Suriname
Recent Economic Developments
Author:
International Monetary Fund
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Publication Date:
14 Mar 1995
eISBN:
9781451835205
Language:
English
Keywords:
ISCR; CR; company; bauxite company; customs duty; time deposit; exchange loss; market forces; free market; holding company
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This report analyzes economic developments in Suriname during the 1990s. In 1990–92, real GDP recovered moderately, but inflation accelerated, reaching 58 percent in the 12 months ended December 1992, owing to a further weakening of financial policies. Interest rates became sharply negative in real terms, which initiated a gradual shift out of domestic financial assets. The external accounts remained weak, and the overall balance of payments showed deficits that were financed by a decline in international reserves and an accumulation of external payments arrears.

Abstract

This report analyzes economic developments in Suriname during the 1990s. In 1990–92, real GDP recovered moderately, but inflation accelerated, reaching 58 percent in the 12 months ended December 1992, owing to a further weakening of financial policies. Interest rates became sharply negative in real terms, which initiated a gradual shift out of domestic financial assets. The external accounts remained weak, and the overall balance of payments showed deficits that were financed by a decline in international reserves and an accumulation of external payments arrears.

I. Recent Economic Developments 1/

1. Developments before 1994

Suriname’s economic performance has deteriorated markedly since the early 1980s as a result of a decline in world prices for bauxite and its derivatives—which substantially reduced export earnings and government revenues 2/−-and the lack of corrective measures. These difficulties were compounded by the suspension in late 1982 of development assistance from the Netherlands following reports of human rights violations 3/, and guerrilla activity against the Government. As international reserves dwindled, the authorities resorted increasingly to trade and exchange restrictions and to controls on economic activities. This gave rise to widespread parallel market transactions and created serious distortions in relative prices. During the 1980s real GDP declined by a cumulative 12 percent, while annual inflation averaged 13 percent. Large remittances from Surinamese living abroad, mainly in the Netherlands, prevented an even greater deterioration of economic conditions.

In the period 1990-92 real GDP recovered moderately, but inflation accelerated, reaching 58 percent in the 12 months ended December 1992, owing to a further weakening of financial policies (Table 1). Interest rates became sharply negative in real terms, which initiated a gradual shift out of domestic financial assets. 4/ The external accounts remained weak, and the overall balance of payments showed deficits that were financed by a decline in international reserves and an accumulation of external payments arrears. The Suriname guilder became increasingly appreciated in real effective terms as the official exchange rate remained fixed at Sf 1.785 per U.S. dollar (a rate in effect since 1971).

Table 1.

Suriname: Selected Macroeconomic Indicators

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Sources: Central Bank of Suriname; General Bureau of Statistics; Ministry of Finance; and Fund staff estimates.

In response to increasing demand pressures in the official exchange market, in September 1992 the authorities introduced a multiple exchange rate system, with unification scheduled for mid-1994. 1/ This system comprised up to seven exchange rates, including one for the transactions of the bauxite companies, 2/ and another one determined in auctions of foreign exchange provided by the Netherlands for balance of payments support. 3/ Based on a weighted average of the various prevailing exchange rates, 4/ the Suriname guilder depreciated substantially in real effective terms following the introduction of the multiple system (Chart 1).

CHART No 1
CHART No 1

SURINAME PRICE AND EXCHANGE RATE DEVELOPMENTS

(Index 1960=100)

Citation: IMF Staff Country Reports 1995, 015; 10.5089/9781451835205.002.A001

Source: IMF Information Notice System.1/ Trade-weighted index of nominal exchange rotes deflated by seasonally adjusted relative consumer prices; increase means appreciation.

The economic situation deteriorated further in 1993: real GDP declined by 3 percent, reflecting lower output in the construction, government, manufacturing, and agricultural sectors; while the 12-month rate of inflation accelerated to 225 percent by December owing to a further weakening of financial policies. Late in 1992 the National Assembly had approved a framework for a Structural Adjustment Program (SAP), which contained a number of policy measures in the fiscal, monetary, exchange rate, and social areas; but only few of the envisaged measures were put in place. In the event, the Central Government showed an overall deficit equivalent to 8 percent of GDP in 1993 (including foreign grants equivalent to 20 percent of GDP) 5/ and the Central Bank experienced exchange losses (owing to the multiple exchange rate system introduced in late 1992) equivalent to 11.5 percent of GDP. Interest rates fell further in real terms, and the shift away from domestic financial assets intensified, with broad money declining by 47 percent in real terms during 1993.

The current account of the balance of payments registered a surplus of US$6 million in 1993, with large declines in both exports and imports. The overall balance of payments showed a deficit of US$16 million, which was financed by an accumulation of payments arrears. By end-1993 gross international reserves stood at US$41 million (about one month of imports of goods and nonfactor services) and external payments arrears had reached US$48 million; 1/ the officially recognized exchange rates ranged from Sf 1.785 per U.S. dollar to Sf 87 per U.S. dollar, while the parallel rate stood at Sf 110 per U.S. dollar.

2. Developments during 1994

Real GDP is projected to decline by about 1 percent in 1994, reflecting lower output in the government and agricultural sectors, and the 12-month rate of inflation is likely to reach close to 500 percent. Inflation has accelerated because of further shifts out of domestic financial assets and notwithstanding that the central government deficit is estimated to have remained at the same level as in 1993 and central bank exchange losses have declined markedly (see below).

As had been envisaged in the SAP, the authorities unified the official foreign exchange market on July 11, 1994. Initially, the new official exchange rate was announced daily by the Central Bank, and commercial banks and exchange houses (cambios) had to effect their transactions at exchange rates that stayed within a narrow band around that rate; deviations from the band required central bank consent. Participation in the official market continued to be subject to constraints on the demand side as banks and cambios could sell foreign exchange only to those holding foreign exchange licenses. In addition, the system of “own funds” imports was discontinued in May 1994.

Upon unification, the exchange rate was set at around Sf 180 per U.S. dollar, fairly close to the prevailing parallel exchange rate and implying a devaluation of some 40 percent with respect to the weighted average exchange rate of June 1994. Subsequently, the official exchange rate was kept relatively constant in the presence of high inflation, and the spread between the parallel and the official exchange rates increased to about 50 percent by mid-October. At that point, the authorities allowed the official exchange rate to be determined freely by the market and started to grant import licenses liberally. 2/ The Suriname guilder depreciated immediately; by mid-November the official exchange rate was around Sf 370 per U.S. dollar and the spread with the parallel rate was about 20 percent.

The public finances, defined to include the central bank exchange losses, are expected to improve considerably in 1994. The central government deficit would remain about constant, while central bank exchange losses would decline from 11.5 percent of GDP in 1993 to 5 percent of GDP in 1994, reflecting the unification of the official foreign exchange market in July. Central bank credit to the Central Government would expand by the equivalent of 11 percent of GDP in 1994, assuming a moderate decline in external arrears and no accumulation of domestic arrears.

