SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC June 2023 CONTENTS Abbreviations and acronyms 5 Acknowledgments 6 Executive summary 7 1. Introduction 10 1.1 The objectives and approach of this diagnostic 11 1.2 Historical and demographic background 12 1.3 Political context 14 1.4 Recent economic developments 15 1.5 Poverty and shared prosperity 18 2. The challenge: governance and institutions must deliver results for citizens 22 2.1 Capacity and government effectiveness 24 2.2 Accountability, regulation, and enforcement 26 2.3 Corruption and crime 28 2.4 Public financial management 31 2.5 Statistical capacity 33 3. Challenge: the equitable allocation of resource revenue 35 3.1 Offshore oil development 37 3.2 The fiscal management of nonrenewable natural resource rents and the institutional setup 39 4. Challenge: invest in human capital and protect people from shocks 44 4.1 Education and child protection 46 4.2 Health Care 48 4.3 Social assistance 55 3 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC 5. Challenge: Create alternative employment through a thriving private sector 59 5.1 Business environment and private sector development 61 5.2 Labor market 63 5.3 Digital technologies 66 6. Challenge: Protect Suriname’s forest, invest in flood protection, decarbonize 69 6.1 Forest protection 71 6.2 Flood prevention and disaster risk management 74 6.3 Decarbonization and energy 77 7. High-level outcomes 79 HLO 1: Equitable allocation of resource revenues supports growth and poverty reduction 81 HLO 2: Increase human capital and protect people from shocks 82 HLO 3: Create more and better jobs through a thriving private sector 83 HLO 4: Protect forest and living environment in the interior and adapt to increasing flood risks 83 8. Data and analysis gaps 85 9. References 88 10. Annex 98 Annex A. Methodology: Benchmarking 99 Annex B. Methodology: Phone Survey 99 Annex C. Methodology: General Bureau of Statistics Self-Assessment 100 Annex D. Methodology: Microsimulations 100 4 ABBREVIATIONS AND ACRONYMS bpd barrels per day GDP gross domestic product HLO high-level outcome iGOPP index of governance and public policy in disaster risk management NDC Nationally Determined Contribution NIMOS National Institute for Environment and Development in Suriname NRF Natural Resource Fund (Guyana) NRPB nonresource primary balance PAHO Pan American Health Organization RvS Supreme Audit Institution (Rekenkamer van Suriname) SCD Systematic Country Diagnostic SOE state-owned enterprise SSF Savings and Stabilization Fund Staatsolie Staatsolie Maatschappij Suriname (Suriname State Oil Company) UNICEF United Nations Children’s Fund WHO World Health Organization 5 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC ACKNOWLEDGMENTS This first Systematic Country Diagnostic (SCD) of Suriname has been prepared under the leadership of Lilia Burunciuc, Seynabou Sakho, Manuel Reyes-Retana, Ronke-Amoni Ogunsulire, Moritz Nebe, Robert Taliercio, Doerte Doemeland, Ximena Del Carpio, and Carlos Rodríguez-Castelán. The team has benefited from valuable guidance by Shantayanan Devarajan and William Maloney. The SCD has been prepared by a core World Bank team led by Jacob de Hoop, Diletta Doretti, Joost Draaisma, Bernard Myers, and Javier Suarez, with substantive contributions from Luiz Felipe Almeida, Melissa Brown, and Emily Dahl. The team would like to thank peer reviewers Stuti Khemani, Jeetendra Khadan, Hans Hoogeveen, and Verena Fritz for their valuable insights and comments as well as Alexandru Cojocaru and Samuel Rodriguez for their guidance in the formulation of the high- level outcomes. The team benefited from written comments to drafts of the report prepared by James Anderson, Luis Andres, Colin Andrews, Malaika Becoulet, Kevin Carey, Jose Chavez, John Bryant Collier, Vickram Cuttaree, Xavier Espinet Alegre, Pablo Faijnzylber, Eric Feyen, Stephanie Gil, Mona Haddad, Hajime Inoue, Timothy Johnston, Andrea Kucey, Midori Makino Susana Moreira, Rafael Munoz Moreno, Theresa Osborne, Nicolas Peltier, Alberto Rodriguez, Jose Romero, Clelia Rontoyanni, Nian Sadiq, Artessa Saldivar-Sali, Jevaenijs Steinbuks, Heidi Stensland, Maria Vagliansindi, Frederic Verdol, Anna Wellenstein, Penny Williams, and Najibuallah Ziar. Findings in the report are based on interviews the team conducted with government officials and representatives of the private sector, academia, and civil society in Suriname during two visits, in March and June of 2022, and on interactions with other development partners and an extensive literature review. The core of the report was written in the first quarter of 2023. Some issues may have changed since then. The team is grateful to the Suriname country team, the Caribbean Country Management Unit and staff of the World Bank, the International Finance Corporation, and the Multilateral Investment Guarantee Agency who contributed to the SCD. Invaluable support has been provided by Angel Bhagmattie Bhojedat, Hubert Forrester, Desiree Gonzalez, Pamela Gunio, Adriane Landwehr, and Nadischia Semmoh. 6 EXECUTIVE SUMMARY Suriname is a small, natural resource–rich, densely forested, upper-middle-income country, which, though it has great economic potential, is undergoing challenging times. The mining industry is the backbone of the economy. The mining and milling of gold and the extraction and refining of oil account for nearly 30 percent of gross domestic product (GDP) and about 90 percent of exports. In 2015–20, Suriname built up substantial macroeconomic imbalances because of declining commodity prices and economic mismanagement. The 2020 economic crisis was compounded by COVID-19 lockdowns and resulted in a stark decline in GDP. A newly elected government adopted an ambitious and comprehensive macroeconomic stabilization program aimed at restoring internal and external macroeconomic balances. This program, however, has not yet been able to stem a significant decline in GDP per capita, which dropped to US$4,900 in 2021 from a historic high of US$9,200 in 2014. Nor has the program resulted in price stability. Annual inflation has been running at over 50 percent since 2020. The effects of the economic crisis and cost-of-living increase on households are profound. Phone survey data collected by the World