On May 25, President Chan Santokhi and his Progressive Reform Party (VHP) won the Suriname parliamentary elections, ending the ten-year rule of President Dési Bouterse and his National Democratic Party (NDP). After the elections, the country experienced a peaceful transition of power from an outgoing government that had been characterized by scandals and uncertainty, to a new administration promising prosperity, unified governance, and a recovery from the financial crisis that has plagued the nation for over five years. Even though the Santokhi administration has inherited a mess––caused by poor fiscal policies and a financial crisis that was aggravated by poor financial choices––it is still in a propitious position. The recent discoveries of offshore oil reserves present significant opportunities for the country. The new administration has presented a three-stage road map to lead the country out of the crisis, but will this new road map lead Suriname to a prosperous destination?
An overview of the economy of Suriname
Suriname’s small economy is easily affected by external shocks, and has become even more vulnerable due to a recession that began in 2015. In the same period, the Suriname Aluminum Company (a subsidiary of the American aluminum giant ALCOA) decided to cease its bauxite mining operations and hand over the Afobaka Dam hydroelectric plant to the government. Due to the dependence of the Surinamese economy on the bauxite industry, ALCOA’s exit caused an immediate deficit. Collectively, these issues catalyzed the challenging financial circumstances that Suriname now faces.
Despite these challenges, there are some reasons for optimism. In 2018, Suriname experienced marked economic growth and a low rate of inflation, aided by the Central Bank of Suriname’s maintenance of a restrained monetary policy. These trends were largely predicated on a recovery of the mining sector, which would, in theory, support growth over the medium-term. These positive developments, however, were counterbalanced by multiple risk factors, such as unexpected shocks to commodity prices and weak institutions (particularly economic institutions), fiscal imbalances, and high debt levels.
In 2019, prospectors from Total and the Apache Corporation announced a major oil discovery at the Kwaskwasi-1 well off the Surinamese coast. This was followed by announcements of similar discoveries at the Maka Central-1 and Sapakara West-1 wells in January and April 2020, respectively.
These finds promised a better financial outlook for 2020, and were expected to launch Suriname into the upper echelon of international oil producers—a status which had not been achieved in the past—and bring in investments from multinational corporations like Exxon Mobil, Apache, and Total to further bolster the economy. Despite the fact that this outlook seems very positive, the IMF projected that the Surinamese economy would contract by 13.1 percent in 2020.
Challenges for the government
In order to efficiently and effectively turn the tides of economic instability, the government ought to first tackle the persistent problem of a weak domestic economy that is susceptible to external shocks. In 2018, the International Monetary Fund (IMF) forecast that a two percent increase in the national gross domestic product (GDP) would be needed in order for the Surinamese economy to be considered stable and capable of sustaining growth. One of the impediments for Suriname’s economy is its heavy dependence on the mining sector; therefore, it is necessary to boost the Surinamese economy through investments in more diverse infrastructure and industries. The government has to stop the electricity sector subsidies and stimulate small and medium businesses.
Another issue emphasized by the IMF is the importance of strengthening Suriname’s fiscal position in order to reduce public debt. According to the IMF Western Hemisphere report, published in October 2020, Suriname’s debt-to-GDP ratio leaped from 75.6 percent in 2018, to 82.3 percent in 2019, to 145.3 percent in 2020, helped by the shrinkage of the GDP and devaluation.
Suriname’s largest creditors are the Inter-American Development Bank (IADB) and China. Suriname has also received significant loans from the American investment bank Oppenheimer & Co., under a facility agreement covered by Sweden’s National Export Credits Guarantee Board (EKN). In July 2020, the country was not able to repay its Oppenheimer bonds. This led to credit ratings agency Fitch and S&P Global Ratings downgrading Suriname’s credit-worthiness to “default” status. After Suriname paid its interest and creditors agreed to recommence negotiations over repayment, Suriname’s credit rating improved to CCC. The United States and other Western countries want this new government to succeed and are likely to help Suriname with its debt issue (through the IADB, World Bank, and IMF). Additionally, as reflected by the experiences of Sri Lanka and Pakistan, China tends to alter the terms of its loans to make the repayment of debts easier. Suriname could therefore stand to benefit from the burgeoning U.S.-China rivalry in the region.