The overall deficit of the Central Government is projected to remain at about 8 percent of GDP in 1994 (including foreign grants equivalent to 27 percent of GDP). Central government revenue, which had decreased as a proportion of GDP for a number of years due to the erosion caused by accelerating inflation, is expected to rise by some 14 percentage points of GDP in 1994 mainly reflecting the effect of changes in the exchange rate regime on the proceeds from income taxes on the bauxite companies, and from import duties and fees associated with international trade. 1/ In July 1994, a sales tax on domestically produced nonalcoholic beverages was introduced, and the taxes on liquor, beer and tobacco were raised, but the contribution of these taxes on total revenue remained minor.

Central government expenditures (other than those associated with foreign grants) are projected to increase by 5 percentage points of GDP in 1994, mainly as a result of an 11 percentage points of GDP increase in subsidies and transfers that was offset only partially by a decline in other expenditure. Prior to the unification of the official exchange rates, many of those subsidies were provided through the sale of foreign exchange at preferential exchange rates (for imports of vehicle fuel, fuel to produce electricity, cooking gas, wheat, and milk powder) and thus were reflected in central bank exchange losses. Following unification, these subsidies appear explicitly in the central government’s accounts. After falling sharply in 1993, expenditure on wages as a proportion of GDP is expected to decline further in 1994.

Interest rates have become increasingly negative in real terms (time deposit interest rates stood at around 23 percent and bank lending rates at around 30 percent by November 1994), and confidence in the domestic currency has continued to be eroded by the persistence of high inflation. On this basis, broad money is projected to decline by 54 percent in real terms (to 37 percent of GDP) in 1994.

The current account of the balance of payments is projected to show a surplus of some US$40 million in 1994, reflecting a large fall in imports (excluding those associated with project assistance from the Netherlands), mainly in response to the sizable increase in the effective import tariff rate. Official grants are envisaged to increase to US$71 million (of which US$61 million represent project assistance from the Netherlands) and private unrequited transfers to remain relatively unchanged at US$55 million. After taking account of scheduled debt amortization, the overall balance of payments is expected to show a small deficit, which, together with a projected moderate reduction of arrears, would be financed by a decline in gross international reserves.

II. Tax Structure

This section describes the structure of the tax system in Suriname. It indicates the nature, exemptions and rates of direct and indirect taxes in force as of September 1, 1994.

The main sources of government revenue in Suriname are the profits tax on companies, customs duties, and individual income taxes, which together are estimated to provide 84 percent of tax revenues in 1994 (Tables 2 and 3). The relative importance of each of these taxes, however, changed drastically in 1994 as a consequence of the various modifications made to the exchange rate system during the year. In particular, custom duties and the profits tax on bauxite companies have risen substantially and, as a result, their combined shares in total tax revenues are estimated to have increased from 27 percent in 1993 to 67 percent in 1994. 1/

Table 2.

Suriname: Government Tax Revenues 1/

(In millions of Suriname guilders)

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Sources: Ministry of Finance; and Fund staff estimates.

Excludes tax revenues from unindentified sources. As a result, figures may difer from those in Statistical Appendix Table 22.

Table 3.

Suriname: Government Tax Revenues

(In percentage of total tax revenues)

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Source: Table 2.

The most important source of tax revenue in Suriname is the profit tax on companies (37 percent of estimated tax revenue in 1994). This is a tax levied on taxable income of firms domiciled in Suriname and of firms not domiciled in Suriname but receiving a gross income in Suriname. It includes the profit tax paid by the two local bauxite companies (32 percent of estimated tax revenue in 1994), which has been calculated and paid in U.S. dollars since January 1, 1993. The national currency equivalent of the income taxes paid by these companies has increased significantly since 1993 as the bauxite exchange rate was increased from Sf 8 per U.S. dollar in 1993 to Sf 55 per U.S. dollar for the first six months of 1994 and to the unified exchange rate thereafter.

The second most important tax in terms of revenue is the customs duty (34 percent of estimated tax revenue in 1994), which is levied on imports of goods. The valuation of imports in national currency for custom duties purposes was modified from Sf 1.785 per U.S. dollar to Sf 55.34 per U.S. dollar as of April 1, 1994 and to the unified exchange rate on July 11, 1994. In addition, the previous system of numerous tariff rates ranging from 3 to 65 percent was replaced by a four-tier system of 5-10-20-40 percent as of July 4, 1994, but the rate of 40 percent for “extra-luxury” imports has not yet been implemented.

The third most important source of revenue is the tax on domestic and foreign taxable income of individuals (12 percent of estimated tax revenue in 1994). The tax rates and brackets of the wage tax were modified effective August 1, 1994 to compensate in part for the tax bracket creep that resulted from the high rates of inflation that Suriname has experienced recently. An additional “crisis” rate of 10 percent of annual taxable income for incomes over Sf 200,000 was introduced effective August 1, 1994 and is to be levied until the year 2000.

Statistical fees and consent rights, which are levied on merchandise imports and exports, are estimated to contribute 4 percent and 3 percent of tax revenue, respectively in 1994. The sharp increase in the exchange rate used for the valuation of imports and exports has increased the importance of these two sources of revenue in 1994.

A number of consumption taxes levied on goods and services, albeit individually not significant, together constituted an important source of revenue prior to 1994 (17 percent in 1993). However, their share is estimated to decline to 7 percent in 1994 because of the sharp increase in revenue from the previously mentioned taxes, and because most consumption taxes are in the form of specific taxes and thus their revenue is eroded by inflation. They include a consumption tax on imported gasoline, on other similar motor fuels, and on diesel oil (5.4 percent of estimated tax revenue in 1994), a consumption tax on domestic smoking tobacco and cigarettes (0.9 percent of estimated tax revenue in 1994), and other minor taxes such as the tax on motor vehicles operating in Suriname, excise taxes on beer and liquor, taxes on public entertainment, and a tax on all lotteries conducted in Suriname. A sales tax on nonalcoholic beverages of 5 percent of the wholesale price was introduced on July 1, 1994 and is projected to yield 0.3 percent of tax revenue in 1994. A tax on alumina production is also levied on bauxite companies (0.9 percent of estimated tax revenue in 1994).

Other sources of government tax revenue, but with relatively little yield, include a dividend tax payable by those persons who directly or through certificates receive dividends from shares in a profit-making enterprise, or from income-bearing bonds in firms whose capital is divided into shares and that are established in Suriname; a wealth tax levied on holdings of stocks, bonds, mortgages, and insurance policies with periodic dividends and other assets; a tax on the export of wood; a tax on the rental value of land and buildings; taxes on inheritance; a tax on merchandise in transit; and taxes on goods in bonded warehouses.

Suriname: Tax structure as of September 1, 1994 1/

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Sources: Tax Office, Ministry of Finance; Suriname Bauxite Institute; and Suralco.

The first digit of the tax structure classification is according to A Manual on Government Finance Statistics.

III. Social Programs

Income distribution appears to be highly unequal in Suriname. 1/ According to estimates of a private consulting firm, the average income of the highest income earners (traders) was 27 times that of the lowest income earners (retired poor) in 1990. 2/ The Government estimates that 25 percent of the Surinamese population lives in poverty (i.e. members of households with an income of less than Sf 2,200 per month.) 3/. To deal with poverty and the disparities in the income distribution, the Government established a number of wide-ranging social programs, some of which are presently under reform in an effort to increase their effectiveness. Some programs are targeted directly at the poor or groups among which poverty is widespread (the elderly, children and the handicapped), while others are aimed at reducing poverty by providing basic goods at subsidized prices, or more indirectly through education and training.

