Economic Recovery Suriname After Chaos Previous Government
Restructuring before oil FID
Amsterdam, February 18th 2022 — GC: Indeed, the projections in the IMF programme do not consider recent major offshore oil discoveries, citing the absence of clear private sector investment plans to extract these resources. How close is a final investment decision (FID) from Total and Apache on their Suriname discoveries?
Minister Achaibersing: Flow tests from Apache and TotalEnergies do indicate the presence of an oil reservoir in the deep waters of Block 58, but there are still uncertainties, and ongoing drilling operations are aiming at addressing these uncertainties. The FID will depend on the result of these drilling operations, and we are not yet sure if Apache and Total will take the final decision at the end of 2022 or in early 2023.
This explains why the IMF was not in a position to include a potential future oil production in the macro outlook and debt sustainability analysis. The value recovery mechanism, which provides compensation to bondholders that is contingent on potential future oil revenues, is our way of reconciling the IMF’s position and the aspiration of bondholders who would like potential future oil revenues to be taken into account as part of any bond restructuring.
GC: So you think there is a way to conclude the restructuring without the FID?
Minister Achaibersing: I cannot tell you that because I don’t know what strategy the bondholders will take. What I can tell you for sure is that we will come to an agreement, and it will be an agreement based on fair and equitable treatment of all creditors, and also on sustainable debt solutions. I don’t know if it will be today, or tomorrow, or the day after, but there will be an agreement. So far, creditors have been supportive, and indicated they are willing to come to an agreement with Suriname.
I don’t know if it will be today, or tomorrow, or the day after, but there will be an agreement
GC: The IMF reports states that China and India have not been specific in their reassurances they will restructure their debt to Suriname. This was one reason for the delay in approving Suriname’s IMF programme. How are negotiations with these two countries?
Minister of Foreign Affairs, International Business and International Cooperation Albert Ramdin: Suriname’s bilateral debt stands at 20% of GDP, and debt owed to China is the largest component, at 17% of GDP. Debt owed to the Paris Club is around 2%, while we owe around 1% of GDP to India.
At no point were China and India not supportive of the process; the two countries have expressed their willingness to work for solutions on the debt issue, and ultimately both countries provided the IMF with the assurances they needed. We are coming from our position; they have their own reality.
We understand their situation. But they have demonstrated throughout that they will support Suriname, and we look forward to continuing our engagement with our official creditors on restructuring solutions. Technical negotiations are ongoing, but we will find a solution. All players recognise Suriname’s achievements and know that an approach of good faith and honesty will pay off.
G20 Common Framework ‘needs to be looked at’
GC: Suriname is not an IDA [International Development Association] member with the World Bank. Even though the country’s GDP per capita is lower than four eligible Latin American and Caribbean countries, Suriname is therefore not eligible for the G20’s Common Framework for debt treatment. Would you have liked to be able to use such a mechanism?
Minister Ramdin: Of course, we would have liked to get the benefit of the Common Framework. It’s a situation that needs to be looked at — ideally the eligibility requirements would be revised to reflect a country’s GDP per capita. Nonetheless, we embraced the philosophy of the Common Framework even before it was defined by the G20 in November 2020. This essentially means taking the path of transparency and intercreditor equity.
GC: Do you feel the international community could therefore do more to support countries through their debt restructurings?
Minister Ramdin: Based on Suriname’s experience, I’d point out two aspects of the current debt architecture that could be improved. There is a lack of multilateral support for struggling non-IDA small economies. The pandemic has exacerbated their existing debt vulnerabilities, and as the Covid-19 crisis continues and US Federal Reserve monetary policy tightens, solvency problems of those small non-IDA economies could increasingly come to the forefront. G20 member countries should develop and adopt initiatives using SDRs to provide financial support, continue to push data transparency, and promote fair burden sharing across all creditors. It would likely raise participation and avoid costly delays. Ignoring solvency problems only makes them worse.
Secondly, we should highlight the long delay between Suriname reaching a staff-level agreement (SLA) on its IMF programme, and then receiving the endorsement of the IMF executive board. Suriname’s program was brought to an executive board meeting eight months after the country reached an SLA, even though it had long since completed all required pre-programme economic reforms. I should say that IMF staff, management and executive directors were very diligent. But they were heavily constrained by IMF decision-making rules.
I expect the case of Suriname to facilitate some policy changes with the IMF when it comes to dealing with countries that are doing well in executing policy.
We were almost held hostage by IMF procedure and the approach of bilateral countries — and the IMF rules did not account for such a situation. We lost months. For countries that are heavily engaged in reforms under an IMF programme, the Executive Board decision should not exceed three months — the lifespan of an SLA. Setting such a rule would prevent a reforming government from being deprived of valuable financing for an extended period of time, while arrears to its creditors accumulate and public support erodes. I expect the case of Suriname to facilitate some policy changes with the IMF when it comes to dealing with countries that are doing well in executing policy.
End Part IV
Proceed to Part V