Standard & Poor’s stelt Suriname’s kredietwaardigheid naar boven bij van ‘negatief’ naar ‘stabiel’

Positieve bijstelling vanwege te verwachten stabiliserende goudprijs en toenemende productie

Minister Hoefdraad van Financiën is blij met de positieve beoordeling


Kredietbeoordelaar Standard & Poor’s (S&P) heeft Suriname’s kredietwaardigheid maandag 2 april 2018 naar boven bijgesteld van ‘negatief’ naar ‘stabiel’. Doordat de goudprijzen stabiliseren, de Merian goudmijn operationeel is en de productie toeneemt is Suriname terug op het pad van economische groei. Hierdoor vermindert de druk op externe financiën en wisselkoersen, worden betere begrotingsresultaten geboekt en neemt de netto schuldenlast van de overheid af. Zo blijkt uit het door Standard & Poor’s maandag 2 april 2018,  uitgebrachte persbericht (zie onderaan). 

Maar, de Ware Tijd schrijft echter: 'Zo blijkt uit een rapport dat naar de minister van Financiën is gestuurd. dWT heeft de hand weten te leggen op het document, een voortvloeisel uit de evaluatie die Standard & Poor's in januari dit jaar maakte over de Surinaamse economie en de stand van de overheidsfinanciën.' 'De hand heeft  weten te leggen op', terwijl de kredietbeoordelaar gewoon gisteren onderstaand persbericht op haar website heeft gepubliceerd, na inloggen voor iedereen beschikbaar, ook voor de Ware Tijd....

'We herzien daarom ons vooruitzicht voor de Republiek Suriname van 'negatief' naar 'stabiel'. We bevestigen onze 'B' lange termijn soevereine kredietrating en onze 'B' senior schuldrating op de 550 miljoen US dollar obligatie die in 2026 zal worden terugbetaald.'

Ook Suriname's 'B-plus' rating wat betreft het overmaken en omwisselen van vreemde valuta wordt bevestigd. Het stabiele vooruitzicht weerspiegelt S&P's verwachting dat de komende twaalf tot 24 maanden de reële groei van het bruto binnenlands product positief zal blijven en stijgen, dat het overschot op de lopende rekening zal resulteren in toenemende 'bruikbare' reserves.

Ook wordt verwacht, dat overheidstekorten zullen blijven afnemen, inflatie zal teruglopen en dat de nettoschuldenlast van de overheid zal blijven afnemen.

Minister Gillmore Hoefdraad van Financiën, die momenteel in Tunesië is voor de jaarvergadering van de Islamic Development Bank, laat via het Nationaal Informatie Instituut weten blij te zijn met de positieve beoordeling.

Hij geeft aan dat de erkenning over de opgaande economische trend, zoals de groei in de mijnbouwindustrie, maar ook de erkenning voor de positieve effecten van de genomen macro-economische en fiscale beleidsstappen terecht zijn. Volgens Hoefdraad is het S&P’s rapport realistisch over structurele belemmeringen die opgeheven moeten worden, zoals geringe uitvoeringscapaciteit en economische eenzijdigheid.

De minister wijst op de gunstige track-record die Suriname heeft om buitenlandse investeringen aan te trekken en ruimte te geven. In een kleine open economie zijn investeringen in de productie, industrie en infrastructuur, en in het menselijk kapitaal dringend nodig. 'We moeten ombuigen naar een gediversifieerde economie en het sociaaleconomisch en stabilisatiebeleid erop afstemmen.'

Een gunstige beoordeling van S&P’s is ook beter voor de onderhandelingspositie en dit zal de minister benutten tijdens zijn komende ontmoetingen met investeerders, crediteuren en donoren.

Republic of Suriname Outlook Revised To Stable From Negative On End Of Economic Contraction

• 02-Apr-2018 17:31 EDT

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OVERVIEW

With gold prices stabilizing and new production on line, Suriname is 
experiencing a return to economic growth, which is easing pressure on its 
external finances and exchange rate, generating improved fiscal outcomes, 
and lowering its net general government debt burden.
We are therefore revising our outlook on the Republic of Suriname to 
stable from negative. 
We are affirming our 'B' long-term sovereign credit rating and our 'B' 
senior unsecured debt rating on the country's US$550 million bond due in 
2026.
We are also affirming our 'B+' transfer and convertibility assessment on 
Suriname.
The stable outlook reflects our expectations that, in the next 12 to 24 
months, real GDP growth will remain positive and rising, current account 
surpluses will result in growing usable reserves, general government 
deficits will continue falling, inflation will subside, and the burden of 
net general government debt will continue to decline. 