1. Social programs aimed directly at the poor

Low-income households can enroll in a government-financed program that entitles them to subsidized medical care (“Geneeskundige Hulpkaart” or GHK, also known as the “Vrije Geneeskundige Voorzieningen” or VGV). Low-income households are classified into destitute families (“onvermogenden”), with less than Sf 1,100 in income per month, and limited income households (“minvermogenden”), with a monthly income between Sf 1,100 and Sf 2,200. Limited income households pay a semiannual fee of Sf 10 for enrollment in this program, while destitute families are exempt. The destitute contribute Sf 25 for every day that they are hospitalized and Sf 10 for every drug prescription, while limited income families pay Sf 100 for a day in the hospital and Sf 25 for a prescription. In June 1994, 46,667 families with 106,921 members were enrolled in this health care program. The cost for the Government is estimated at Sf 123 million in 1994 (Table 4).

Table 4.

Suriname: Expenditures on Social Programs

(In millions of Suriname guilders)

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Sources: Ministry of Social Affairs; Warwick Research Institute; and Statistical Appendix Table 25.

Excludes the costs of school transport in 1994. Those costs amounted to Sf 35 million in 1993.

Data on expenditures on public schools are not available.

No estimate is available for the cost of the food parcel program in 1993.

In addition, the Government provides direct income support (“Financiēle Bijstandsuitkering” or FB, also known under the name “Behoeftigen- en Bejaardenzorguitkering” or BBZ) to destitute households. The amount of the FB benefit depends on the size of the household, varying from Sf 270 per month for single people to Sf 900 per month for families of five or more. It is estimated that currently some 11,000 families with 17,600 persons receive an FB benefit. 4/ In 1994, the cost of the FB program is estimated at Sf 72 million.

Since the beginning of 1994, destitute families receive a supplemental emergency benefit of Sf 50 per family member per week. This program was introduced to replace a program under which food parcels were distributed to every household in Suriname and that broke down in the beginning of 1994. The cost of this program in 1994 is estimated at Sf 48 million.

A public pension system (“Algemene Ouderdomspensioen Voorziening” or AOV) provides retirement, disability, and survivor benefits to the 33,000 Surinamese over 60 years of age. The pension benefit is currently Sf 900 per month. The AOV is funded by payroll taxes (2 percent of taxable income) and by general tax receipts. In 1993, when pension benefits totalled Sf 178 million, Sf 38 million was paid out of payroll taxes and Sf 140 million out of general taxes. In 1994, the total cost of the AOV pension system is estimated to rise to Sf 310 million.

The Government provides child allowances of Sf 30 per child per month (through a program called “Algemene Kinderbijslag” or AKB) to parents who do not receive financial support from their employers (see below the description of supplementary programs). In 1994 the Government will spend an estimated Sf 25 million on AKB benefits for approximately 64,000 children up to the age of 18. In addition, in 1994 the Government will spend an estimated Sf 68 million from the budget and the equivalent of Sf 35 million in foreign aid on food, school supplies, school clothing, study allowances and school transport for children. It distributes free milk to needy children up to age 5 on the indication of their pediatricians; meals for school children of age 4 to 12 on the indication of their teachers; school uniforms and shoes for children and teenagers between 6 and 16 years (limited-income households receive vouchers for two free school uniforms a year, destitute households can claim four uniforms, and other students can obtain the cloth for school uniforms at a subsidized rate); monthly allowances for students older than 15 years from poor families (the allowances are Sf 115 per month for students in secondary school and Sf 375 a month for university students supplemented with Sf 1,125 a year for books and other learning materials; 10 percent of the students receive such an allowance); free school transport for children who live more than four kilometers from their school; and subsidies for books for students in primary and secondary school.

The Government also administers a social housing program, although no funds were allocated for this purpose in 1993 and 1994. Under this program, three types of housing are subsidized. First, households with an income below Sf 1,000 a month can rent a house (“volkswoningen”) at a cost of 1/7 of their income, with a minimum rent of Sf 30. Households with incomes up to Sf 2,000 a month can build their own houses with government support in the “zelfbouw woningen” or “sociale woningen” programs. In 1992, there were 7,178 “volkswoningen” (up from 6,528 in 1988) and 320 houses in the “zelfbouw woningen” and “sociale woningen” programs (unchanged from 1988). After 1992, no new social housing has become available, even though at the start of 1993, 14,000 people were on the waiting list.

In 1994, the Government is expected to grant an estimated Sf 38 million in subsidies to 19 social institutions (homes for the elderly and handicapped, orphanages and several charity institutions including a lottery), partly on the basis of operating losses, partly on the basis of occupancy rates in homes and partly as a subsidy for fuel costs. In addition, the Government also subsidizes the medical institutions (at an estimated cost of Sf 198 million in 1994), mostly by financing the operational deficit and investments.

2. Education and training

A cornerstone of the social programs in Suriname is the universal educational system, which entitles all school-aged children to free education at the primary and secondary levels. The Government covers most of the cost of education. In 1994, the Government will spend an estimated Sf 1,274 million on education, including departmental costs and other non-educational spending, (4.4 percent of total Government expenditures), of which Sf 373 million would go to subsidies for private schools and the University of Suriname. About 43 percent of all students attend a private school while the rest attend public schools.

In 1994, a training and credit program for small entrepreneurs was started, financed out of Dutch grants. The training program is targeted at increasing the level of vocational skills and is projected to cost Sf 15 million in 1994. The Social Investment Fund (“Sociaal Investeringsfonds” or SIF) provides credits to small businesses at a projected cost of Sf 87 million in 1994.

3. Price subsidies

The Government subsidizes the prices of rice, milk, bread, sugar, water, cooking gas, electricity and fuel. 1/ In 1994 these subsidies were increased markedly, in part to compensate for the discontinuation of the food parcel program in the beginning of 1994, and in part to cushion the adverse effects on the price level of the unification of the exchange rate in July 1994.

Rice exporters are required to sell part of their merchandise to the Government at a concessional price. The rice is then sold to the public at an even lower rate via a number of designated shops. The Government subsidizes milk by providing the single milk processing plant of Suriname with imported milk powder at a subsidized price; controls on the price of milk ensure that this subsidy is passed on to the consumer. The Government subsidizes bread in a similar way; the price of imported wheat is kept low and the price of bread is subject to controls. To buy subsidized rice, milk, bread, cooking oil and sugar, the prospective buyer must have a card (“green card”) issued by the Ministry of Trade and Industry that can only be obtained by heads of households. The subsidizing of water takes the form of covering the operating losses of Suriname’s water company. The system of subsiding cooking gas and electricity prices is aimed at keeping the prices low for poor families. This is done by directly subsidizing the price of the smaller type of gas canisters, mainly in use by poorer households, and by subsidizing the operating losses of the electricity company that ensue from the progressive electricity price system, benefitting small users. To keep fuel prices down, the Government provides car owners with vouchers that allow them to buy a limited amount of fuel at the equivalent of a subsidized exchange rate.