Bank in May and June 2022 indicate that socioeconomic indicators had still not returned to precrisis levels (World Bank 2023). Unemployment and informal employment continued to be elevated, and it was common for (especially woman-headed) households to indicate that they could not meet basic needs. The share of households indicating that they had run out of food because of a lack of money had increased from 13 percent precrisis to about 25 percent. Deteriorations in socioeconomic conditions were more profound for already poorer segments of the population: households with a less well educated head and households in the interior of the country. Substantial offshore oil deposits were recently discovered in the Suriname-Guyana Basin, with potentially significant implications for the country’s fortunes in the medium term. Production- sharing contracts have been signed with several international oil companies, although none of them has resulted in a final investment decision yet. Oil revenues could drastically improve Suriname’s growth outlook and fiscal situation. The first two offshore reservoirs expected to come on stream are estimated to contribute at least US$10 billion in government income during the term of the project. While there is still uncertainty about the commercial viability of the extraction of all the oil and gas discovered, it appears reasonable to assume that substantial revenues can be anticipated in the years ahead. Weak institutions and governance challenges, however, are holding back growth and development. Shaped by commodity dependence and ethnic diversity, patronage tends to dominate the policies of the political parties in power and has contributed to a bloated, but low-capacity civil service and a high level of subsidies and transfers. Suboptimal government information sharing with the public hampers public debate and the ability of civil society to hold public officials accountable. Auditing bodies are underdeveloped, which undermines their efforts to address corruption. Transnational crime and drug trafficking have a foothold in the country, and efforts to address the associated money laundering are lagging. Rudimentary public financial management systems contribute to vulnerability in the stewardship of public finances. The entry of businesses that could increase competitive pressure is heavily restricted through administrative and regulatory barriers to entry. Consequently, there is a significant risk of a resource curse, capture, and waste when offshore oil extraction begins. A strong 7 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC and concerted effort to depart from business as usual is required to strengthen institutions, good governance, and a competitive business environment. A sense of political urgency is needed. The window for preparation is closing quickly. This Systematic Country Diagnostic (SCD) identifies the strengthening of the institutions that contribute to accountability and good governance as the critical challenge to inclusive and sustainable growth. Converting oil revenues into assets that support sustainable and equitable growth will require public spending and investment without overwhelming the absorption capacity of the domestic economy, prudent fiscal policy, and the saving of some of the resource wealth in foreign financial assets. Significant and urgent improvement in governance and institutions is needed to achieve this outcome. Enhanced public discourse and improvements in auditing bodies, public financial management, and the national statistical system are all critical to ensuring the appropriate investment of oil revenues. The fiscal framework will have to be strengthened to address properly the challenges posed by volatile resource revenue. And Suriname’s Savings and Stabilization Fund (SSF), approved in 2017, will have to be adapted to operate within a fiscal rules framework aimed at smoothing public spending, the appropriate investment of resource wealth, and fiscal sustainability. Investing in human capital is another high priority. Compared with peer countries, Suriname has significantly lower levels of human capital. For instance, according to the latest year of the data on the World Development Indicators (2015), the net secondary-school enrollment rate (58 percent) and the lower-secondary-school completion rate (45 percent) were well below the performance of Suriname’s structural peers. The drivers of low human capital include limited or inefficient and ineffective spending in education, social protection, and health, and a drain on human resources in several sectors. An inadequately trained labor force is a major concern identified by firms and will become more pressing in view of the opportunities offered by the digital transformation of the economy. Improving education outcomes—notably, secondary-school attainment, learning in school, and the progress of disadvantaged groups—requires reforming the Ministry of Education to propel strategic change. It will also have to involve addressing broader societal challenges, including malnutrition and child marriage. The latter will require the expanded delivery of social assistance. The development of a social registry is a priority to ensure that social assistance reaches those most in need and responds to shocks. To enhance health outcomes, there is a need to address noncommunicable diseases, pay attention to poor mental health, and deliver services to disadvantaged groups, all while controlling spiraling costs. Human capital reform would need to be complemented by reforms to foster a thriving private sector to create more and better jobs. Although mining and oil are the backbone of Suriname’s economy, new offshore oil extraction will not necessarily result in improved employment opportunities. Oil extraction itself is capital intensive and offers limited employment potential. The cascading impacts of expanded oil revenues on employment in other sectors will depend on creating a more favorable business and investment climate. This will have to entail addressing burdensome procedures especially related to the entry of businesses, reduced state involvement in the economy, and a focus on enterprise access to finance. The inadequate training of the workforce is mentioned