US-based rating agency, Fitch Rating, has further downgraded Suriname’s creditworthiness as the country looks to the International Monetary Fund (IMF) for assistance in turning around an ailing economy.
Fitch in its latest rating said the credit rating of Suriname’s long-term foreign debt has been brought to the level of restricted default as compared to the “c” rating it had been given in October.
The US-based agency defended its decision for the further reduction of the ‘C’ to the Restricted Default status, saying that Suriname owes this to the fact that the country has not been able to pay the interest on the Oppenheimer loan of US$550 million that was due on November 25.
Suriname also faces the prospect of having to pay another interest payment of US$23 million on December 30 this year, consisting of a repayment and an interest amount for the US$125 million loan taken for the Afobaka power plant.
With regard to that loan, Suriname retains the ‘C’ status, because a rescheduling process has started with the creditors in time. However, the ratings agency insists that Suriname is a defaulter.
Fitch notes that demanding a debt standstill will not change Suriname’s structural debt position.
It said this is a reflection of the high government debt, which is expected to reach 137 per cent of gross domestic product (GDP) by the end of 2020, without any agreement with creditors.
Fitch also predicts a structurally large budget deficit, difficult financing conditions and an acute shortage of foreign currency. The rating agency refers to its previous credit ratings for Suriname in July of this year and when the credit rating was revised from ‘CC’ to ‘C’ in October.
The IMF last month said it is holding discussions with Suriname that has requested financial support for its economic plan.
In a brief statement, Alejandro Werner the Director of the Western Hemisphere department, said the economic plan is aimed at tackling the country’s macroeconomic vulnerabilities and putting Suriname back on a path of “strong, sustained, and equitable growth.
“The authorities have also retained financial and legal advisors to help address issues relating to Suriname’s public debt and have begun the process of engaging with creditors,” Werner said.
He said that an IMF team and the Surinamese authorities have been engaged, via video teleconferencing, “in a very constructive and close dialogue.
“These talks are ongoing. The team will communicate further at the end of these technical discussions,” the senior IMF official said.
Also last month, the Suriname government said it was seeking to postpone payment to bondholders saying such a move will give the country an opportunity to reduce the budget deficit.
The Ministry of Finance and Planning said, in accordance with the loan conditions, it has asked bond holders of 2023 and 2026 for a so-called ‘standstill’, adding that with the expected approval, there are benefits for the country.
“This will give the government breathing space to reduce the budget deficit, which will ensure macroeconomic stability. This is currently under discussion with the International Monetary Fund (IMF). Another advantage is that the country has the opportunity to develop and submit a debt management programme to all of its creditors,” the Ministry of Finance said.