4. Supplementary programs

The Surinamese system of social security consists of three layers: (a) Government administered social programs; (b) insurance schemes that are established as part of collective wage negotiations, and which are tied to the employee status of the insured person; and (c) individual insurance plans.

Government and private collective schemes provide old-age, disability and survivors’ pensions, health care insurance, family benefits, termination of service compensation, and sick pay and employment injury benefits. They are generally paid out of employers’ and employees’ contributions. Collective insurance plans are freely determined by employers and workers, with some exceptions (sick pay for up to six weeks and employment injury insurance are obligatory). Generally, only workers in larger firms and in the public sector are provided with an extensive insurance package.

Public sector employees are insured against health care costs through the “Staatsziekenfonds” or SZF. Public sector employees contribute 4 percent and public sector entities 5 percent of gross wages to the SZF, which covers about 145,000 people at an estimated cost to the Government of Sf 390 million in 1994. Since 1992, the SZF is also, on a voluntary basis, open for nonpublic sector employees, including employers who want to insure their workers. However, not many choose to participate in the SZF since it is perceived as an expensive insurance scheme.

The pension plan for public sector employees (“Pensioenfonds”) is funded by a contribution of 15 percent of gross wages, with 10 percent paid for by the public sector employees and the remainder by the employer. In 1994, the Government will pay an estimated Sf 489 million into the public sector pension plan, covering about 43,000 public sector workers. Furthermore, about 19,000 private sector employees are enrolled in private pension plans. This brings the share of workers covered by plans other than the AOV to more than 60 percent of the total labor force. Of the current pensioners, about 40 percent receive a pension besides their AOV benefit. Upon retirement, workers receive a pension benefit that ranges between 40 and 70 percent of their pre-retirement wage (70 percent for public sector employees and workers at large companies), not including the AOV benefit. Pension benefits, including those from the public sector pension plan, are not indexed for inflation.

The third layer of social security is made up of individual insurance plans. In Suriname, it is possible for individuals to buy insurance against medical costs (e.g. through the SZF), and against the loss of income as a consequence of disability, death or old age. However, not many people take part in these individual insurance schemes.

In addition to the social programs, the activities of domestic and foreign Non-Governmental Organisations (NGO’s), often funded by foreign donors, play an important part in the alleviation of poverty in Suriname. They undertake such activities as building and renovating schools, organizing food programs and aiding the handicapped. NGO’s currently also participate in the implementation of the Social Investment Fund.

5. Reform of the social programs

The social programs in Suriname seem to have been beset by a lack of transparency and problems of management. 1/ While the criteria to determine the eligibility for benefits under these programs might be well defined, there have been difficulties in properly targeting the poor, in part because of the absence of an appropriate statistical database. In addition, the management of these programs is hampered by limited resources. As a consequence, an estimated 15-20 percent of direct income support (FB) is unjustly claimed. This percentage might be considerably higher for the subsidized medical insurance (GHK), as many employers avoid having to obtain costly health care insurance for their workers by under-declaring their wages.

Also, the Government has not always been able to fulfill its obligations with respect to the state pension fund, the state medical insurance (SZF), and several suppliers of subsidized goods. This has resulted in an apparent underfunding of the state pension plan, labor unrest among state workers and disruptions in the flow of subsidized goods.

Other problems are related to the multi-tier nature of the social security system. The wide disparity in collective insurance benefits for workers in different organizations seriously hampers mobility. Given the wide-ranging social benefits package that is provided to state workers, it is particularly unattractive for them to switch to positions in the private sector. Moreover, the lack of coordination between the public sector and private sector arrangements gives rise to disincentives for private sector schemes. For example, employers are reluctant to introduce child allowance schemes since that would prevent their workers from obtaining state child allowance benefits (AKB).

In light of these problems, the Government has begun a reform of the social programs. The reform aims at increasing the effectiveness of the programs through improved targeting, strengthening of management and coordination, and the introduction of new programs. Some measures have already been implemented. For example, the requirements for obtaining direct income support (FB) have been simplified and the pools of child allowance (AKB) and state pension (AOV) recipients are being screened by eliminating those who do not show up when they are requested to. In addition, the Ministry of Social Affairs is in an ongoing process to strengthen the internal and external auditing of the social programs by improving its departmental organization, and it intends to initiate a computerization project.

Several problems remain unresolved, however. Untargeted subsidies still are an important part of Suriname’s social programs, an integrated policy that comprises both public and private forms of social insurance has not yet been developed, and the group of the poor still is not clearly identified for lack of basic statistics concerning the distribution of income.

IV. Financial System: Main Features

1. Legal framework

The Bank Act of 1956 created the Central Bank of Suriname and established its legal framework; until then the largest commercial bank—the Surinaamsche Bank—had acted in the capacity of a Central Bank. Subsequently, the Bank and Credit Supervision Act of 1968 provided the guidelines for the supervision of financial institutions.

The Bank Act of 1956 sought to contain central bank financing of public sector deficits through Article 21, which allows short-term government borrowing up to 10 percent of budgeted government revenues for the fiscal year. To circumvent this ceiling, the Government has sought financing from the Central Bank by issuing short-term paper every six months. These transactions with short-term paper were based on the authorities’ liberal interpretation of Article 16 of the 1956 Bank Act, which authorized the Central Bank to use open market operations as tools of monetary policy. 1/ The authorities are now considering measures to close existing loopholes so as to make the legal limit effective (established by Article 21), and are preparing draft legislation that would enable the Government to consolidate existing short-term credits into a one-time long-term central bank loan.

The Board of Directors of the Central Bank is headed by the President of the Central Bank and includes three directors: the Director of Banking Affairs, the Director of Monetary and Economic Affairs, and the Director of Bank Supervision and Financial Institutions. The Bank is divided in six departments (Administration, Secretary’s, Banking Supervision, Personnel Affairs, Public Relations, and Research) which report directly to the President of the Central Bank.

2. Financial institutions

The banking system consists of the Central Bank of Suriname and six commercial banks. In declining order of the amount of credit outstanding the commercial banks are: the Surinaamsche Bank, the Hakrinbank, the ABN-AMRO Bank, the Landbouwbank, the Surinaamse Postspaarbank, and the Volkscredietbank. 2/ The six commercial banks account for 90 to 95 percent of credit to the private sector extended by the financial system. The Surinaamsche Bank and the ABN-AMRO bank are privately owned in affiliation with Dutch banking groups, while the Government is the sole or majority owner of the other four commercial banks. The rest of the financial sector comprises eight finance companies; four indemnity, five life, two funeral service insurance companies and one holding company; twenty-eight pension funds; eight provident funds; and thirty-four credit unions. In addition, in June 1993, five cambios (exchange houses) were authorized to deal in foreign exchange. All incorporated financial institutions, with the exception of the Government’s pension fund, are subject to supervision by the Central Bank.

3. Central Bank supervision of the financial system

The Central Bank’s supervision practices include off-sight and on-sight inspection. In keeping with the off-site inspection requirements, commercial banks and medium and large credit unions are required to report on all financial transactions to the Central Bank at least once a month; small credit unions must report once each quarter; provident funds must report every six months; and all others must report once a year. 1/ On-site inspection of commercial banks takes place once a year and usually targets one aspect of the institution such as the credit portfolio or the internal organization and administrative procedures of banks.

