Suriname: 2013 Article IV Consultation

KEY ISSUESContext. Growth remains robust while inflation has fallen to very low levels. However,declining commodity export prices and a substantial fiscal slippage have weakened theexternal position. The authorities have already tightened fiscal policy, but more will beneeded to buttress macroeconomic stability and entrench fiscal sustainability.International reserves have dipped but remain adequate. Price competitiveness appearsacceptable, but warrants continued vigilance. Good progress is being made tostrengthen the monetary policy framework, financial sector resilience, the fiscalframework, and structural competitiveness, with TA from the Fund and other institutions.Focus of the consultation. The consultation focused on policies to offset recent fiscalslippages and safeguard the fixed exchange rate, ensure long-term fiscal sustainability,strengthen financial sector resilience, and advance structural reforms to enhancecompetitiveness and growth.Policy recommendations:? Tighten fiscal policy to strengthen macroeconomic stability and ensure sustainability.? Establish a fiscal framework appropriate for this resource-rich country. This shouldcomprise a fiscal anchor consistent with sustainability, medium-term expenditureceilings, a Sovereign Wealth Fund, and revenue diversification including a VAT.? The monetary authorities should stand ready to contain demand pressures if fiscaladjustment proves insufficient, and press ahead with efforts to establish indirectinstruments of monetary policy and strengthen the financial sector resilience.? Structural reforms to improve the business environment and increase the efficiencyof public utilities will be needed to enhance competitiveness.Past surveillance. During the 2012 Article IV consultation, Executive Directorsunderscored the need for sound management of future mining revenues and building ofpolicy buffers, and welcomed the significant improvement in the fiscal position in 2011as well as the authorities' commitment to strengthening financial sector resilience andimplementing prudent policies going forward. While there has been good progress instrengthening monetary and financial sector policies, and public financial managementis being improved, the fiscal stance has slipped significantly.