by firms as one of the most serious obstacles to firm performance and underlines the case for investment in education. Enhancing private sector employment growth will require a strategy in digital technology to support firm growth. Additional measures would be required to close gender gaps in labor market 8 outcomes (including labor force participation and unemployment) and ensure that women benefit from more and better jobs. Addressing legal barriers in the workplace and in entrepreneurship is one step toward closing the gender gap in employment outcomes. Access to modern family planning and reduced adolescent fertility is another. These efforts could, together, also facilitate a process to increase the efficiency of the civil service and help address human resource flight. Suriname is a signatory of the main climate conventions and is at significant risk of flooding, and climate change adaptation and mitigation are critical. Suriname is a conundrum from a climate change mitigation perspective. It is one of the most densely forested countries in the world, relies on renewables for about half of its electricity generation, and, accordingly, is one of only three carbon negative countries globally. At the same time, impending offshore oil extraction could make hydrocarbons the cornerstone of the country’s economic growth for decades to come and push the ambition in the country to do its part in limiting the increase in global temperatures to 1.5°C out of reach. The country’s forests are at risk, particularly because of small-scale artisanal gold mining. Not only does this form of gold mining threaten the forests, but the heavy use of mercury in this industry also threatens the health and livelihoods of those living in the interior of the country. Nonetheless, there are opportunities to curb emissions and alleviate the pressure on the forests. Efforts to limit emissions could be supported through reduced energy subsidies and continued investment in renewable electricity generation. Indeed, 100 percent renewable energy supply may not be an unreasonable goal in the medium term. The creation of alternative, forest-friendly, private sector opportunities is both feasible and necessary to reduce the pressure on the country’s forests. As the forests represent an important carbon sink, these efforts could be financed through the international REDD+ framework designed to reduce emissions from deforestation and degradation. Addressing ethnic and regional disparities could contribute to reduced pressure on the forests and support the development of the interior of the country. This would require progress on discussions to grant indigenous and Maroon communities rights over land, combined with strengthened community capacity to manage forests and engage in sustainable partnerships. 9 1. INTRODUCTION 1.1 THE OBJECTIVES AND APPROACH OF THIS DIAGNOSTIC Suriname is traversing a challenging period of macroeconomic adjustment that has repercussions for the population. Under new political leadership, the government has embarked on a macroeconomic stabilization and recovery program and has begun discussions with the country’s creditors to restructure external debt. An International Monetary Fund Extended Fund Facility was approved in December 2021 in support of the program. While there has been progress in the implementation of the program, significant challenges remain. The population has been heavily affected by the deep economic downturn in 2020–21. High levels of inflation, following sharp adjustments in the exchange rate and pressures in international food and energy prices, have rapidly eroded the purchasing power of many households. And problems in implementation capacity and social and political constraints are hampering the launch of critical macrofiscal, financial, and institutional reforms. Newly discovered offshore oil and gas may offer opportunities to change this situation if the right conditions are created for revenues to be invested in sustainable and equitable growth. This SCD aims to describe the challenges and opportunities for stakeholders and the government to reduce poverty and enhance shared prosperity in a sustainable manner. The SCD is intended to provide a broad overview of the challenges and opportunities. It not necessarily restricted to the core areas of World Bank engagement. However, the study is considered an important input to the development of the Country Partnership Framework that will guide the collaboration between the World Bank and the government of Suriname in coming years. The framework is expected to be developed after completion of the SCD. In particular, the anticipated high-level outcomes (HLOs) identified and described in the diagnostic are expected to serve as a key building block of the framework. The description of these outcomes is intended to inform a multisectoral approach to achieving concrete improvements in lives and livelihoods and the partnership of Suriname and the World Bank in the years ahead. Governance and institutions are discussed in detail in this SCD. Poor governance and weak institutions are the defining challenge in Suriname. They are hampering progress in most other areas of the economy and society and could prove to be a critical barrier to the productive and equitable allocation of natural resource revenues, including from future oil and gas extraction. The next section of the SCD therefore focuses on this topic, which is also explored as part of other development challenges that are analyzed in detail in the SCD: (a) the prospects for a renewed natural resource boom through the exploitation of offshore oil and gas deposits; (b) the weaknesses in the education, health care, and social assistance systems that are creating an inadequately educated and trained labor force, aggravated by the emigration of experienced, skilled individuals; (c) significant government involvement in the economy, the high cost of doing business, a backlog in adopting crucial business- related legislation, and the insufficient access of enterprises to finance; and (d) the environmental damage caused by illegal, small-scale mining and logging and the growing vulnerability to extreme weather events and rising sea levels (floods and coastal erosion). The