Compliance with reporting requirements has not been uniform across the various types of institutions. While commercial banks and insurance companies have a good record of reporting information to the Central Bank, other institutions such as the credit unions, pension funds, and finance companies have a poor record.

There are special off-site reporting instructions for each category of institution. For instance, commercial banks’ monthly statements must include a list of debtors’ names, along with their account number, their credit limit and the amount drawn. In addition, commercial banks are to provide information on the sectoral destination of credit and on how the loan was secured. When making loans, commercial banks also are required to abide by predetermined solvency ratios, which, depending on the nature of the financial assets and the extent of the perceived risk, determine the percentage of equity capital cover which must be retained. These “solvency requirements” are shown in Table 5. Compliance with these ratios is monitored routinely by the Central Bank.

Table 5.

Suriname: Solvency Requirements

(In percent)

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Source: Central Bank of Suriname.

Commercial banks also are subject to a large exposure rule designed to help spread risk. This provision restricts banks from extending loans of more than 25 percent of own capital to any one borrower or group of borrowers. In addition, since 1986 banks have been subject to an “immobilia rule” which restricts them from having more fixed assets (such as real estate and inventory stocks) than equity capital.

The existing penalties for noncompliance with the above mentioned regulations (in order of increasing severity) are: counselling, public exposure, legal action, and liquidation.

4. Interest rates

There are no regulations constraining the level of interest rates in Suriname. However, nominal rates have failed to keep up with inflation and have become increasingly negative in real terms, presumably due to the lack of competition in the financial system. While in the 1980s bank deposits increased in real terms despite negative real interest rates, reflecting in part money illusion and the absence of alternative investment opportunities, the acceleration of inflation in recent years has been accompanied by a sharp decline in bank deposits in real terms.

Nominal deposit rates averaged 4.7 percent a year during 1990-92 and increased slightly to 5.4 percent in 1993. In real terms, the average deposit rate was a negative 24.5 percent a year during 1990-92, and it declined to a negative 67.5 percent in 1993 as inflation increased to 225 percent (Table 6). Similarly, the average lending rate increased from 9.7 percent a year in 1990-92 to 13.2 percent in 1993. In real terms, the average lending rate was a negative 20.9 percent in 1990-92 and declined to a negative 65.1 percent in 1993. With accelerating inflation, bank loans are being made increasingly on an adjustable rate basis, and there has been a shift in the composition of bank assets in favor of loans of a shorter maturity.

Table 6.

Suriname: Summary of Average Commercial Bank Interest Rates

(In percent)

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Sources: Central Bank of Suriname; and Fund staff estimates.

Nominal rates deflated by the end-of-period rate of increase in the consumer price index.

5. Financial instruments

Financial instruments in Suriname include demand deposits, savings deposits, time deposits, and foreign exchange deposits. 1/ Table 7 shows broad money and its components over the period 1989-93. The table reveals a decline in the share of demand deposits since 1991, and a decline in the share of savings deposits in 1993.

Table 7.

Suriname: Composition of Broad Money

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Source: Central Bank of Suriname.

Foreign currency deposits, legalized in April 1993, presumably constitute only a small fraction of private sector liabilities of the banking system. 2/ Indeed, commercial banks as well as the cambios find it difficult to compete with the parallel market.

6. Financial system credit

Commercial banks are faced with monthly limits on credit expansion on the basis of the composition of their deposit liabilities. No credit expansion is permitted on the basis of demand deposits. Banks are allowed to use 75 percent of the increase in short-term time deposits for credit expansion, 90 percent of the increase in savings deposits, and 100 percent of the increase in long-term time deposits. 3/ The ceiling on credit creation for a given month is based on the difference between the increase in deposits in that month and the unused part of the previous month’s credit ceiling. 4/ Banks are not required by law to keep at the Central Bank the portion of their deposits that is not loaned (i.e., 100 percent of demand deposits, 25 percent of short-term time deposits, 10 percent of savings deposits), but they have preferred to do so for reasons of safety and convenience. 1/

There are no known formal restrictions governing the sectoral distribution of commercial bank credit in Suriname. Commercial banks have shown a preference to finance trade activities. In 1993, the commerce sector was the principal beneficiary of credit accounting for 35 percent of total credit issued. Commerce, housing construction, agriculture and manufacturing activities accounted for 65 percent of total credit issued by the commercial banks in 1993.

7. Monetary policy instruments

The Bank Act of 1956 authorized the Central Bank to engage in open market operations and utilize rediscount policy, credit ceilings and liquidity ratios. In addition, the Bank and Credit Supervision Act of 1968 expanded the list of instruments by authorizing the Central Bank to use reserve requirements. However, no use has been made of reserve requirements or open market operations, and central bank rediscounting and overdraft facilities are seldom used. Therefore, credit ceilings are the only formal monetary policy instrument in use.

V. Developments in the Exchange Rate System in Suriname

This section describes the recent evolution of the exchange rate system in Suriname, which moved from a single official exchange rate to multiple official exchange rates in late 1992, and returned to a unified system in mid-1994.

The system of multiple official exchange rates was introduced as a temporary arrangement to replace the increasingly unrealistic official exchange rate and as an attempt to bring the growing amount of parallel market activity back into the formal financial system. However, as the underlying macroeconomic disequilibria were not addressed, parallel market activity did not subside and pressures on the official foreign exchange market continued. As envisaged at the time of introducing the multiple exchange rate system, Suriname returned to a unified system on July 11, 1994.

1. The initial system

The Suriname guilder was first issued in 1865 under a Dutch royal charter. Originally printed by the Surinaamsche Bank, notes have been issued by the Central Bank of Suriname since 1957. In the period from December 1971 until October 1992, the Suriname guilder was pegged officially to the U.S. dollar at a rate of Sf 1.785 per U.S. dollar. 1/ A parallel market for foreign exchange emerged in the 1970s and proliferated after 1982 following the suspension of the Dutch development aid. As inflationary pressures accumulated, the parallel market rate diverged rapidly from the official rate, reaching Sf 26 per U.S. dollar by August 1992 (Chart 2).

CHART 2
CHART 2

SURINAME NOMINAL EXCHANGE RATES

(Suriname guilders per U.S dollar)

Citation: IMF Staff Country Reports 1995, 015; 10.5089/9781451835205.002.A001

Source: Fund staff estimates.

