Suriname will receive a US$40 million investment loan from the Inter-American Development Bank (IDB) to increase tax revenue and improve public spending and investment in order to reduce its budget deficit and improve its fiscal sustainability in the medium-term.
The loan aims to support the country’s effort to balance its budget due to growing spending and decreased tax revenue stemming from a drop in commodity prices and a halt in alumina production. Suriname is currently implementing a fiscal adjustment program which seeks to reduce the country’s budget deficit to 2.5 percent of the gross domestic product in 2018 from 5.7 percent in 2016.
“Since 2011, the IDB has been working very closely with Suriname to implement reforms to develop the tools and framework critical to updating the public expenditure and revenue systems, which provide the basis for this new investment operation,’’ said Gerardo Reyes-Tagle, the IDB project team leader.
“This investment loan will provide a critical institutional capacity platform to improve the effectiveness of the Ministry of Finance on its main activities and contribute the economic growth of Suriname,” said Cesar Falconi, the IDB representative in the country.
The IDB’s new operation will strengthen the institutional capacity of the Ministry of Finance to collect tax revenue in an efficient manner and strengthen the planning, prioritization, preparation, execution and monitoring of the annual budget, including the implementation of public investment projects.
The loan will finance activities to: (i) revamp the Department of Taxes and Customs organizational structure in order to implement the value-added tax, (ii) improve the budget decision-making process regarding planning, execution and monitoring, and (iii) strengthen the public investment strategy in order to prioritize and rationalize investment projects based on the “Value for Money” methodology.
The project is expected to benefit the country by allowing the government to have resources to carry out priority public investments to improve the economic and social situation of the population as well as general taxpayers, which will receive better support to fulfill their tax obligations.
Since 2011, the IDB has been supporting Suriname in implementing important reforms to strengthen its fiscal position. IDB loans have supported the introduction of a value-added tax in the country as well as the restructuring of the Department of Taxes and Customs. Moreover, IDB loans have also supported key reforms in the country public financial management and procurement laws to improve expenditure management.
The investment loan is for a 25-year term, with a 5.5-year grace period and a LIBOR-based interest rate.
About the IDB
The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source of long-term financing for economic, social and institutional development in Latin America and the Caribbean. The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public and private sector clients throughout the region.
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