RATING ACTION
On April 2, 2018, S&P Global Ratings revised its outlook on the Republic of 
Suriname to stable from negative. At the same time, S&P Global Ratings 
affirmed its 'B' long-term sovereign credit rating, 'B' short-term issuer 
credit rating, and 'B' senior unsecured debt rating on Suriname's US$550 
million bond due in 2026. S&P Global Ratings also affirmed its 'B+' transfer 
and convertibility assessment.

OUTLOOK
The stable outlook reflects our expectations that, in the next 12 to 24 
months, real GDP growth will remain positive, leading to sustained current 
account balances and slow growth in usable reserves. We also assume the 
government will follow through on its plan to implement a value-added tax 
(VAT) or, if not, enact some combination of fiscal measures to keep its 
deficits on an improving trend, leading to a gradual reduction of its net debt 
toward 50% of GDP by 2021. We also expect that the exchange rate will remain 
stable and inflation will continue to fall and pressure on the domestic 
banking system eases.

Upside scenario
The announcement of additional steps to boost investor confidence and GDP 
growth, in conjunction with the continued steady production among Suriname's 
gold mines could further accelerate the government's movement toward fiscal 
sustainability. A clear track record of strengthening economic and fiscal 
results and further improvement in Suriname's external position, with narrow 
net external debt falling below 50% of current account receipts and higher 
useable reserves on a sustainable basis could lead to an upgrade.   

Downside scenario
Delays in strengthening the government's revenue base or failure to contain 
spending could result in a return to persistently high fiscal deficits and 
further increases in net general government debt and interest expense. 
Alternatively, a weaker external liquidity position could put greater strain 
on the exchange rate, boost inflation expectations, undermine domestic 
confidence, and stress the domestic financial system. We could downgrade 
Suriname as a result.

RATIONALE
The outlook revision reflects two key events. First, full-year production at 
Newmont Mining Corp.'s Merian gold mine, which together with the output from 
IAMGOLD Corp.'s Rosebel gold mine, has made gold the most important component 
of Suriname's exports and helped to end a two-year economic contraction. 
Second, the government intends to implement a VAT later this year, the latest 
initiative in a succession of revenue and expenditure measures aimed at 
returning the government's finances to balance. The VAT (or other equivalent 
fiscal measures should the implementation be delayed) should significantly 
raise revenues. While increased gold mining and production have increased the 
country's economic and fiscal exposure to gold prices, current account 
balances have returned to surplus, general government deficits are shrinking 
and should head toward balance, and annual increases in general government 
debt and interest burdens are turning into decreases. 

Other factors have played roles in this moderately improving story. The 
decision to loosen the exchange rate and the subsequent depreciation of the 
Surinamese dollar have compressed imports and aided the return to current 
account surpluses. Thanks to the government's resolve, a suite of new 
expenditure control and revenue enhancement measures has helped to turn the 
fiscal trend to improving from worsening. Staatsolie, the country's wholly 
owned state oil company, will resume its exploration programs and contribute 
higher levels of taxes and dividends to the government treasury. 

While we still view Suriname's institutional and government effectiveness as 
weak, the government is making some progress. It continues to implement 
improved policies and practices, especially those in the purview of the 
Ministry of Finance. 

The exchange rate has been stable for more than a year and inflation has 
fallen significantly from its peak of 52% in 2016 and we expect it to continue 
to fall. 

Flexibility and performance profile: External assessment strengthens on return 
to current account surpluses.

We believe Suriname will record current account surpluses in 2018 and the 
next three years on full production at the Merian mine and continuing 
import compression. 
The general government deficit should decline in 2018 and in subsequent 
years as it did in 2017, with annual increases in net general government 
debt falling in lockstep. 
Net general government debt should decline again in 2018 though general 
government interest expense will rise in 2019 and then begin to decline. 

Thanks to full-year production at the Merian mine and increasing current 
account receipts (CARs), Suriname will record a current account surplus in 
2018 for the second consecutive year. The 2018 surplus should represent about 
7% of 2018 GDP, down from 8% a year earlier. The return to surplus is also due 
to continuing import compression brought on by the Surinamese dollar's 
depreciation in 2016. Much of what is consumed in Suriname is imported. 
Imports have fallen by more than a third from pre-depreciation levels. We 
expect that imports will recover in the next few years, but more slowly than 
exports increase. Accordingly, we believe that the country will record 
surpluses for the next three years. Higher levels of CARs are translating into 
improving external liquidity and balance metrics. Gross external financing 
needs should be 87% of CARs and usable reserves for the 2018-2021 period; 
narrow net external debt should represent 61% of CARs in 2018 declining to 51% 
of CARs by 2021. 