SCD has been prepared by World Bank, in close consultation with national authorities and other stakeholders, including the private sector, civil society, and key external development partners of Suriname. At many meetings, representatives of the World Bank, the government, associations, the private sector, academia, civil society, and development partners discussed the issues and challenges. The World Bank team carried out a benchmarking of the country’s development performance relative 11 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC to structural peers, aspirational peers, and high-income peers to identify priorities, challenges, and opportunities (see annex A). Because Suriname is a data scarce country, the team implemented a phone survey to obtain new information on the well-being of the population and the development of indicators of well-being during the recent years of macroeconomic hardship (World Bank 2023; see annex B). The analysis of these and other available public data sources was used to provide quantitative support to the more qualitative observations. The analysis was complemented with an extensive review of the literature and previous analytical work on the relevant topics in Suriname. 1.2 HISTORICAL AND DEMOGRAPHIC BACKGROUND Suriname is a small, ethnically diverse country with an increasingly aging population. Suriname’s postindependence democratic development has been interrupted by multiple periods of military rule. Suriname, a tropical and densely forested country in the northeast of South America, is situated to the north of Brazil and neighbors French Guiana and Guyana. In 2023, the country had an estimated total population of about 623,000.1 Located just north of the equator, Suriname has a tropical climate with two wet seasons.2 Although part of mainland South America, Suriname is culturally and politically close to the Caribbean and a member state of the Caribbean Community.3 Paramaribo, the capital, is the country’s main political and economic hub and home to a large share of the population.4 The remainder of the country (about 97 percent of Suriname’s total land surface) consists predominantly of forest.5 Before being colonized by the Dutch, Suriname was inhabited by various indigenous peoples. The most numerous were the Arawaks and the Caribs. Multiple European powers established trading posts and began vying for influence in what is now Suriname early in the seventeenth century. The British first colonized Suriname and established plantations in the middle of that century. After decades of war, the Dutch took control following a land swap with the British in 1667. In the following centuries, the Dutch ran Suriname as a plantation colony, relying heavily on enslaved people from Africa. Stories of the exceptionally harsh treatment of the enslaved people abound. After slavery was formally abolished over the decade from 1863 to 1873, indentured laborers were marshaled from China, India, and the Dutch East Indies to make up for the labor shortfall. 1 World Population Prospects 2022 (dashboard), Population Division, Department of Economic and Social Affairs, United Nations, New York, https://population.un.org/wpp/. 2 CCKP (Climate Change Knowledge Portal), World Bank, Washington, DC, https://climateknowledgeportal.worldbank.org/. 3 Suriname (web page), Caribbean Community, Georgetown, Guyana, https://caricom.org/country_profiles/suriname/. 4 At the time of the latest census, 2012, about half of the population was living in the capital (ABS 2013). More recent govern- ment publications put the share of the population living in the capital at about 400,000 or two-thirds of the population of the country (for example, see Office of the President 2019). 5 See Forest Area (% of Land Area): Suriname (web page), World Bank, Washington, DC, https://data.worldbank.org/indica- tor/AG.LND.FRST.ZS?locations=SR. 12 FIGURE 1. SURINAME IS IN DEMOGRAPHIC TRANSITION, AND THE POPULATION IS AGING Population by broad age groups 500 Population (thousands) 95% prediction interval 450 400 350 25-64 300 250 200 0-14 150 15-24 100 50 65+ 0 1950 1975 2000 2025 2050 2075 2100 Year Source: World Population Prospects 2022 (dashboard), Population Division, Department of Economic and Social Affairs, United Nations, New York, https://population.un.org/wpp/. As a result of its colonial history, Suriname is home to a wide range of ethnic groups, none of which are in majority. According to the 2012 census, the main ethnic groups were Hindu (27 percent), Maroons (22 percent), Creoles (16 percent), Javanese (14 percent), mixed (13 percent), indigenous (4 percent), and Chinese (1.5 percent).6 The official language is Dutch. However, Suriname is home to dozens of other languages. The most prominent is Sranan Tongo. Maroons, who are descendants of runaway enslaved people, and indigenous groups live predominantly in the interior of the country. The other ethnic groups live mostly in the capital, Paramaribo, and in the nearby coastal areas. Suriname has a comparatively large diaspora in the Netherlands. In 2017, about 350,000 Surinamese were living in the Netherlands versus about 570,000 in Suriname. Skilled Surinamese often emigrate for better opportunities abroad, particularly in the Netherlands and the Dutch-speaking Caribbean islands. Migrants into Suriname are generally less highly skilled and come primarily from Brazil, Cuba, the Dominican Republic, and Haiti. Current population indicators point to a country in demographic transition, with moderate birth and mortality rates, declining fertility rates, increasing longevity, and moderate to low natural replacement rates. This demographic transition is reflected in a changing population structure (figure 1). The share of the population age 65 or more is growing quite rapidly. The number 6 For excellent discussion of the demographic and socio-economic make-up of Suriname’s population see Menke, Jack K., ed. (2016). 13 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC and shares of children (0–14) and youth (15–24), in contrast, are projected to decline in coming decades (UN DESA 2022). The dynamics of the demographic transition are concentrated mainly in the country’s densely populated areas around Paramaribo and, to a lesser extent, along the rural coast. The sparsely populated interior still exhibits a preindustrial demographic profile, with high birth rates and lower life expectancy. 