WASHINGTON – The International Monetary Fund (IMF) has welcomed Suriname’s ongoing economic receiver after the Dutch-speaking Caribbean Community (CARICOM) country recorded a 1.7 per cent growth in real gross domestic product (GDP) last year.
The IMF executive board in reviewing the staff appraisal that was conducted last month, said that the economic growth is underpinned by increased commodity exports.
However, it noted that the economy faces challenges arising from a weak fiscal position, rising public debt, an underdeveloped monetary policy framework, a vulnerable banking sector, and heavy dependence on the mineral sector.
The IMF is encouraging the authorities to use the current economic environment to build policy buffers, enhance resilience, and promote diversified and sustainable growth.
It said that priority should be given to strengthening the fiscal position and reducing public debt and recommended that adjustment efforts should focus on reducing energy subsidies, containing the public wage bill, implementing a broad-based value-added tax, and continuing to improve tax and customs administration.
The IMF said these measures would put debt on a downward path and create space for public investment and called for a strengthening of the social safety net to protect vulnerable groups.
The Washington-based financial institution said it welcomed the strengthening of the fiscal framework. They emphasised that further efforts are needed to strengthen revenue administration, improve public financial management, and strengthen the public investment system to improve public finances.
It agreed that a fiscal framework focusing on the non-resource primary balance could help safeguard long-term fiscal sustainability.
But while the IMF considered the current monetary policy stance to be broadly appropriate, it called for quick absorption of the excess liquidity in the banking system.
The IMF emphasised the need to strengthen the monetary framework by adopting reserve money targeting and developing open market operations and standing facilities to allow the central bank to effectively conduct monetary policy operations.
It underscored the need to strengthen both institutional and financial settings of the Central Bank and agreed that maintaining a flexible exchange rate would support the economy’s adjustment to external shocks.
The IMF said it recognised the recent improvements in the financial sector indicators but noted that vulnerabilities remain.
It underscored that developing a robust contingency plan and bank resolution framework will help strengthen financial stability an noted the progress so far in the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) framework and encouraged the authorities to further strengthen this framework in line with the 2012 FATF standards, as it will help mitigate risks regarding the withdrawal of correspondent banking relationships.
The IMF said that structural reforms should focus on boosting productivity and diversifying the economy to foster sustained strong growth and called for reforms to enhance the business climate and improve the environment for private investment.
“Priority also needs to be given to investing in education and increasing labour market flexibility while providing a meaningful safety net for the unemployed. Strengthening governance will also support investor confidence and promote growth,” the IMF said. (CMC)