NEW YORK, May 16, CMC – Standard & Poor’s, a leading international credit rating agency has given the thumbs up to Suriname’s credit quality which has been on the “upswing” since 2006.
“Solid economic growth during the past decade, along with the government’s efforts to institute prudent fiscal policies, have contributed to three successive upgrades since 2006,” said the Wall Street-based agency about Suriname’s BB-/Stable/B rating.
It said the upgrade, from B+ reflected Suriname’s “improving macroeconomic fundamentals” including a robust annual growth forecast of four to five per cent for the intermediate term and relatively low net general government debt, at less than 20 percent of Gross Domestic Product (GDP) at the end of 2011.
In addition, Standard & Poor’s attributed the upgrade to Suriname’s “improving external indicators as a result of current account surpluses and rising international reserves.
“Legislative and institutional efforts to preserve these accomplishments were key factors in the upgrade. There is growing political consensus about the importance of adhering to prudent fiscal and monetary policies to maintain macroeconomic stability,” it added.
For example, the rating agency said, in January 2011, the government took “unpopular, but necessary, measures to correct economic imbalances that had built up during 2010 (an election year) through a fuel tax increase and devaluation of the Suriname dollar”.
It also said, in July 2011, the government reached an agreement with the United States to clear the last remaining arrears on its bilateral debt.
But Standard & Poor’s said Suriname’s “narrow economic base” which is strongly tied to commodities–alumina, gold, and oil, is “one of the sovereign’s key credit constraints”.
It said these commodities represented more than 80 per cent of current account receipts at the end of 2011.
Standard & Poor’s said Suriname’s fiscal accounts are also “highly dependent” on commodity revenues, which represent an estimated 30 per cent of total revenues in 2012.
Additionally, it said the central bank’s limited monetary flexibility and the country’s institutional weaknesses are also “ major constraints and hinder effective debt management, public investment, and a more rapid advancement of structural reform”.
Standard & Poor’s said it would consider raising its sovereign rating on Suriname if the government’s “ambitious reform agenda proves successful.
“Many of the proposed reforms would mitigate the sovereign’s key risks, primarily its high dependence on commodities and its institutional capacity constraints,” it said.