1.3 POLITICAL CONTEXT Despite government efforts to tackle the big challenges the country faces, public discontent with mismanagement and corruption remains. The postindependence development of democracy in Suriname was frequently interrupted by military rule. Suriname gained autonomy as a state within the Kingdom of the Netherlands in the 1950s and became fully independent in 1975. After independence, the country went through multiple cycles of democratic election and (semi-)military rule. A first coup was staged by the military in 1980, after which a military regime ran Suriname until 1987. The military regime fought a Maroon guerilla army over control of the interior of the country, with many civilian casualties, and was involved in numerous human rights abuses. Following a brief period of democratic rule, the military staged a second coup in 1990 only to organize democratic elections again in 1991. Although the countries have close ties, Suriname’s relationship with the Netherlands since independence has undergone significant change. The approach of the Netherlands toward Suriname following independence was initially noninterventionist and focused on development assistance. A more interventionist approach by the Netherlands beginning in the early 1980s, however, contributed to a postcolonial relationship with the Netherlands that has been described as “complex, charged, and emotional” (Ramsoedh 2015).7 Ethnic diversity and dependence on commodities and extractives have shaped politics in Suriname. Voting occurs largely along ethnic lines, and, because no ethnic group predominates, coalitions among several parties must be formed to obtain a parliamentary majority. “Corruption and clientelism are pervasive problems in society and in the government, undermining the rule of law” concludes Freedom House (2022). Because the checks and balances on the power of the ruling majority are limited, patronage along ethnic lines tends to dominate the policies of the political parties in power. The revenues from commodity exports and the extractive sector have reinforced these patterns and made the distribution of rents across ethnic groups a central political objective. While ethnic conflict has mostly been contained, it played a role, for instance, in the civil war in the 1980s, during which Maroon guerillas in the interior of the country fought the ruling military dictatorship. Gender appears to play a more modest role in politics in Surinam than in many other countries. According to the World Economic Forum (WEF 2022) gender gap index, women make up 29 percent of the members of parliament and fill 33 percent of ministerial positions. Menke et al. (2012, 7 For political and economic motives, the Netherlands unilaterally interrupted the development assistance relationship on several occasions. 14 xxviii) find that, although “women seem to have lower levels of political efficacy than men,” “attitudes towards women in terms of political participation [are] favorable.” They note that “In terms of voting behavior there are no significant gender gaps in Suriname.” After the latest elections, in 2020, a new government took power on the promise that it would restore economic stability.8 The previous government, led by the Nationale Democratische Partij, had nearly brought the country to the brink, as explained in more detail below, and damaged international relations. In 2020, the new government, led by the Vooruitstrevende Hervormingspartij and the Algemene Bevrijdings en Ontwikkelingspartij, broadly reestablished international relations. However, while it promised to represent all Surinamese, patronage along ethnic lines remains visible. The new government presented a more reliable image, but mismanagement and corruption did not fade into the past. In the middle of 2022, deteriorating economic circumstances and fears of capture of impending oil rents resulted in popular protests. Public outcry for improvements in public health care provision and dismay with continuing high inflation and rising fuel and electricity prices spiraled into broader protests. Protestors also denounced the perceived nepotism in the government and demanded that those in the highest political offices remove their family members from the board of Staatsolie Maatschappij Suriname (Suriname State Oil Company, Staatsolie). Protests faded after a government response acknowledging the concerns of the protestors, but flared again in February 2023, becoming more violent and leading to looting in Paramaribo. One of the coalition parties (the Nationale Partij Suriname) announced that it would leave the governing coalition and withdrew its ministers. The country appears to have entered a period of political uncertainty. Meanwhile, the economic situation remains troubled. 1.4 RECENT ECONOMIC DEVELOPMENTS Following a severe economic and fiscal crisis, the government is implementing an ambitious and challenging macroeconomic stabilization program. The economic performance of the country has been volatile over the past two decades. The fluctuation in economic activity and incomes is closely related to the natural resource–based nature of the economy. The commodity price boom, which started around 2000, led to a significant increase in GDP per capita in US dollar terms, peaking at nearly US$9,200 in 2014 (figure 2). The subsequent commodity price slump was aggravated by the termination of bauxite and alumina exploitation in 2015 and led to a strong decline in GDP per capita. Foreign investment in a second large-scale gold mining operation boosted economic activity and export earnings when the mine opened in 2017, though this has not halted the decline in GDP per capita, which dropped to US$4,900 in 2021. 8 Suriname holds parliamentary elections every five years. The 51 members of parliament subsequently appoint the vice-president and president. 