COSTA DO SAUÍPE, BAHIA, BRAZIL

March 29, 2014

Written statement by the Governor for Suriname

Gillmore Hoefdraad

1. I would like to take this opportunity to thank the Brazilian Government for hosting this annual event. I am grateful that you are making our stay so pleasant and fruitful.

2. In my brief remarks, I would like to present to you some of our recent economic developments, and share with you our efforts to sustain our achievements by building strong institutions; efforts that are supported by our development partners, including the IDB. I want to remark in particular about our ongoing large-scale investments in the country, and our efforts to reduce risks and vulnerabilities in the country.

3. One of the main engines of growth in Suriname has been investment in the oil and mining sector. The state-owned oil company is building a new US$700 million refinery in the country that will substantially reduce imports of oil derivatives starting in 2015. The company is also expanding into ethanol production and managing the offshore exploration activities that are being carried out by large international oil companies. In the mining sector, we expect that the American mining company Newmont will shortly begin to build a new US$1.1 billion gold mine, in which the government is intent on participating with a 25% share. Looking further ahead, we also expect the Canadian company Iamgold to expand significantly its gold mining activities in Suriname, while the mining company Alcoa is expected to increase its existing bauxite operations over the medium term.

4. While Suriname continues to grow at rates above 3-4% annually, we experienced a difficult year in 2013 due to sharp revenue losses as the prices of our main export commodities dipped sharply in world markets. The fiscal impact was exacerbated by an untimely acceleration of public sector expenditure, mainly in the areas of goods and services, wages, and capital expenditure. The government has now decided to rein in the fiscal deficit through a catalog of measures focused strongly on expenditure restraint.

5. In parallel, the Central Bank tightened monetary policy in late-2013 to reduce domestic demand pressures stemming from both private and public sector demand. These had led to a strong increase in imports in 2013, which in turn had contributed to our first current account deficit of the balance of payments in eight years and a loss in reserves in 2013. While the Central Bank stands ready to tighten monetary policy further should the need arise, we expect that the stabilization of international commodity prices and the reduction in public and private sector demand will suffice to reverse the loss in reserves and return the country to a sustainable growth path. Looking ahead, we expect that the new oil refinery that will come on-stream in late-2014 will significantly reduce import demand and help return our current account of the balance of payments to a surplus position.

6. Inflation continues to be benign in Suriname, notwithstanding the sharp increase in domestic demand in 2013. In fact, inflation has fallen to a 25-year low as we recorded an inflation rate of just 0.6% in 2013.

7. Suriname is one of the most vulnerable countries in terms of the risks of shocks emanating from commodity price fluctuations. In 2012-13, our country has been affected strongly by the decline in the world market price of gold, Suriname's main export product. To reduce the vulnerability to such shocks, we expect to put in place a sovereign wealth fund in 2014. One of the objectives of the fund is to shield the budget from the severe fluctuations in international commodity prices and thereby provide much needed predictability and stability in government finances. Through this mechanism, the sovereign wealth fund will also protect the country from the boom and bust cycles that have plagued Suriname in the past. As we are exploiting non-renewable resources, we want to save part of the proceeds for the benefit of future generations, and create an alternative income stream that will diversify the income base of our country. I am pleased to inform you that the draft legislation has been amply discussed in the National Assembly and we expect its approval in the coming months. In this context, there is general agreement that we will establish a sovereign wealth fund in line with best international practices and that we will incorporate these practices and wide-ranging transparency requirements in the legislation.

8. The government has embarked, also with the support of the IDB, on a large-scale modernization program that will institutionalize a more stable, cost-effective, nimble, and transparent administrative apparatus. A new computerized budget-execution, management and information system has been launched recently, and automation efforts will expand to include customs, procurement, and tax collection. We are also preparing far-reaching tax reforms that will reduce red tape, simplify the tax code, and shift the tax burden from direct to indirect taxation.

9. At the Central Bank of Suriname, we are also putting in place far-reaching reforms. These include the establishment of a Treasury bill auction system and a reform of the payment system in the banking sector. We have significantly improved our financial sector oversight to reduce the possibilities of money laundering and the financing of terrorism. We are also revamping the legal framework, having modernized the banking code, and preparing legislation for the insurance and pension sectors.

10. In my first speech as Governor of the IDB, I mentioned in 2011 that Suriname had one of the smallest portfolios with the IDB. It also had a portfolio of projects that were not progressing well. This has changed dramatically. The IDB's 2011-15 Country Strategy envisaged an almost tripling of lending operations. Today, the IDB has already tripled its portfolio and new projects are being put on stream. Areas of support and cooperation include the agriculture, education, and energy sectors, as well as financial sector development, public investment management, social protection and transportation. And reflecting the hands-on and engaged attitude by the government, the Suriname IDB portfolio is now one of the best performing country portfolios. We will continue to do our best to make this cooperation a success and we are thankful for the continued and proactive support of the IDB.

11. In closing, I would like to avail myself of this opportunity to commend President Moreno and his staff for the excellent work currently being done and would encourage you to continue on this path.