2. The introduction of the multiple system

In response to this divergence and the increasing importance of parallel market activity, in October 1992 the authorities issued a resolution that established a multiple exchange rate system consisting of seven exchange rates 2/ (Chart 2 and Statistical Appendix Table 42):

a. The official rate (Sf 1.785 per U.S. dollar), applicable to the service of official and officially guaranteed debt and imports of basic consumer goods;

b. The auction rate (the rate determined at the most recent auction of balance of payments support from the Netherlands) applicable to licensed transactions not designated to be carried out at the other official rates; 3/

c. The tourist rate (Sf 10 per U.S. dollar), applicable to the tourist surrender requirement of f 300;

d. The rate for rice exports (50 percent of the official rate and 50 percent of the auction rate);

e. The rate for banana exports (70 percent of the official rate and 30 percent of the auction rate);

f. The rate for other exports and service receipts (20 percent of the official rate and 80 percent of the auction rate); and

g. The bauxite rate (Sf 8 per U.S. dollar) for the surrender of foreign exchange by the bauxite companies, which became effective on January 1, 1993.1/

The resolution also formally established a regulated rate to be managed by the Central Bank. However, this rate never came into effect because the plan to create an intervention fund for this purpose did not materialize. The auction rate was used in lieu of the regulated rate when reference was made to the regulated rate in legislation.

The foreign exchange auctions introduced market forces in the determination of the exchange rate for some legal transactions, but only to a limited extent. Participation in the auctions was subject to restrictions, as bidders were to use auction proceeds only for items on the so-called “positive list” (i.e., inputs for the “productive sectors”). Participants were required to bring import licenses for the amount of foreign exchange desired; in the event of a successful bid, Dutch guilders were disbursed from an account in the Netherlands to an exporter to pay for the licensed import (foreign exchange was not credited to any account in Suriname). These restrictions were reflected in the spread between the parallel exchange rate and the auction rate, which averaged some 55 percent for the period October 1992-July 1993.

3. Modifications to the multiple system

The pressure on the exchange rate system continued, as inflation accelerated and the parallel market rate depreciated further (to Sf 42 per U.S. dollar by May 1993). In response, in June 1993 a new resolution modified the existing multiple exchange rate regime into one consisting of the following six rates:

a. The official rate (Sf 1.785 per U.S. dollar), applicable to the service of official and officially guaranteed debt, and the receipts of specified exports that took place before October 2, 1992;

b. The bauxite rate (Sf 8 per U.S. dollar), applicable to the exports of the bauxite companies, imports of basic consumer goods, imports of the health and education sectors, and transactions of the public utilities; 2/

c. The fuel rate, (Sf 20 per U.S. dollar), applicable to imports of gasoline and diesel fuel;

d. The auction rate Sf 55.34 per U.S. dollar., as determined at the last auction of balance of payments support, in July 1993, applicable to specified imports of the productive sectors, export proceeds of the banana, shrimp, and oil sectors, aid received under the 1975 Development Treaty with the Netherlands, and the foreign tourist surrender requirement;

e. A rate applicable to all foreign transactions of the rice sector: this rate moved from Sf 34 per U.S. dollar during the first half of 1993 to Sf 64 per U.S. dollar for the spring harvest, and to the free-market rate in October 1993.

f. The free-market rate, determined in the newly established official free market (with six commercial banks and five cambios participating). The free-market rate was applicable to all transactions that went through the banking system and for which none of the other official rates could be used. The official free-market exchange rate for a given day resulted from the average exchange rate reported by banks and cambios to the Central Bank. 1/

As the supply of foreign exchange at the subsidized rates fell short of existing demand, in June 1993 the authorities permitted imports at the free-market rate of basic consumer goods, goods for the health and education sectors, transactions of public utilities, fuel imports, and inputs for the “productive sectors”.

The free market did not develop strongly; the volume of transaction remained low and foreign exchange was scarce, as banks and cambios were not completely free in setting the exchange rate, mainly because of moral suasion. For instance, a bank reporting a heavily depreciated rate could be asked to meet with the Central Bank to discuss underlying developments. Moreover, these institutions apparently had difficulties in competing against parallel market dealers who had a well-developed network and more experience in operating in a competitive foreign exchange market.

Regulations on foreign exchange deposits further limited the competitiveness of the free market. Foreign exchange accounts became legal in April 1993, but were subject to restrictions. For instance, they could not be credited with export proceeds or receipts from real estate transactions, and the use of funds in these accounts required the filing of extensive documentation.

4. Return to a unified system

In accordance with the Structural Adjustment Program approved by the National Assembly in November 1992, the authorities adopted a unified exchange rate system on July 11, 1994. Initially, the unified exchange rate was managed by the Central Bank, but as of mid-October the rate was allowed to float freely (see Section I).

STATISTICAL APPENDIX

Table 8.

Suriname: Output and Expenditure

(In millions of Suriname guilders at current prices)

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Sources: Data provided by the Surinamese authorities; and Fund staff estimates.

Includes public entities other than the Central Government.

Table 9.

Suriname: Aggregate Demand and Supply at Current Prices

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Sources: Statistical Appendix Table 8.

Includes public entities other than the Central Government.

Table 10.

Suriname: Gross Domestic Product by Sector

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Sources: General Bureau of Statistics; and Fund staff estimates.
Table 11.

Suriname: Real Gross Domestic Product by Sector

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Sources: General Bureau of Statistics; and Fund staff estimates.
Table 12.

Suriname: Real GDP (at 1980 Prices)

(Annual percentage change)

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Sources: Statistical Appendix Table 11.
Table 13.

Suriname: Agriculture, Livestock, and Fisheries—Production Data

(In metric tons unless otherwise indicated)

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Source: Ministry of Agriculture, Animal Husbandry, and Fishing.

Cabbage, tomatoes, and green vegetables.

In thousands of units.

In hectares

The ratio of planted to physical area; reflects areas with two harvests.

In metric tons per hectare.

In millions of units.

Table 14.

Suriname: Bauxite Sector - Production Data

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Sources: Central Bank of Suriname; Bauxite Institute of Suriname; and World Metal Statistics.
Table 15.

Suriname: World Production, Consumption, and Changes in Stocks of Primary Aluminum

(In thousands of metric tons)

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Sources: World Metal Statistics, various issues, London; International Financial Statistics; and Fund staff estimates.

U.S. cents per pound.

Table 16.

Suriname: Selected Manufacturing Production

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Source: General Bureau of Statistics.
Table 17.

Suriname: Consumer Price Index - Paramaribo and Suburbs

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Source: General Bureau of Statistics.
Table 18.

Suriname: Employment by Sector 1/

(Number of employees)

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Sources: General Bureau of Statistics; and Fund staff estimates.

Companies or entities with nine employees or more.

Table 19.

Suriname: Average Gross Labor Cost Per Employee

(Annual percentage change)

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Sources: General Bureau of Statistics; and Fund staff estimates.
Table 20.

Suriname: Population Data

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Source: General Bureau of Statistics.
Table 21.

Suriname: Central Government Operations

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Sources: Ministry of Finance; Central Bank of Suriname; Embassy of the Netherlands in Suriname; and Fund staff estimates.

Debt service on external debt and external arrears are valued at Sf 1.8 per U.S. dollar.

Table 22.

Suriname: Government Revenues and Grants

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Sources: Ministry of Finance; Embassy of the Netherlands in Suriname; and Fund staff estimates.

Includes the difference between total receipts for the tax group and the individual components reported by collecting agencies.

Table 23.

Suriname: Government Revenues and Grants

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Source: Statistical Appendix Tables 8, 22 and 31.

Includes the difference between total receipts for the tax group and the individual components reported by collecting agencies.

Table 24.