15 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC FIGURE 2. REAL SECTOR ACTIVITY, EXPORTS, AND EMPLOYMENT GDP and a. GDP GNI and per GNI capita per capita b. GDP growth (US$) b. GDP growth (US$) 10.000 10,00 5,00 8.000 0,00 6.000 -5,00 -10,00 4.000 -15,00 -20,00 2.000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2006 2008 2010 2012 2014 2016 2018 2020 GDP per capita GNI per capita c. GDP by sector, 2019 c. GDP by sector, 2019 c. GDP by sector, 2019 d. Employment 2019 by sector,by d. Employment sector, 2019 Agriculture Industry (incl. Mining) Agriculture Industry (incl. Mining) Agriculture Industry (incl. Mining) Construction Education/Health Construction Education/Health Construction Education/Health Public Administration Other services Public Administration Other services Public Administration Other services e. Exports f. Gold production (million US$) (metric ton) 3.000 50 2.500 2.000 40 1.500 30 1.000 500 20 0 10 2011 2017 2012 2013 2015 2021 2014 2016 2018 2019 2010 2022 2007 2020 2006 2008 2009 0 Other 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Agriculture, Forestry and Fishing Gold Small scale mining Large scale mining Oil Alumina Source: Based on data of the General Bureau of Statistics and the Central Bank of Suriname. Note: GNI = gross national income. 16 Labor productivity is highest in the primary and secondary sectors. Gold mining and oil extraction, along with milling and refining operations, are highly capital-intensive activities. As a result, industry (excluding construction) employs about 10 percent of the labor force, while it generates about 30 percent of value added, according to 2019 national accounts statistics. Similarly, agriculture, forestry, and fishing generate nearly 10 percent of value added, while employing about 5 percent of the labor force. The latter may be an underestimate because there is often reference to significantly higher, largely informal employment in the sector. In contrast, education, health care, and public administration account for about 13 percent of GDP, while employing nearly a third of the total labor force.9 Other tertiary sector service activities represent more than 40 percent of employment and display a larger variation in labor productivity, while sectors such as financial, insurance, and professional business services show substantially higher productivity than trade, transport, and hospitality services. The country currently faces difficult economic conditions. Substantial macroeconomic imbalances were built up following a sharp decline in commodity prices in 2015–16 and the end of alumina production in 2015. In the run-up to the 2020 general elections, the macroeconomic imbalances were exacerbated by a substantial expansion in the number of civil servants, excessive borrowing, and the monetary financing of the fiscal deficit. A widening gap between the fixed official exchange rate and parallel market rates contributed to large current account deficits and the near- exhaustion of usable international reserves. A severe economic crisis compounded by restrictions on economic activity to curb the spread of COVID-19 led to a contraction of GDP by 16.0 percent in 2020 and another 2.7 percent in 2021. The near-term outlook critically depends on the successful implementation of an ambitious macroeconomic stabilization program. The newly elected government adopted a comprehensive program of policy measures with respect to fiscal and debt sustainability, monetary and exchange rate policy, financial sector stability, and governance to address the imbalances. On December 22, 2021, the International Monetary Fund Board approved a three-year Extended Fund Facility in support of this program. Revenue enhancing and expenditure reduction measures narrowed the country’s primary deficit to an estimated 1.3 percent of GDP in 2021, a stark improvement from the primary deficits of nearly 19 and 10 percent of GDP in 2019 and 2020, respectively. Additional measures, such as the introduction of a value added tax, the elimination of electricity subsidies, and the rationalization of the civil service, should see the primary balance improve to a surplus of 3 percent–4 percent of GDP by 2023–24. Tax policy reform and the strengthening of tax administration are needed to encourage domestic revenue mobilization. Government revenues stalled at around 20 percent of GDP following the cessation of alumina production in 2015. Mining royalties dropped from 3.9 percent of GDP in 2017 to 3.8 percent in 2020. Additionally, the pandemic had a negative impact on tax revenues, which fell from 15.0 percent of GDP in 2019 to 13.4 percent in 2020, mainly because of a decline in indirect taxes. Sustained higher revenues will depend not only on the economic recovery, but also on the ability of the government to implement tax policy reform to remove important distortions and broaden the tax burden, while strengthening tax and customs administration. 9 Whereas bauxite, alumina, and gold production is almost fully exported, oil production and refining are directed toward both the domestic and external markets. Agriculture, forestry, and fishing similarly produce commodities—mainly rice, ba- nanas, fish, shrimp, and wood—for both domestic consumption and export. 17 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC Restoring public debt sustainability will require a restructuring of the country’s external public debt. Public debt was estimated at around 126 percent of GDP at the end of 2021. External public debt makes up 66 percent of total debt and has been contracted in about equal parts with private creditors, bilateral creditors, and multilateral agencies. Suriname finalized a debt restructuring agreement with the Paris Club in mid-2022 and agreed on the terms of a debt restructuring with India early 2023. Negotiations with China, a non-Paris Club bilateral creditor holding a majority of the country’s bilateral debt, and with private creditors have not yet been finalized. A floating exchange rate and a new monetary policy framework targeting reserve money were adopted in mid-2021. Exchange rate depreciation and the overall economic downturn led to a significant shift in the current account of the balance of payments, from a deficit of 11 percent of GDP in 2019 to significant though decreasing surpluses of 9 percent, 5 percent, and 2 percent of GDP in 2020, 2021, and 2022, respectively. The improvement in the current account was the result of a sharp contraction in imports of