Staatsolie loan reduces fiscal pressure on Suriname

Staatsolie loan reduces fiscal pressure on Suriname

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Staatsolie has obtained $625m through a syndicated loan from international markets, alleviating some fiscal and liquidity pressures on the government of Suriname.

Credit Suisse led the transaction, according to two bankers in the region. Sources at the Swiss investment bank declined to comment. When contacted by LatinFinance, officials in Suriname were not immediately available to comment on the terms of Staatsolie's syndicated loan.

The state-backed petrol company used proceeds to repay the government $337.5m, equivalent to 9.2% of the South American's GDP, according to a report from Moody's. Of the total owed, $261.5m went towards money the government gave Staatsolie from its $550m 2026 bond, while the rest was used to acquire the sovereign's share in the Newmont mine.

According to a separate statement from the government, it said proceeds would reduce public finances, clear arrears, build up FX buffers and "sterilize" money inflows.

After being downgraded by all three major rating agencies over the last year, Suriname intends to increase its banks' foreign currency holdings. Moody's said in its report that this would occur through a reduction in currency swaps and a restructuring of US Treasury bills.

Suriname's government debt reached almost 60% of GDP at the end of last year, above the 40.5% B2-median set by Moody's. Government debt peaked at 70.7% at the end of 2016 from 43% at the end of 2015.

B2/B/B- rated Suriname debuted in the cross-border bond market in October 2016, placing its 2026 note at par to yield 9.25%. The bond was spotted at roughly 97 to 98 points in secondary trading over the last week, according to a DCM banker.

Suriname's medium-term fiscal prospects hinge on its government's ability to implement a fiscal reform plan. It intended to introduce a 15% VAT facility in July this year, which is projected to raise about 2.5% of GDP in additional revenues, but this has been postponed indefinitely. Moody's said a potential VAT initiative would "unlikely" be considered until after parliamentary elections in May 2020.

Proposed fiscal reforms aim to improve control of spending and broaden tax revenue collection. The government has also created a sovereign wealth fund to increase future savings.

After the decline in commodity prices, Suriname's fiscal deficit widened to 11% of GDP in 2015 and 2016 as mining-related revenue declined.

Moody's cut the South American nation to B2 from B1 in February, while S&P Global Ratingsand Fitch Ratings downgraded Suriname in April and February of 2017, respectively.

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