Suriname’s Economic Crisis

Suriname’s economy is in a steep recession. This was made painfully evident in this month when Independence Square across from the Presidential Palace in the capital, Paramaribo, was filled with demonstrators opposed to the government’s price increases for fuel, water, and electricity. With an economy highly dependent on commodity exports, many Surinamers are finding the gains of the commodity boom (2001–2014) slipping away and are angry, holding the Dési Bouterse government accountable. The government is seeking to adhere to a structural adjustment program, with the support of the International Monetary Fund (IMF) and Inter-American Development Bank, but price rises on key day-to-day items are not popular. The political situation could also become more complicated if efforts to revive a trial against President Bouterse and others for the December 1982 murders of 15 opposition figures are allowed to proceed.

Although Suriname hardly tops international news headlines, its economic problems add to the geopolitical weight of the Caribbean at a time when one of its neighbors, Venezuela, is imploding economically and politically. And the regional Caribbean economy is also fragile. Nearby Barbados has hit a profound economic crisis, while hydrocarbon-dependent Trinidad and Tobago is fighting to regain its economic equilibrium, and concerns are growing over Guyana’s economy despite its discovery of massive offshore oil. Even French Guiana, which shares borders with Suriname, is in the throes of tough economic times and strikes. In the above context, what happens in Suriname has implications for a region that is undergoing structural changes, and major questions hang over its economic future.

Suriname Macroeconomic Data







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Source: International Monetary Fund, January 24, 2017.

Suriname, with a population of a 542,975, is located on the northern shoulder of South America, sandwiched between Guyana, the French overseas department of French Guiana, and Brazil to the south. Although its northern border is defined by the Atlantic, Suriname is usually considered a Caribbean country. It was a Dutch colony and gained its international fame as being what the Dutch traded away New York for to the English in 1667.

Throughout much of the twentieth century Suriname’s economy was dominated by bauxite, but the industry declined as Suriname neared the next century. Gold and then oil became the dynamics for the economy in the early twenty-first century. Indeed, from 2000 to mid-2014, the rise in international commodity prices resulted in strong economic expansion of the Surinamese economy and a 65 percent gain in gross domestic product (GDP) per capita, according to the Inter-American Development Bank. On the back of gold, oil, and at decreasing levels, alumina exports, the economy expanded from under $1 billion in 2000 to a little over $5 billion in 2014.

It was during the boom years that the seeds of the current economic crisis were sowed. Four factors are significant in the light of the current economic crisis. First, Suriname became highly dependent on commodity exports, mainly gold and oil. According to the World Bank, these exports generated 90 percent of foreign exchange earnings and 45 percent of government revenues. Related to this was the failure to diversity away from this dependence.

Second, the state remained the dominant factor in the economy, which has proven to have a long-term negative impact. According to the Inter-American Development Bank, as of 2015, there were 144 registered state-owned enterprises, with 60 percent of the workforce employed in the public sector.

As long as the commodity boom ran, revenues flowed into state coffers and bloated employee rolls could be maintained. Commodity largesse also meant that inefficiencies could continue without consequences. Moreover, outside advice was ignored. As the 2016 IMF Article IV report (updated on January 24, 2017) observed: “ During the boom there was no institutional arrangement to save resources for future prices corrections, and implementation of IMF advice on strengthening the policy framework was limited. Suriname has thus had a much sharper recession, steeper exchange rate deprecation, and larger rise in inflation and government debt than most commodity exporters.

Third, the country’s infrastructure, though improved with Inter-American Development Bank loans and technical assistance, is still lacking. There is a gap in terms of air transport infrastructure and electricity supplies. For the economy to diversify, possibly into tourism, better infrastructure is needed (as are friendlier and more efficient border entry points). There are also inadequacies in education and labor productivity.

Fourth, Suriname failed to develop a robust private sector. The economy has produced no large private-sector companies, and of those small- and medium-sized businesses that do exist, many are limited to selling goods and services to the government and importing products for the general population not produced locally. When government finances were cut over the past two years, the pain quickly rippled into the private sector.