Suriname: Central Government Expenditures

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Sources: Ministry of Finance; Embassy of the Netherlands in Suriname; and Fund staff estimates.

Relates to payments made directly to those eligible to receive pensions.

Relates to payments made directly to providers of medical services.

Interest on external debt is valued at Sf 1.8 per U.S. dollar.

Table 25.

Suriname: Central Government Subsidies, Net Transfers, and Lending

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Sources: Ministry of Finance; and Fund staff estimates.
Table 26.

Suriname: Central Government Debt

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Sources: Ministry of Finance; Central Bank of Suriname; and Fund staff estimates.

Mainly government bonds.

Based on a GDP in U.S. dollars estimated by the staffs of the World Bank and the Fund, using an average of prevailing exchange rates including the parallel market rate.

Table 27.

Suriname: Summary Accounts of the Banking System

(In millions of Suriname guilders)

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Sources: Central Bank of Suriname; and Fund staff estimates.

Gold is valued at market prices.

Includes external payments arrears.

Includes Central Government issue of coins.

Table 28.

Suriname: Banking System Liabilities to the Private Sector, End of Period

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Source: Statistical Appendix Table 27.
Table 29.

Suriname: Distribution of Commercial Bank Credit by Destination 1/

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Source: Central Bank of Suriname.

Figures may differ from those in Statistical Appendix Tables 27 and 30 because they were obtained from different sources.

Table 30.

Suriname: Loans and Deposits of Commercial Banks by Interest Rates 1/ 2/

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Source: Central Bank of Suriname.

Rates are in percent per annum.

Figures may differ from those in Statistical Appendix Tables 27 and 29 because they were obtained from different sources.

Table 31.

Suriname: Summary Balance of Payments 1/

(In millions of U.S. dollars)

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Source: Statistical Appendix Table 32.

On an accrual basis, there has been a large and rapidly growing discrepancy between imports as recorded by customs, and payments as recorded by the Central Bank. It is estimated that “own funds” imports are two-thirds financed by under-reporting of exports and one-third financed by under-reporting of receipts of services and private transfers. To correct for this problem, cash basis exports as reported by the Central Bank have been increased for 1989, 1990, 1991, 1992, and 1993 by US$72 million, US$86 million, US$117 million, US$150 million, and US$153 million, respectively (two thirds of “own funds” imports of US$109 million, US$129 million, US$176 million, US$225 million, and US$230 million, respectively). Similarly, receipts of services and private transfers have been increased by US$36 million, US$43 million, US$59 million, US$75 million, and US$77 million, respectively.

Includes changes in the commercial banks’ net external position.

Based on a GDP in U.S. dollars estimated by the staffs of the World Bank and the Fund, using an average of prevailing exchange rates including the parallel market rate.

Table 32.

Suriname: Balance of Payments 1/

(In millions of U.S. dollars)

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Sources: Central Bank of Suriname; Embassy of the Netherlands in Suriname; and Fund staff estimates.

On an accrual basis, there has been a large and rapidly growing discrepancy between imports as recorded by customs, and payments as recorded by the Central Bank. It is estimated that “own funds” imports are two-thirds financed by under-reporting of exports and one-third financed by under-reporting of receipts of services and private transfers. To correct for this problem, cash basis exports as reported by the Central Bank have been increased for 1989, 1990, 1991, 1992, and 1993 by US$72 million, US$86million, US$117 million, US$150 million, and US$153 million, respectively (two thirds of “own funds” imports of US$109 million, US$129 million, US$176 million, US$225 million, and US$230 million, respectively). Similarly, receipts of services and private transfers have been increased by US$36 million, US$43 million, US$59 million, US$75 million, and US$77 million, respectively.

Includes parcel imports of US$30 million in 1989, US$36 million in 1990, US$45 million in 1991, US$45 million in 1992 and US$38 million in 1993.

Includes Dutch bridging and humanitarian aid.

Includes changes in the commercial banks’ net external position.

Table 33.

Suriname: International Reserves 1/

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Source: Central Bank of Suriname.

Gold holdings are valued at market prices.

The amounts in Suriname guilders are derived from the U.S. dollars amounts using the official rate (Sf 1.785 per U.S. dollar) for the years 1989-92 and the free rate (Sf 84.48 per U.S. dollar) for 1993.

Adjusted for external payments arrears.

Table 34.

Suriname: Exports by Major Categories

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Sources: General Bureau of Statistics; and Fund staff estimates.

Includes estimates of under-reported exports.

Table 35.

Suriname: Value, Volume, and Unit Price of Principal Exports

(Value in millions of U.S. dollars; volume in thousands of metric tons: and unit price in U.S. dollars per ton)

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Sources: General Bureau of Statistics; Suriname Bauxite Institute; and Fund staff estimates.

In thousands of kilograms.

U.S. dollars per kilogram.

In thousands of cubic meters.

U.S. dollars per cubic meter.

In thousands of liters.

U.S. dollars per thousand liter.

Table 36.

Suriname: Imports (c.i.f.) of Hydrocarbons

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Sources: Central Bank of Suriname; Ministry of Natural Resources; and Fund staff estimates.

Based on a GDP in U.S. dollars estimated by the staffs of the World Bank and the Fund, using an average of prevailing exchange rates including the parallel market rate.

Table 37.

Suriname: Imports by Economic Use 1/

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Sources: General Bureau of Statistics; and Fund staff estimates.

Net of re-exports.

Table 38.

Suriname: Destination of Exports

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Sources: General Bureau of Statistics; Central Bank of Suriname; and Fund staff estimates.
Table 39.

Suriname: Origin of Imports 1/

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Sources: General Bureau of Statistics; Central Bank of Suriname; and Fund staff estimates.

Net of re-exports.

Table 40.

Suriname: Trade Indices

(1990=100)

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sources: General Bureau of Statistics; Central Bank of Suriname; Suriname Bauxite Institute; Ministry of Natural Resources; and International Financial Statistics.
Table 41.

Suriname: Public and Publicly Guaranteed External Debt Outstanding 1/

(In millions of U.S. dollars at end of period)

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Sources: Central Bank of Suriname; and Fund staff estimates.

Data on external debt owed by the private sector are not available.

Based on a GDP in U.S. dollars estimated by the staffs of the World Bank and the Fund, using an average of prevailing exchange rates including the parallel market rate.

Table 42.

Suriname: Exchange Rates 1/

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Sources: Central Bank of Suriname; International Financial Statistics: and Information Notice System.

The official exchange rate was Sf 1.785 per U.S. dollar through July 11, 1994.

An increase in the index indicates an appreciation of the Suriname guilder, nominally or in real terms.

Through June 1994, a flexible exchange rate applicable to certain specified transactions. Afterwards, the (unified) official exchange rate.

Quotations from a limited survey among currency traders.

Marginal rate, i.e. rate of lowest accepted bid in currency auctions, through October 1992; weighted average of accepted bids thereafter.

Trade weighted average of the various officially recognized exchange rates and the parallel exchange rate.

References

  • Coopers and Lybrand Deloitte, “A Programme for Adjustment and Structural Adaptation in Suriname,” Special Report No. 7 (December 1990).