Given the gap between Suriname's net external liabilities and net external 
debt falling below 100% of CARs and external funding risks diminishing, we 
believe that the risk of a marked deterioration in the cost of or access to 
external financing has fallen and no longer moderates our view of the 
country's ability to raise funds abroad. 

We expect that official reserves will improve in modestly in 2018 to about 
US$330 million and continue to strengthen in subsequent years. For 2018, 
official reserves will represent about three months of import cover. 

The government's fiscal picture is improving. Revenues will increase in 2018 
on the introduction of new fiscal measures (such as a VAT)  along with revenue 
measures already implemented and additional revenue from the gold sector. 
Continuing fiscal restraint will keep expenditure growth rates below those of 
revenues and shrink general government deficits. Fiscal restraint is happening 
through a suite of measures, such as eliminating duplication, wage restraint, 
and workforce attrition. We expect the country to record a deficit of 4% of 
GDP in 2018 (7% in 2017). Deficits should continue to shrink beyond 2018, 
falling to 2% of GDP in 2019 and reaching as low as 1% by 2021. 

We understand that the government and opposition parties generally support tax 
reform, including most notably the VAT. Proposed tax reform includes lowering 
income tax rates while broadening the base of contributors to simplify the 
code and improve collections. The VAT, which is scheduled for implementation 
later this year, could raise government revenues by as much as 2% of GDP. We 
expect that, if implementation is delayed, the government will put equivalent 
fiscal measures in place to maintain its improving fiscal balances.

With general government deficits falling, the change in net general government 
debt will decline. We expect the change in net debt will be 5% of GDP in 2018 
(15% in 2017), 3% of GDP in 2019, and about 1% by 2021. 

However, Suriname's public finances are now more vulnerable to fluctuations in 
commodity prices, most especially gold. We expect that revenues from gold and 
oil production and associated manufacturing will represent 27% of total 
revenues for the 2017-2019 period, tempering our view of the country's fiscal 
assessment. Future revenues from the government's equity stake in the Merian 
gold mine may further amplify revenue volatility.  

Debt and interest expense have continued to increase. Net general government 
debt should stand at 61% of GDP in 2018 (63% in 2017). Falling deficits and 
rising GDP, however, should help debt decrease. We expect that net general 
government debt will fall to 59% of GDP in 2019 and reach as low as 53% of GDP 
by 2021. Suriname's US$550 million bond issue in 2016 and currency 
depreciation has pushed up interest expense in Suriname dollar (SR$) terms. 
General government interest expense should reach close to 19% of general 
government revenues in 2018 (17% in 2017). We expect interest expense to 
decline thereafter, falling to 16% of revenues in 2019 and reaching as low as 
11% by 2021. 

Owing to the US$550 million issue, the majority (67%) of the country's debt in 
2018 will be external, denominated predominantly in U.S. dollars, which 
moderates our view of Suriname's debt. In a similar vein, nonresidents hold 
about 75% of the country's commercial debt. As well, the banking sector's 
exposure to the government (including the Central Bank and nonfinancial public 
corporations) was about 24% of the banking sector's net assets at the end of 
2017, which also tempers our view of the country's debt.

We believe that the financial system will remain a limited contingent 
liability to the government. Suriname's financial system is not large, and we 
do not expect it to become so. The gross assets of other depository 
corporations totaled about SR$17 billion and represented 66% of GDP in 2017. 
The central bank monitors their financial health, and has intervened before to 
strengthen banks under financial stress. The nondepository segment is also 
small, which we expect to continue. We estimate that the segment's total 
assets are below SR$5 billion, or less than 20% of GDP. Staatsolie, the 
largest nonfinancial public enterprise with debt, is profitable even at 
current oil prices and pays regular dividends to the government. The majority 
of Staatsolie's debt is to the government, which on-lent US$261 million to the 
company in 2016; that debt is already included in general government debt. 
Debt in Staatsolie's name represents only about 7% of 2017 GDP. We consider 
nonfinancial public sector enterprises a limited contingent liability risk to 
the government.

We believe that Suriname will continue to lack monetary policy flexibility. 
Small capital markets and high dollarization of both bank assets and 
liabilities should continue to constrain the effectiveness of monetary policy. 
The central bank has limited monetary policy tools. Its primary tool is 
reserve requirements on local and foreign currency deposits, which it uses to 
manage credit growth in the local banking system. It has taken steps to set up 
an interbank market and holds regular Treasury bill calls for bid with the 
goal of eventually conducting open market operations. This could give the bank 
a more powerful tool to transmit monetary policy and result in an improved 
assessment of monetary policy credibility and effectiveness. We believe that 
the country's move from its former long-standing fixed rate regime could 
gradually increase monetary flexibility. A credible track record in using a 
flexible exchange rate could help the country to better manage external 
shocks.

