Suriname has completed the country’s first conversion of external debt into Surinamese dollars, transforming an estimated US$150 million Inter-American Development Bank (IDB) floating-rate loan into a fixed-rate loan in Surinamese dollars.
The IDB said that the transaction will help Suriname shield its debt-service payments from foreign exchange rate and interest rate volatility through 2044.
Under the IDB’s Flexible Financing Facility, borrowers can change the currency or interest-rate basis of a loan after approval, depending on market conditions. These options can apply to outstanding balances or future disbursements.
The IDB said that as part of the operation, the government activated the currency and interest-rate conversion options available under the IDB’s Flexible Financing Facility. To support the conversion, the currency exchange fund (TCX) provided the IDB with an 18-year non-deliverable cross-currency swap, a long-term financial hedge that protects the transaction from future exchange-rate movements, allowing the loan to remain effectively denominated in Surinamese dollars through 2044.
‘Completing our first external debt conversion into Surinamese dollars, and our first currency conversion in nearly three decades, represents a major strategic milestone for Suriname,’ said Charlene Soentik, Administrator-General of the Suriname Debt Management Office,
Minister of Finance and Planning of Suriname, Adelien Wijnerman, said converting US$150 million of foreign debt into fixed Surinamese dollars allows Suriname to shield its public finances from exchange rate and interest rate volatility through 2044.
‘This transaction stabilizes our debt-service obligations and ensures greater fiscal predictability as we manage our national budget and pursue sustainable economic growth’, said Wijnerman.
IDB Vice President for Finance and Administration, Gabriel Yorio, said Suriname has taken an important step to better protect its public finances from foreign-exchange fluctuations while fostering the development of its local-currency market.
‘Through the Client Financial Hub, the IDB is bringing together its financial capabilities to help countries make fuller use of the conversion and risk-management options available in their loan agreements, and develop solutions that respond to their broader financial needs.
‘This is how we can strengthen debt sustainability and increase the impact of development financing,’ Yorio added.
The IDB said that the transaction is part of is efforts to help member countries strengthen public debt management through access to sophisticated risk-management instruments.
‘In Suriname’s case, the operation enabled access to a long-term local-currency hedge that private markets cannot currently provide. The country’s financial market lacks both long-term local-currency benchmarks and hedging instruments to manage fluctuations between the US dollar and the Surinamese dollar, making the transaction a significant step toward reducing debt-service volatility’ the IDB added.