Last week a letter to the editor was placed in the Daily Herald of April 5 about the exchange rate of the Antillean guilder against the US dollar. The header stated: “Consider and decide asap.”
After that, people asked me several times the last days to explain more in detail what happened in Suriname the last years regarding their currency, the Surinam dollar (SDR), also – as in our case – being connected to the US dollar, so here comes some extra information on request.
The Central Bank of Suriname has maintained a fixed exchange rate with the US dollar for a long time. Until February 2011, the exchange rate was set at a rate of SRD 2.70 per one US dollar. Later an exchange rate of 3.30 SRD per dollar was sought. In November 2015, the SRD devalued by 20 per cent and the official exchange rate was 3.96 SRD per USD. At that time, around 4.30 SRD for a US dollar was already counted on the black market.
On 7 February 2016, the central bank announced that the currency was being disconnected. This measure was taken in connection with the falling revenues from oil and gold and the large expenditures by the Surinamese government, as a result of which the demand for the US dollar became relatively large and the value of the Surinamese dollar too low. Between November 2015 and March 2016, the rate of the SRD fell by 40 per cent to 5.7 SRD per dollar. (Source text: Wikipedia, April 2019)
The SRD was linked to the US dollar because many imported goods are paid for with the US currency. The link prevented sudden price fluctuations for the Surinamese consumer.
Surinamese consumers pay for their products with Surinamese money, but the traders have to exchange the SRDs for US dollars to be able to buy the goods. They exchange the money at the banks, which in turn buy their dollars at the Central Bank.
Oil and gold were the main sources of currency for the Surinamese government, but due to the decreasing world market prices, these sources dried up quickly. In addition, the first Bouterse government has handled money from the treasury very generously, so that much more government spending has been made than was justified. The US dollar became more and more expensive on the black market. The result: large price increases.
The Central Bank of Suriname has intervened many times over the past years to somewhat curb the rate of the Surinamese currency. The bank did that by selling US dollars to the market. In this way, almost half of the currency reserve of Suriname was rushed through in 2015.
Earlier, economists had warned that a persistent holding on to the link between SDR and US dollar would lead to a drying up of the cash reserve in hard currency. “By stubbornly sticking to the link, aren’t we flushing our last currencies through the sewer?” wondered Waddy Sowma of the Association of Economists in Suriname (VES). (Source text: NOS.nl, 2016)
Now, the exchange rate is at the moment SRD 7.42 per US dollar!
A new devaluation of the Surinamese currency in the run-up to 2020 is unavoidable if the case is to be tackled cheaply, according to Asiskumar Gajadien, member of Parliament, and member of the parliament committee on state spending, in Dagblad Suriname, July 1, 2018.
Has this anything to do with St. Maarten? I elucidated it in the first article from last week that it might, if Curaçao and (to a lesser extent) St. Maarten are not succeeding to get the economy and the related finances in some harmony soon. Let us not wait, please, until the Central Bank of Curaçao and St. Maarten will let us know that problems might be showing up, because then it might probably be a little late.
Geert van der Leest