Overview of the economic development

Overview of the economic development

General

From 1667-1975 Suriname was off and on colonized by the Dutch. In 1954 Suriname became an autonomous country within the Kingdom of the Netherlands until it gained its independence on November 25, 1975, as the Republic of Suriname. At the time of independence, The Netherlands granted Suriname NLG 3 billion -Dutch Florins- aid (Nederlandse Hulp Allocatie aan Suriname/NHAS) for the development of Suriname, based on mutually approved project plans.

After independence, Suriname established a democratically elected Government until they were overthrown with a coupe d’état on February 25,1980. The military regime lasted until 1987 when democratically elected officials, once again took over and they became in charge of Suriname, though allowing for a brief come back made by the military from December 1990 to September 1991.

Historically from the 17th century to the 19th century, Suriname’s economy was primarily focused on agriculture with the cultivation of cocoa, sugar and cotton on plantations located along the various Surinamese rivers.

During the colonization the triangular trade consisted of:

• Trade of labor -People procured from Africa and shipped to South America, the Caribbean and North America to work as slaves on the plantations, while
• Trade of commodities -sugar, coffee, cotton etc. were sailed back to The Netherlands /Europe and then
• Trade of manufactured goods and textile in exchange for the trade for slaves.

After the abolition of slavery in 1863 and the arrival of East-Indian Immigrants -from India-, as contracted laborers, in 1873, rice as an export commodity was added to the list of agricultural products. In the 20th century bananas, citrus and seafood/fish were added to this list of export goods. During the early stages of the 20th century the export of extractive products, with a high focus on bauxite and aluminum, started. This was by far the largest source of income from the beginning of the 20th century until present.

Due to the plantation culture that Suriname has known from its colonial past, the coastal area has been developed and infrastructure has been constructed in this area. Partly because of its limited types of exports, insufficient local production due to the small population and labor force, the Surinamese economy, can be characterized as an import economy: it depends heavily on importing basic commodities such as food, healthcare products and medicine, textile manufactured goods, and also cars, building materials, industrial machinery/heavy equipment. In contrast to the triangular trade, export and import of goods as well as the export and import markets have changed significantly and expanded during the 20th and 21st century.

Overview of the 5 main streams of export and import goods, the export markets and import countries:

Table 3.2 a/3.2 b: OEC – Suriname (SUR) Export, Import, and Trade Partners / https://atlas.media.mit.edu/nl/profile/country/sur/
* (2015/ Gold) is added to this line, since 2015 bauxite mining has stopped.
** According to ‘Algemeen Bureau voor de Statistiek’(ABS)/General Office for Statistic) the 2nd ranking export good is Refined petroleum.

Suriname’s export, mostly based on raw materials and basic agricultural products, is dependent on developments on the international commodity markets and therefore volatile.

Local Currency

Up till December 31, 2003, the Surinaamse gulden (SRG/ Surinamese Guilders) was the official currency. The exchange rate of SRG-USD was stable until mid-1980/1981. Suriname’s currency was linked to the USD. Previously, until 1994, there was a fixed exchange rate ratio between the USD and SRG of USD/SRG 1.77.

As a result of the unification of the exchange rates on July 1, 1994:

• a floating exchange rate was established based on the supply and demand mechanism
• so-called subsidized rates were eliminated
• ban on foreign exchange trade on the ‘parallel’/black market

The SRG as a currency was replaced on January 1, 2004, by a new currency called Surinamese dollar (SRD). At the time of the transfer, the nomination on banknotes expressed in SRG was divided by a factor of 1,000. On January 1, 2004 the exchange rate for the USD was set at USD/SRD 2.77.

From January 1, 2004 to November 19, 2015 the SRD was twice devaluated as a monetary necessity, i.e.:

• on January 21, 2011, the exchange rate quotation became USD 1 = SRD 3.25
• on November 19, 2015, the exchange rate quotation became USD 1 = SRD 3.96
  From February 2016 on the SRD was disconnected from the USD for its daily quotation. On December 31, 2016 the exchange rate for the USD based on the quotation of CBoS was USD/SRD 7.354 and the average month exchange rate for 2016 was USD/SRD 6.173.

Commercial and reporting currencies

Although the trade currency in Suriname is the SRD, unlike in other South American countries, buying and selling goods and services in USD and Euro informally became a common practice. Since July 1,1994, it is legal to carry foreign currency and hold foreign currency accounts in the banks.

Public Sector

All the financial accounts reports and the budgets of the Government are stated in SRD. In accordance with Article 10 of the Government Accounts Act 1952 (Comptabiliteitswet) “taxes and other sources or benefits, must be recorded for the service of the year in which they are received”.

Private Sector

The financial accounting (bookkeeping) of companies must take place in SRD unless the economic reality of the company is based on a different currency, i.e. its functional currency. According to article 36 paragraph 4 of the Income Tax Act 1922 a taxpayer can request to prepare its financial statement in accordance with the provisions of Article 42, third paragraph, in a currency designated for this purpose by the Minister.

The amounts mentioned in the Income tax law are converted to the aforementioned currency according to the unified exchange rate set by the CBoS. Though the request must be made to the Minister of Finance it must be submitted to the Inspector of Direct Tax. To obtain approval, the taxpayer must comply with the conditions as mentioned in the State decree of December 3, 1995.

The conditions for eligibility are as follows:

• regular financial accounting i.e. bookkeeping is conducted with regular annual closures, which should also meet the requirements as set by the Inspector of Direct Taxes;
• it concerns a foreign exchange-generating company; this is understood to mean a company that has demonstrably achieved its turnover, wholly or almost entirely, in the previous calendar- or financial year in a currency other than the local currency with a minimum of USD 250,000 or its equivalent in the designated currency, or the company can demonstrate that this will be the case in the current calendar- or financial year.

The large size mining companies, and the IOCs can conduct financial accounting and reporting in USD according to their agreement. Staatsolie has been granted permission by the Tax Authority to conduct financial accounting and reporting in USD from January 1, 1995, when it adopted the US-GAAP for Hydrocarbon and gas as accounting principles.