    • Search Google Scholar
    • Export Citation

  • Government of Suriname, “Meerjaren ontwikkelingsprogramma 1994-98: Suriname op een keerpunt (Multi-Annual Development Plan 1994-98: Suriname at a Turning Point),” September 1993.

    • Search Google Scholar
    • Export Citation

  • International Labour Organization, “Suriname: Planning of Social Security-Project Findings and Recommendations,” 1987.

  • Warwick Research Institute and Aide à la Decision Economique, “Development Cooperation Program,” August 1994.

1/

The continued deterioration of statistical information in Suriname has made it increasingly difficult to assess economic developments. Furthermore, the existence of a sizeable parallel economy and the operation of a multiple exchange rate system complicate the interpretation of economic data, particularly on the national accounts and the external sector.

2/

Exports of bauxite and its derivatives accounted for 71 percent of total exports during 1980-93, while taxes on the bauxite sector represented 14 percent of total government revenue.

3/

This assistance, which is provided in the context of the Development Cooperation Agreements of 1975 and 1992 between the two nations (see appendix to SM/93/192), averaged some US$87 million a year in 1980-82. It was resumed in 1988 at US$3 million, and averaged US$50 million a year in 1989-94. These amounts compare with a GDP of about US$466 million a year on average for 1989-94 (based on a World Bank estimate of GNP in U.S. dollars for 1993 that uses an average of the various legal exchange rates and the parallel exchange rate to convert Suriname guilders into U.S. dollars).

4/

Broad money (average of beginning and end-of-period stocks) had reached the equivalent of 116 percent of GDP in 1991, presumably due to the lack of alternative financial assets and expectations of a decline in inflation.

1/

The evolution of the multiple exchange rate system is described in Section V.

2/

In January 1993 the Government and the bauxite companies agreed that a special exchange rate would be applicable to the transactions of these companies, that their tax liabilities would be based on accounting in U.S. dollars, and that taxes would be paid in U.S. dollars.

3/

There were ten auctions of foreign exchange between October 1992 and July 1993 for a total amount of US$36.4 million dollars.

4/

Including the parallel exchange rate, weighted by the values of exports not subject to surrender requirements and of imports not requiring proof of a foreign exchange purchase, such as “own funds” imports.

5/

The ratio of foreign grants to GDP in the government accounts depends on the particular exchange rate at which these grants are converted into Suriname guilders for fiscal purposes, and thus it is likely to differ from the ratio of foreign grants in U.S. dollars to GDP estimated in U.S. dollars. Also, comparison of fiscal proceeds from foreign grants (as a percentage of GDP) across years may be distorted by sharp changes in the exchange rate applied to these grants for fiscal purposes.

1/

These are arrears on government and government-guaranteed debt; there is no information available on arrears on private sector debt.

2/

The Central Bank is a major participant in the foreign exchange market as it receives foreign exchange surrendered by the main exporting sectors, which it sells back to commercial banks. Those transactions are effected at the official exchange rate, which is calculated daily as a weighted average of the exchange rates at which commercial banks effected their transactions with the public during the previous working day.

1/

The modifications to the exchange rate system in 1994 also have resulted in a marked increase in total tax revenue as a proportion of GDP, from 8 percent of GDP in 1993 to 24 percent of GDP in 1994.

1/

No income distribution survey has been carried out in Suriname.

3/

Unless indicated otherwise, all numbers in this chapter refer to the situation as of September 1994.

1/

A scheme to subsidize cooking oil was interrupted in May 1994 due to a disagreement over prices between the Government and the manufacturer.

1/

The Loan Act of 1971 established a global ceiling on credit to the Government, but this ceiling has been revised upward to accommodate the growing government budget deficits.

1/

As of April 1994, the shares of the three largest banks in total bank credit were approximately 38, 18, and 15 percent, while the share of each of the other three banks was 10 percent.

1/

Insurance companies have to report every month on their foreign exchange transactions and every quarter on their financial position. In addition to the annual audit report which insurance companies submit to the Central Bank, life insurance companies must also file an actuarial report.

1/

This is in addition to government bonds issued in 1990 and 1992.

2/

Since commercial banks do not report information on foreign exchange deposits to the Central Bank, no entries are shown in Table 7.

3/

Short-term time deposits have a maturity of one year or less.

4/

For example, if in a given month a commercial bank obtains additional short-term time deposits for Sf 100 million of which it lends only Sf 50 million (instead of the Sf 75 million allowed) and in the next month it obtains another Sf 100 million of short-term deposits, the bank can lend only 75 percent of the difference between the additional deposits in the second month and the unused part of the first month ceiling. In other words, the bank can lend 75 percent of Sf 75 million rather than 75 percent of Sf 100 million.

1/

Commercial bank reserves held at the Central Bank are unremunerated.

1/

There were two other rates: the Arron rate of Sf 5 per Dutch guilder, applicable to bridging aid with funds from the 1975 Development Treaty with the Netherlands (mid-1988 through end-1990); and a special SLM rate of Sf 14 per U.S. dollar, applicable to the conversion to Suriname guilders of the U.S. dollar price of airplane tickets (paid by the public) and the payments made by SLM (the state-owned airline) on government-guaranteed debt. However, the volume of transactions at these rates was relatively small.

2/

This is in addition to the parallel market exchange rate.

3/

There were ten auctions (between October 1992 and July 1993) for a total amount of US$36.4 million. The mechanism by which foreign exchange was allocated and by which the reported auction rate was determined varied. For the first three auctions, foreign exchange was allocated at the marginal successful rate (i.e., lowest in foreign currency terms), and this rate was reported as the auction rate. For the fourth and fifth auctions, foreign exchange was allocated at the individual successful bids—the Dutch auction mechanism—while the reported auction rate remained the marginal successful rate. For the sixth through tenth auctions, foreign exchange was allocated at the individual successful bids, and the reported exchange rate was a weighted average of the successful bids.

1/

The rate applicable to the surrender of foreign exchange by the bauxite companies is governed by agreements negotiated between the Government and the two local bauxite companies.

2/

As of January 1, 1994 the exchange rate applicable to the transactions of the bauxite companies was changed to Sf 55 per U.S. dollar, as contemplated in the 1993 Bauxite Agreement.

1/

Only rates on transactions with the public were used to calculate the official free-market rate (interbank quotes were disregarded).

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Cover IMF Staff Country Reports
Suriname: Recent Economic Developments
Author:
International Monetary Fund
Volume/Issue:
Volume 1995: Issue 015
Publisher:
International Monetary Fund
ISBN:
9781451835205
ISSN:
1934-7685
Pages:
82
DOI:
https://doi.org/10.5089/9781451835205.002
  • CHART No 1
    View in gallery
    CHART No 1

    SURINAME PRICE AND EXCHANGE RATE DEVELOPMENTS

    (Index 1960=100)

  • CHART 2
    View in gallery
    CHART 2

    SURINAME NOMINAL EXCHANGE RATES

    (Suriname guilders per U.S dollar)

CHART No 1

SURINAME PRICE AND EXCHANGE RATE DEVELOPMENTS

(Index 1960=100)
CHART 2

SURINAME NOMINAL EXCHANGE RATES

(Suriname guilders per U.S dollar)