Moody's verlaagt de rating van Suriname naar B3; verandert vooruitzichten in negatief

Moody's down- grades Surina- me's rating to B3; changes outlook to negative

New York, April 14, 2020 -- Moody's Investors Service, ("Moody's") has today downgraded the long-term issuer and senior unsecured ratings of the Government of Suriname to B3 from B2, and changed the outlook to negative from stable. 

The downgrade to B3 reflects the significant deterioration in fiscal metrics as larger-than-expected fiscal deficits in 2018 and 2019 have led to a sustained rise in government debt to 75% of GDP at the end of 2019. The downgrade also reflects heightened liquidity and external risks. 

The negative outlook on the B3 rating reflects Moody's view that risks are skewed to the downside. In the absence of fiscal consolidation, persistent large fiscal deficits in 2020-21 will generate potential funding risks. Moody's sees persistent pressures on the exchange rate, increasing the likelihood that an abrupt correction could further erode debt metrics and Suriname's overall credit profile. 

Concurrently, Moody's lowered Suriname's long-term foreign-currency bond and deposit ceilings to B1 from Ba3 and to Caa1 from B3, respectively. Moody's has lowered the long-term local-currency bond and deposit ceilings to B1 from Ba2. All short-term foreign-currency ceilings remain at Not Prime. 

RATINGS RATIONALE
RATIONALE FOR THE DOWNGRADE TO B3
SIGNIFICANT DETERIORATION IN FISCAL METRICS HAS UNDERMINED THE SOVEREIGN CREDIT PROFILE 

Suriname's adverse fiscal trends have led to a steady increase in the government's debt burden, which reached 75% of GDP in 2019 from 43% in 2015. Debt affordability has deteriorated as well with the ratio of interest-to-government revenue increasing to 15.6% from 7.3% in 2015. 

Moody's expects Suriname's debt burden to peak at around 81% of GDP in 2021, higher than previously expected, and to remain around that level over the next several years with debt affordability bordering 20% of government revenue in the next two years. 

The economic and financial implications of the coronavirus pandemic, along with existing institutional weaknesses that limit policy effectiveness, will limit fiscal consolidation efforts. In addition, a large share of foreign-currency-denominated government debt leaves Suriname exposed to exchange rate shocks.

Moody's expects the fiscal deficit to reach 9.2% of GDP in 2020 and 7.8% of GDP in 2021. In addition to increased expenditures related to the coronavirus pandemic, spending pressures will likely emerge ahead of the May 25 parliamentary elections, contributing to elevated expenditures through the first half of 2020. Significant mining-related (primarily gold and oil) government revenue expose the fiscal accounts to changes in commodity prices and introduce an element of volatility that will pose challenges to fiscal management. Additionally, the government has limited expenditure flexibility given a relatively high share of spending on wages and interest payments. 

HEIGHTENED LIQUIDITY RISK 

Large fiscal deficits combined with limited domestic and external market funding options have led to increased government liquidity risk - gross borrowing requirements will be at around 20% of GDP in 2020. 

An underdeveloped domestic capital market along with limited access to external markets restrict the government's future capacity to access funding. Additionally, the quality of funding -- both external and domestic -- has deteriorated. Increased reliance on less concessional forms of external debt and short-term borrowing from the domestic banking sector have increased rollover risk. 

Despite limited access to external markets and an underdeveloped domestic market, Suriname has been able to tap less conventional forms of borrowing and financing. The government has demonstrated an ability to monetize its ownership stakes in various mining concessions, e.g., the government may sell part of its stake in the Saramacca gold mining project. Moody's expects this to continue in 2020 contributing to partially ease liquidity pressures. 

EROSION OF FOREIGN EXCHANGE BUFFER INCREASES EXTERNAL VULNERABILITIES 

International reserves stood at $565.3 million at the end of February 2020, down from $647.5 million at the end of 2019. International reserves increased in 2019, but this was largely the result of commercial banks placing a portion of their required foreign exchange reserves at the central bank. If the banks' reserve requirements are netted out from the calculation of international reserves, the central bank has only around $100 million available, including $88 million in gold, which represents royalties paid by the mining sector. 

An increase in mining-related imports resulted in a widening current account deficit to 11% of GDP in 2019 from 3% in 2018. The current account deficit was financed primarily by portfolio and other investments. Large net errors and omissions added to the negative balance of payments position. 

A low level of liquid international reserves and a large current account deficit have placed downward pressure on the exchange rate. In March 2020, the government passed the Foreign Currency Market Act, which prohibits cash receipts and payments in foreign currency for firms and households. Moody's expects pressures on the Surinamese dollar will persist raising concerns about the authorities ability to maintain the peg.

