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President of Suriname Chandrikapersad Santokhi (File photo)

Suriname’s hope of economic help dented by creditors’ concerns

President of Suriname Chandrikapersad Santokhi (File photo)

Suriname’s struggling economy is awaiting the delivery of significant relief, but its creditors are promising to continue the protracted uncertainty over the South American country’s prospects.

Suriname’s bondholders have objected to their exclusion from an agreement between the Government and the International Monetary Fund (IMF) for US$690 million in credits to be delivered over three years.

The Central Bank of suriname (Photo: Twitter @Suriname Herald)

The Dutch-speaking country defaulted on its bond payments in April and the creditors agreed to defer payments on bonds of US$675 million.

However, while the Government awaits approval of the credit agreement from the IMF’s board, its bondholders are threatening to reverse their decision. They plan to reinstate the payment schedule because they were ignored in the negotiations between the Government and the fund, the creditors said.

Demanding urgent response

“This threatens to undo much of the repair we anticipated from the agreement with the fund,” a leading banker in Paramaribo said.

An aerial view of Paramaribo, capital of Suriname. (File photo)

“The economy needs relief urgently, and it will be damaged if the disagreement with the bondholders delays the support from the fund.”

If the IMF’s executive board approved the agreement, Suriname will receive the first instalment of US$57.5 million to support the parlous economy of the country of 800,000.

Suriname is awaiting word from the International Monetary Fund for the approval of a relief agreement. The South American country stands to benefit from a first instalment of US$57.5 million if the IMF approves the deal. (File photo)

The economy has been troubled by high inflation and a shortage of foreign currency — problems that have been compounded by the coronavirus pandemic. It contracted by 13 per cent in 2020, according to the IMF.

The committee of the country’s bondholders “believes that Suriname has already breached its obligation to negotiate in good faith”, it said, deepening the row over the IMF agreement.

The bondholders’ inclusion in the negotiations is a condition of the credit arrangements, they said, indicating they could institute an automatic reimposition of payment schedules.

“The economy needs relief urgently, and it will be damaged if the disagreement with the bondholders delays the support from the fund”

Suriname’s energy sector as a lifeline

The creditors also criticised the Government and the fund for failing to take account of Suriname’s emergence as potentially a major oil and natural gas producer.

Suriname will begin producing oil in 2025 from one of five offshore discoveries made since the start of 2020, the national oil company Staatsolie forecast.

A Staatsolie chemical plant in Suriname. The South American country’s bondholders point to its prospect as an emerging oil and gas producer as a sig that it can pay its debts; however, oil and gas production will not begin in Suriname until 2025. (File photo)

The company hopes to emulate neighbouring Guyana where US major ExxonMobil started crude production in December 2019 from the highly prospective Stabroek block.

But the statements made by the bondholders are “false” and they should “reconsider this ill-informed course of action,” the Suriname Government said.

“The people of Suriname will bear much of the burden of the adjustments needed to create a brighter future, but Suriname’s international creditors will need to make a substantial contribution.”

The conditions Suriname will have to meet through economic adjustments “are yet to be known but could be controversial and socially troublesome,” the Paramaribo banker said.

“Cuts in government subsidies could lead to unrest.”