Suriname like neighbouring Guyana is set to experience a windfall in oil revenue as international oil and gas companies continue to make significant offshore discoveries. Whereas Guyana is expected to use its new revenue streams to embark on ambitious infrastructure spending, Suriname will use them to service its mounting debt obligations.

A political analyst based in Suriname highlighted current developments, “Oil majors have discovered almost four billion barrels of oil in Suriname’s offshore basin. Total and APA are planning a USD 7 billion investment in an offshore area, known as ‘Block 58’, while Exxon is considering an investment in ‘Block 59’. For Paramaribo, this is an opportunity to tackle impending fiscal responsibilities.”

“Oil majors have discovered almost four billion barrels of oil in Suriname’s offshore basin."

Political analyst, Suriname

Exxon, Shell, and Total have all commenced exploratory activities in Suriname. Investors are particularly excited about the country’s low production costs which could see barrels produced between USD 30 to USD 50, significantly undercutting competitors - including the US.

There is no getting around the fact that Suriname’s economy has taken a beating by Covid – it contracted by almost 16% in 2020 - which has induced elevated levels of public expenditure. The government has also defaulted on its sovereign debt payments – given that major oil production will not begin until 2025, the question now is whether reserves are sufficient to weather fiscal obligations until then.

The administration of President Chan Santokhi is now trying to position the country as an attractive destination for foreign investment. Given that Suriname is a small country with a small human resources base and limited investment portfolios, it is therefore critical that returns from investment in the sector are significant.

In December 2021, the International Monetary Fund approved a USD 688 million loan programme for Suriname to be disbursed from 2022 to 2024. Part of this package requires the introduction of VAT and a reduction public sector wages, fiscally necessary but politically unpopular. This is in addition to finance proposed by the World Bank and the Inter-American Development Bank – over USD 400 million in total.

Government debt has grown at a fast pace over the last decade due primarily to increasing fiscal deficits under the previous government. In 2019, the National Assembly was forced to raise the debt limit to 95% of GDP from 60% to fund expenditure but this makes future repayments even more challenging. Soaring inflation is compounding economic woes.

The political analyst explained, “The government debt-to-GDP ratio surpassed 130% of GDP in 2020. This was driven by a widening fiscal deficit and a sustained depreciation of the (Suriname) dollar.”

“The government debt-to-GDP ratio surpassed 130% of GDP in 2020."

Political analyst, Suriname

Industry experts believe there are at least three to four billion barrels of oil reserves in Suriname’s waters. The administration can relax for the time being, Suriname’s natural resources are too attractive a prospect for foreign companies to bail anytime soon.