goods and services, a build-up of arrears on external debt service liabilities, and a strengthening in the price of gold, Suriname’s main export. Because Suriname is a small economy, with imports equaling about 50 percent of GDP, a significant pass-through from exchange rate depreciation to domestic prices led to a sharp rise in inflation. Annual inflation ran above 60 percent during both 2020 and 2021 and was well above 50 percent in 2022. Near-term economic growth will be largely driven by the prospects for commodity-based activities. Whereas the volumes of current oil, gold, and wood production are projected to remain stable over the next few years, a modest boost in domestic demand and the demand for nontradable goods and services should accompany modestly favorable commodity price developments, a modest increase in the labor force, and the stabilization in macroeconomic conditions. The longer-term growth outlook may be more positive following the discoveries of several offshore oil deposits. A final investment decision by one of the major oil companies is expected by the end of 2023, at which point there will be more certainty regarding possible revenues from offshore oil production, though any revenue will still take several years to materialize. 1.5 POVERTY AND SHARED PROSPERITY Suriname has not fully recovered from the recent economic crisis; poverty remains elevated; and women’s employment subdued. Poverty tends to be more widespread in the interior of the country and among certain ethnic groups. Suriname’s Multidisciplinary Poverty Working Group (Sobhie and Kisoensingh 2023) estimates that 46.5 percent of the population was unable to meet basic needs at the time of the 18 2013/14 household budget survey. The estimated poverty rate was markedly higher in rural (74.6 percent) than in urban (36.8 percent) areas. The share of the population in extreme poverty (that is, unable to meet the cost of a minimum food basket) was estimated at 24.9 percent. Poverty rates were slightly lower among woman-headed households (44.6 percent) than man-headed households (47.4 percent). They were appreciably higher among Surinamese of indigenous (73.2 percent) and Maroon (62.4 percent) ethnicity, large households (70.3 percent in households with eight or more inhabitants), households with a less well educated head (64.0 percent if the head has not attended secondary school), and households with an unemployed head (59.3 percent).10 Relying on different data sources, others find similar patterns, including through analysis based on the Latin America Public Opinion Project survey and the 2016/17 Survey of Living Conditions (Beuermann, Muñoz, and Flores Cruz 2018; Sobhie 2017). The latter also indicates that poverty has a spatial dimension, that is, rural areas are comparatively poorer than urban areas, and rural areas in the remote interior are poorer than areas on the coastal plains and more reliant on forest products and subsistence agricultural production. The macroeconomic crisis that started in 2020, combined with the COVID-19 pandemic, had a severe impact. Because household survey data are not collected on a regular basis in Suriname, following trends in poverty and inequality is difficult. Nonetheless, high inflation, particularly rising prices for food, beverages, and housing, have clearly been a major obstacle in achieving well-being among households (figure 3). Although no study has documented the impact of the macroeconomic crisis on poverty, multiple studies suggest that the impact has been profound. Arteaga, Beuermann, and Khadan (2021), for instance, conducted a phone survey in August 2020 documenting a clear deterioration in employment, widespread business closures, and declining remittances. Moreover, they found that “preexisting inequalities across income and gender groups were exacerbated” as a result (Arteaga, Beuermann, and Khadan 2021, 1). Building partly on their analysis, the World Bank simulated the impacts of the 2020 crisis on poverty rates and found evidence that the rates had risen by about 9 percentage points at the height of the pandemic (see box 4 below). 10 Ethnicity and place of residence are known to be important predictors of socioeconomic outcomes in Suriname. Menke et al. (2012) provide a detailed overview of ethnic disparities in Suriname. They argue that, in Suriname, ethnicity is a more prominent social construct than skin color and that place of residence and ethnicity are jointly key determinants of well-be- ing. This finding is echoed by Fung-Loy and Van Rompaey (2021, 491), who conclude that “different ethnic groups tend to concentrate in different neighbourhoods. These segregated ethnicities are in turn linked to the higher and lower level socio-economic groups.” 19 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC FIGURE 3. CONSUMER PRICE INDEX INFLATION: CONTRIBUTION, BY COMPONENT Annual percent 80 70 60 50 40 30 20 10 0 ene-20 jun-20 nov-20 abr-21 sep-21 feb-22 jul-22 dic-22 Food and non-alcoholic beverages Housing and utilities Transportation Other Source: Macro Poverty Outlook (dashboard), World Bank, Washington, DC, https://www.worldbank.org/en/publication/macro- poverty-outlook#sec1. Note: December 2022 data are preliminary. The population continues to be affected by the severe economic downturn that began in 2020. Phone survey data collected by the World Bank in May and June 2022 indicate that socioeconomic indicators lagged pre-2020 levels (figure 4). The share of men age 18–65 in employment was about the same, at 84 percent, but the share of women in employment was 63 percent, 4 percentage points below the pre-pandemic level. Moreover, the share of the employed in formal work (defined as contributing to the pension fund) had declined by 10 percentage points among both women and men. It is common among households, especially woman-headed households, to report that they cannot meet basic needs. Food insecurity had increased since the 2020 economic crisis. The share of households that run out of food because of a lack of money rose from 13 percent before the pandemic to a quarter of all households by the middle of 2022. The share was a bit higher among woman-headed households. 