The combination of these factors resulted in a state-dominated economy that was unable to respond quickly to changing market conditions. As the 2016 report by the Inter-American Development Bank eloquently stated: “ …Suriname is characterized by high vulnerability to external shocks, Dutch disease (resource misallocation effects) and resource curse (unproductive rent seeking effects).

When commodity prices fell in 2014, Suriname suddenly found itself faced with a decline in exports and fiscal shortfalls. While 2014 was bad, 2015 was worse, with a current account deficit swelled to 16 percent of GDP and a fiscal deficit of 8.8 percent of GDP. An ambitious government austerity program was launched in late 2015, but it stalled in the face of public discontent. Real GDP contracted by 2.7 percent in 2015, and 2016 was even worse, with another contraction of 9.0 percent. Adding to the problems, according to the IMF, inflation rose from 3.4 percent in 2014 to around 60 percent by year-end 2016. This was fueled by limited action by the authorities to raise interest rates, which stimulated a move out of local currency assets, with bouts of exchange rate depreciation.

Suriname’s outlook is challenging. While there has been some recovery in international gold and oil prices, and multinational mining giant Newmount Gold has opened a gold mine in the country, the economy is still set to contract. The IMF is forecasting another 2.6 percent contraction for 2017. At the same time, there are questions over the government’s ability to keep to the program of raising prices for oil, water, and electricity in the face of public opposition.

Suriname’s economic crisis is a major test for the government of President Dési Bouterse. Inflation needs to be brought under control and wage increases held in check. The IMF also called for a reform of the country’s civil service and a more aggressive central bank, raising interest rates to slow the pace of currency depreciation and to restore confidence in the local currency. Attention must also be given to diversify away from the current levels of commodity dependency, with tourism being one area that could benefit (only after a sustained effort to streamline the entry process and make the country more attractive as a destination point).

The IMF call for civil service reform points to another issue that dogs Suriname—corruption, which casts a shadow over the economic policymaking environment. Indeed, the International Narcotics Control Strategy Report issued by the U.S. government in March 2017 stated: “ Corruption pervades many government offices in Suriname and may also play a role. ” This comes from the top as President Bouterse’s checkered track record reflects a lack of playing by the rules, beginning with his involvement in the 1980 coup, the December 1982 massacre of 15 leading members of the opposition, possible involvement in the Moiwana massacre of 1986, and a conviction in the Netherlands in 2000 for cocaine trafficking.

Bouterse managed to remain out of jail due to the impunity he enjoys as chief executive of Suriname and because of the nonexistence of extradition treaties between Suriname and its former colonial power. However, efforts have recently been made to bring the 1982 deaths back to trial, which could raise political tensions.

Bouterse’s son, Dino, the former head of the Suriname Anti-Terrorist Unit, was not as lucky. He is currently serving a 16-year sentence in the United States after his conviction for drug smuggling and seeking to aid Hezbollah to establish a base in Suriname and Latin America. Not only does this situation complicate Suriname’s relations with the United States and the Netherlands, it makes Suriname’s relations with multilateral lenders, like the IMF and Inter-American Development Bank, operate under circumstances that are less than optimal, especially when it comes to the dispersion of funds.

The government of Suriname needs to meet its responsibility of providing sustainable economic growth to its citizens. Failure in addressing the structural problems will leave the economy struggling and erode confidence in governmental institutions at a time when much of the surrounding region is combating similar economic woes. President Bouterse’s problematic political baggage complicates the economic situation, as the embattled leader feels pressures between a restless and frustrated population and external forces such as the IMF, Inter-American Development Bank, and the United States. There is a path out of the economic crisis for Suriname, but it will take making tough decisions and sticking to them.

Scott B. MacDonald is a senior associate with the Americas Program at the Center for Strategic and International Studies in Washington, D.C., and chief economist at Smith’s Research and Gradings.

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Photo credit: LUIS ROBAYO/AFP/Getty Images

Scott B. MacDonald