RATIONALE FOR THE NEGATIVE OUTLOOK 

Credit risks are skewed to the downside. In the absence of fiscal consolidation efforts that lead to a material reversal of the deterioration in government accounts, the continued presence of large fiscal deficits would generate additional near- and medium-term funding challenges and potential credit risks. Moody's will assess the extent to which post-election fiscal reforms contribute to alleviating the government's market funding needs, as well as the extent to which exchange rate pressure can lead to a sizeable exchange rate devaluation which would adversely affect the government's balance sheet and, consequently, the sovereign's credit profile. 

ENVIRONMENTAL SOCIAL AND GOVERNANCE CONSIDERATIONS

Suriname is significantly exposed to environmental risks through its vulnerability to rising sea levels. The large share of the population that lives within a few meters of sea level, along with the large share of economic activity that occurs in these areas, exposes Suriname to coastal flooding risks. 

Social considerations are important for Suriname's credit profile. Social considerations have also contributed to the slow implementation of measures to correct large fiscal deficits. Moody's also considers the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. 

Governance considerations are material for Suriname's credit profile. The quality of policymaking suffers due to a lack of highly qualified professionals in the public administration. With the exception of a handful of officials, the staff lacks technical expertise, which makes even sound policy decisions difficult to implement. Weaknesses in oversight of government spending, particularly at lower levels, often results in an accumulation of government arrears. 

GDP per capita (PPP basis, US$): 15,111 (2018 Actual) (also known as Per Capita Income)
Real GDP growth (% change): 2.6% (2018 Actual) (also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 5.4% (2018 Actual)
Gen. Gov. Financial Balance/GDP: -11.7% (2018 Actual) (also known as Fiscal Balance)
Current Account Balance/GDP: -3.4% (2018 Actual) (also known as External Balance)
External debt/GDP: 102.3% (2018 Actual)
Economic resiliency: b3
Default history: No default events (on bonds or loans) have been recorded since 1983. 

On 09 April 2020, a rating committee was called to discuss the rating of the Suriname, Government of. The main points raised during the discussion were: The issuer's economic fundamentals, including its economic strength, have materially decreased. The issuer's institutions and governance strength, have materially decreased. The issuer's fiscal or financial strength, including its debt profile, has materially decreased. The issuer has become increasingly susceptible to event risks. 

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS 

Moody's would likely downgrade Suriname's rating if liquidity pressures intensify, increasing the risk of a missed bond payment. Additionally, the rating agency would likely lower the rating if it were to conclude the fiscal policy response after the elections would not be sufficient to materially ease liquidity pressure or improve the medium-term fiscal outlook. 

Moody's could change the outlook to stable if there were clear evidence that the government intended to pursue policies that would ease liquidity pressures and reverse the deterioration in fiscal metrics. 

The principal methodology used in these ratings was Sovereign Ratings Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1158631. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
The weighting of all rating factors is described in the methodology used in this credit rating action, if applicable. 

(https://www.moodys.com/research/Moodys-downgrades-Surinames-rating-to-B3-changes-outlook-to-negative--PR_422426 ) 


'Deze beoordeling bevestigt dat het bar slecht gaat met de economie van het land'


Econoom en oud-bankier Jim Bousaid zegt woensdag 15 juli op Starnieuws, dat het te verwachten was dat deze kredietbeoordelaar ook dezelfde trend zou volgen als de andere twee. Moody’s volgt een iets andere ratingmethode, maar de downgrade en de rating komen overeen met die van Fitch and Standard and Poor's. 

'Deze beoordeling bevestigt dat het bar slecht gaat met de economie van het land. De regering onderneemt geen stappen om verbetering aan te brengen. Integendeel worden er steeds meer uitgegeven en geleend', stelt Bousaid.

Moody's voert aan, dat de overheidsfinanciën enorm aan het verslechteren is. Het begrotingstekort is groot. De wisselkoers staat eveneens onder druk, terwijl de schulden alleen toegenomen zijn.

Bousaid merkt op, dat de regering op 26 april US$ 25.4 miljoen moet betalen aan rente voor de Staatsobligatie van US$ 550 miljoen via Oppenheimer. De waarde van deze bond is intussen gedaald tot 41%. In juni moeten aan rente en aflossingen nog eens US$ 23.6 miljoen betaald worden aan de overbruggingslening die via Oppenheimer is genomen.

Naast de financiële krapte en verminderde inkomsten, zijn er ook extra middelen nodig voor de coronacrisis. Daarbij is een wet aangenomen waarin de regering een noodfonds van SRD 400 miljoen mag instellen. De regering zal extra geld moeten lenen op de lokale markt of monetair financieren.

Bousiad zegt ook, dat er geen ombuiging van het beleid komt, waardoor Suriname steeds lager wordt beoordeeld. Het land zal steeds minder in staat zijn om zijn schulden af te lossen. Internationaal neemt het vertrouwen van investeerders af.