Battered by low oil and commodity prices including gold, one of the Caribbean Community’s most resource rich countries is headed to the international capital markets to raise funds to keep its economy afloat.
Suriname, the Dutch-speaking republic neighboring community headquarters, Guyana, is experiencing one of its worst financial crunches since the 1980s when the country’s military dictatorship ran the economy into the ground.
Low international prices for oil, gold, bauxite and rice, the country’s main exports and foreign exchange earners have pushed the economy on the back foot, leading to a devaluation of the Surinamese dollar, several spending cutbacks by the administration of President Desi Bouterse and growing hardships among its nearly 500,000 residents.
This week, authorities floated the idea of borrowing $100M from international capital markets to keep things afloat but the move is being opposed by some at high levels of government.
The cabinet has already roped in the Oppenheimer Fund (OF), a U.S.-based international investment group to help it raise the money.
De Ware Tijd, the leading daily newspaper reports that the measure is an immediate move of desperation because approaches to the International Monetary Fund (IMF) for bridging finance will take too long so the recommendation is for the money to be sourced from major financial institutions.
“The loan will have a term of 18 months with an interest rate of eight percent per year,” the paper said.
An IMF team is in Paramaribo, the country’s capital for talks with top officials but there are real fears that the bureaucracy of such an institution will mean that Suriname won’t draw down its desired soft loan for several months yet.
This is as bauxite and oil prices remain depressingly weak, while gold from the two mega mines in the interior has been showing signs of a decent and steady improvement in recent weeks. Rates for rice remain unspectacular.
But while officials look for immediate solutions amid rising commodity prices and a continuing weakening of the currency, Central Bank Chief Glenn Gersie is setting his face against the borrowing of such a large sum by an economy that is already tanking.
The result is that top officials are now reported to be looking for a compromise route to source the money while an effort is being made to push the IMF into acting faster.
Last November, the country devalued its currency by 20 percent, sending up prices and increasing tensions among labor unions.
Back in 2012 when prices were better for its exports, Central Bank foreign reserved had topped a billion dollars. At the beginning of this year, it was headed to less than $400M hence the level of panic among officials.
Like Guyana, Suriname is a major exporter of gold, bauxite and rice. Its economy has also raked in hundreds of millions from oil when prices were more decent than today.
In the 1970s, engineers drilling on shore water wells on its west coast across from Guyana stumbled on wells gushing black gold, pushing Guyanese officials to begin drilling on the other side of the border Corentyne River, albeit without success.
Suriname is the second to last country to join the Caribbean Community back in 1995. Haiti followed in 2002.