Financial dollarization was significant in 2017 and we expect this to 
continue, constraining the potential effectiveness of monetary policy. About 
60% of deposits and close to 50% of claims by resident commercial banks and 
credit unions (excluding the government and the central bank) were in foreign 
currency in 2017. 

The government is the lender of last resort in Suriname. It provided a bridge 
loan in 2016 to a small privately held domestic bank that required assistance. 
As well that year, the government merged one small, under-capitalized 
state-owned bank with a larger, better-capitalized one. 

Institutional and economic profile: Economic assessment weakens on greater 
economic dependence on gold mining.

The opening of the Merian mine has increased the economy's reliance on 
natural resources, especially gold mining and production. 
Nevertheless, the output gains will boost GDP per capita to about 
US$6,400 in 2018 and real GDP should rise about 1% or more. 
Suriname has a stable democratic government but poor public policy 
choices have threatened the sustainability of its finances.

We expect that real GDP will grow more robustly in 2018 with development and 
construction work at both mines and a resumption of Staatsolie's exploration 
program. Real GDP growth should be 1% or more in 2018, rising to 2% annually 
by 2021. Real GDP growth turned positive in 2017 with the start of full-year 
production at the Merian mine, ending a two-year contraction. However, weak 
domestic demand will likely temper growth rates because of continued fiscal 
adjustments and recent declines in real wages. We expect that domestic demand 
will remain under pressure from continued fiscal policy measures, rising 
prices, and lagging wage growth.

GDP per capita should be about US$6,400 in 2018, up about 9% from 2017. We 
expect that GDP per capita will continue to increase in 2019 and beyond, 
reaching more than US$7,600 by 2021. The growth should be propelled in part by 
improving domestic demand, new investment at Merian to process harder ore, 
exploration and development at Rosebel's adjacent Saramacca property, the 
resumption of near-shore exploration by Staatsolie, and the potential 
redevelopment of the airport (including a new highway). With the Merian mine's 
opening, the Suriname economy relies more on gold mining and production, which 
tempers our view of the country's economic strength because it has become more 
vulnerable to changes in gold prices. We believe that the gold industry will 
come to represent more than 20% of GDP, if it has not already reached that 
threshold. Also tempering our view of the economy's strength are material data 
inconsistencies, statistical discrepancies, and below-average economic growth 
rates because per capita growth rates remain below the range we expect for a 
country like Suriname. The country has good long-term prospects in oil and in 
agriculture--it was once a significant regional producer of some agricultural 
commodities. 

Suriname has a stable democratic government but poor public policy choices 
have threatened the sustainability of its finances. Mr. Desi Bouterse's 
Nationale Democratische Partij leads the government with a slim majority (26 
of 51 seats) in the National Assembly. The government over-relied on natural 
resource revenues from gold and oil in the first half of the decade and failed 
to develop more stable and sustainable revenue sources, leaving the country 
vulnerable to the downturn in the prices of those commodities. With resource 
revenues buoyant, general government spending almost doubled from 2010-2014; 
large fiscal deficits ensued when commodity prices fell. Foreign exchange 
reserves were high for much of the first half of the decade but, by the end of 
2015, those were in danger of being exhausted. We believe that the checks and 
balances that are the hallmark of stronger institutional frameworks are weak 
in Suriname. Future policy choices are difficult to predict because of highly 
centralized decision-making. "Key person" risk is high in the country--the 
president and the finance minister have outsize roles and the success of 
planned reforms depends much on these two individuals. 

Suriname's society, however, remains civil. Parties largely represent 
different ethnic groups and relations between groups have been harmonious. 
Power sharing has been broad-based but has come at the cost of constraining 
the government's ability to formulate policies and implement timely reforms. 
Nevertheless, the government is making progress in some areas.  The central 
bank has published its inaugural financial stability report and strengthened a 
number of acts governing the financial sector. The Ministry of Finance has 
strengthened the government's debt management practices. As well, the ministry 
has implemented measures, tightening controls on financial transactions 
government-wide and increasing the government's ability to implement fiscal 
measures.

Suriname has a history of encouraging foreign investment. The country's first 
mine was a bauxite mine opened by the U.S. aluminum company Alcoa in 1916. A 
Canadian firm, IAMGOLD, owns the Rosebel gold mine. U.S.-based Newmont owns 
the Merian mine. The government decided to take a 25% equity stake in the 
Newmont project. Historically, it has taken a hands-off policy toward foreign 
investment. 

KEY STATISTICS