately 61/2 percent of the gross national product; this affords a lot more room for social and infrastructural expenditures than the budget that was approved by the National Assembly in February this year,” the government said.

It also said that the amended budget will bring tax benefits.

Government also added that it expected the loans to be afforded against a “very low” interest rate of just over one per cent.

“The foreign exchange component of the loans will enable Suriname to prevent a serious drop in imports; it will support the stability of the exchange rate and help rebuild international reserves and expand trust,” noted the government.

“There is practically no alternative for this home-grown program that has the support from the IMF and the international community. Any other solution would cause a stronger crimp of the economy, a continued plummet of the purchasing power and a host of other pressures on the community,” the government stated.