Corruption is another challenge that the current government must confront. After Suriname gained independence from the Netherlands in 1975, the Surinamese government became the primary employer for partisan loyalists. This was true of all of the administrations that came to power after independence, regardless of the identity or political persuasion of the ruling party. Through the years, numerous government initiatives have ultimately failed to effectively bring change and implement laws challenging corruption in the public sector.
In 2020, the former governor of the Central Bank was arrested for irregularities and misappropriations. His business partner, Ashween Angnoe, was also arrested for his role in the matter. The Attorney General also put out an international Red Notice (an Interpol arrest warrant), for the ex-Minister of Finance of Suriname, Gilmore Hoefdraad, the Belgian Hans Buysse (managing partner at Clairfield), and the Dutchman Robert van Putter who are suspected of violating anti-corruption laws.
The roadmap for success
The current economic situation of Suriname is characterized by a high level of public debt, fluctuating exchange rates for foreign currencies, a shortage of available foreign currency, and a lack of public trust in financial institutions (with far-reaching implications for other infrastructure). The country also faces high unemployment and inflation. According to the annual plan of 2018, unemployment became an increasingly serious issue in Suriname between 2017 and 2019, due to an increase in the size of the labor force, job losses between 2015 and 2016, and other demographic developments. The new administration has drafted a roadmap for a drastic economic reorientation. The is divided into three phases: the “Urgency Phase,” the “Stabilization Phase,” and the “Development and Modernization Phase.”
The “Urgency Phase” will primarily emphasize managing the COVID-19 pandemic and the current financial crisis. The objectives of this phase are to regain and build citizen’s trust in financial institutions, strengthen the national currency (the Surinamese dollar), stabilize the exchange rate, and rebuild international foreign exchange reserves.
The new government has sought to mitigate the effects of the COVID-19 pandemic by partnering with diverse actors in the private and public sectors, introducing a lockdown and building awareness in the communities .
Another policy that is high on the agenda of the current government is stimulating economic growth and creating more employment opportunities. The government has placed a special emphasis on attracting private initiatives to the vast tropical rainforest district of Sipaliwini. Such efforts will be crucial for a district that, due to structural neglect by previous administrations, suffers from an acute lack of employment opportunities. The anticipated result of the government’s initiative is that opportunities for small and medium enterprises in Sipaliwini will increase. One point of concern, however, is that the current government has yet to elaborate specifically on how they intend to stimulate private investment and attract small- and medium-sized enterprises, especially in the district of Sipaliwini.
The “Development and Modernization Phase” is intended to stimulate development and long-term economic growth that can be sustained in different sectors of the country’s economy. This phase will aim to strengthen democratic institutions, and emphasize clean and transparent governance. Previous administrations invested little energy and resources in good governance or strengthening the institutions of the country, which has resulted in a weak government. This Santokhi administration, however, plans to take a good look at the Constitution of Suriname and the country’s electoral system, in order to find ways to make the government run more efficiently.
This new administration needs to resolve the financial crisis, rebuild national and international economic partnerships, regain the public’s trust in key institutions, and fight corruption. Prior governments have sought to make the country’s economic system more efficient and publicly accountable, and failed to do so. It could be argued, with the recent discovery of large offshore oil reserves, that the Santokhi government has a distinct opportunity to create a more open society and broad-based economy. The new government began its mandate with considerable hope and promise; the real test in the days ahead will be to make the necessary, tough decisions, however unpopular they might initially be. Ultimately, making such decisions will allow Suriname to play a more effective role in determining its own future, despite the historical weight of external forces.
Mavrick Boejoekoe is currently working as a director at the Ministry of Regional Development and Sports in Suriname, responsible for regional development. From 2012 to 2017, Mr. Boejoekoe was the district commissioner of Sipaliwinie, Suriname. He has over eight years of experience working in the central and local government in Suriname. In 2016 he founded the Youth Education and Leadership Foundation, and in 2018, was selected to represent Suriname in the Humphrey program where he focused on international development and did his professional affiliation at the Center for Strategic and International Studies (CSIS) with a focus on good governance and corruption in Suriname. He has also worked as the Indigenous and Tribal people and Stakeholder Specialist (ITPS) at the National Institute for Environment and Development in Suriname. Mavrick has a Master in Public Administration from the Anton de Kom University of Suriname and a Master in Business Administration from the International Business School Americas.