20 FIGURE 4. THE ECONOMIC CRISIS AND HOUSEHOLD POVERTY a. Employment outcomes have not fully recovered since the 2020 economic crisis Population age 18–65 in employment, % The employed in formal jobs, % 84% 84% 84% 84% 80% 80% 67% 67% 75% 75% 73% 73% 80% 80% 69% 69% 65% 65% 67% 67% 63% 63% 59% 59% 55% 55% 57% 57% 60% 60% 60% 60% 40% 40%84% 84% 40% 40% 80% 67% 75% 73% 80% 69% 65% 67% 20% 20% 63% 20% 20% 59% 84% 84% 55% 57% 60% 80% 75% 73% 60% 80% 67% 69% 67% 0% 63% 65% 0% 0% 0% 59% 55% Men 57% 40% 60% Men Men Women Women Overall Overall 40% 60% Men Women Women Overall Overall 20% Pre-crisis Pre-crisis Post-crisis Post-crisis 20% Pre-crisis Pre-crisis Post-crisis Post-crisis 40% 40% 0% 20% 0% 20% 46% 46%Men b. Many households Women cannot meet basic Overall 30%and needs, 30% Menfood security has deteriorated since Women 2020 Overall 44% 44% 26% 26% 44% 44% 25% 25% 25% 25% 0% 0% Pre-crisis Post-crisis 42% 42% 25% 25% Pre-crisis Post-crisis Men Households Women 42% 42%that can meet basic needs, % Overall Men Women Households without food or money, % Overall 40% 40% Pre-crisis Post-crisis 20% 20% Pre-crisis Post-crisis 46% 38% 44% 37% 37% 30% 15% 15% 38% 14% 14% 15% 15%13% 13% 26% 44% 25% 25% 36% 36% 42% 25% 30% 46% 42% 34% 44% 34% 10% 10% 26% 44% 25% 25% 40% 32% 42% 20% 25% 32% 5% 42% 5% 38% Male-headed Male-headed Female-headed 37% Female-headed All All 15% 14% 15% 20% 13% 40% %0 %0 36% 38% 37% 15% Female-headed Male-headedFemale-headed All 10% Male-headed 14% All 34% 15% 13% 36% Pre-crisis Pre-crisis Post-crisis Post-crisis 32% 5% 10% 34% Male-headed Female-headed All 32% %0 5% Male-headed Female-headed All Male-headed Female-headed All %0 Pre-crisis Post-crisis Male-headed Female-headed All Pre-crisis Post-crisis Source: Based on World Bank 2023. 21 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC 2.THE CHALLENGE: GOVERNANCE AND INSTITUTIONS MUST DELIVER RESULTS FOR CITIZENS 22 Deficiencies in governance in Suriname have been attributed to patronage and the creation of government employment as a mechanism to distribute natural resource rents. Ethnic diversity and dependency on commodities and extractives have played an important role in shaping Suriname’s political decisions. To this day, voting occurs largely along ethnic lines, which contributes to clientelism. The revenues from commodity exports and the extractive sector have only reinforced these patterns and made the distribution of rents across ethnic groups a central political objective. These political dynamics have contributed to interconnected governance challenges. The recruitment of civil service personnel based on ethnicity rather than merit has contributed to a bloated, but low- capacity public sector and undermined government efficiency. Clientelism stifles public debate, thus reducing the accountability of government and contributing to high-level corruption. Corruption, in turn, negatively affects the stewardship of public finances. The negative implications of these governance problems can be observed in the public and private sectors. There is significant government involvement in the economy. There is a long- standing bias against trusting the private sector, which has resulted in regulations that establish barriers to private sector development. Such laws and regulations were developed under a closed economy model in which government subsidies and protection played a central role. State ownership remains important in many sectors of the economy, and there is limited, centralized oversight over loss-making state-owned entities and recipients of subsidies and transfers. The institutional environment is reflected, moreover, in a serious backlog in the passage of business-related laws. Crucial legislation on customs, foreign investment, mining, trade facilitation, competition, standards, and intellectual property has been pending often for more than a decade. A relatively large discretionary decision-making power and ad hoc decision-making have fostered a lack of predictability and a high cost of doing business (WTO 2019). Large investments in the mining sector are subject to extensive negotiations between the government and investors. The absence of clear procedures and processes in the registration of businesses, or the application of unclear ones leads to a perception that Suriname’s investment and business climate is negatively affected by a general lack of transparency and clarity (IDB 2014). The political economy and governance context has not been conducive to the adoption of more up-to-date business regulation and progress in privatization and control over state-owned entities. Overcoming deficiencies in governance and improving the capacity of the government to implement core public sector functions seems to be the overriding challenge in the effort to foster economic and social development. This is becoming even more urgent if the country is to take advantage of the opportunities offered by a near-term surge in natural resource rents. The expansion of low-skill civil service employment has contributed to the high cost of government, crowding out qualified staff and promoting deterioration in government effectiveness and efficiency. Failures in budget management have contributed to macroeconomic instability and to the inefficient use of resources. Information generation and dissemination are modest, causing low levels of transparency in many parts of the public sector and hampering evidence-informed decision-making. Some of the obstacles the country is facing are not unlike those experienced (a) in small island developing states and (b) in fragmented societies globally, in which groups compete for resources. In these societies, enhancing transparency and openness is a vital first step toward improving accountability. Moreover, technical solutions—including in public finance management—need to reflect the capacity limitations inherent in a small society (Haque, Knight, and Jayasuriya 2015). 23 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC 2.1 CAPACITY AND GOVERNMENT EFFECTIVENESS Government effectiveness in Suriname is below that of peers, and it is deteriorating. Patronage acts as a driver of a large, but low-capacity civil service. International benchmarks, such as the Worldwide Governance Indicators, present an unfavorable contrast in government effectiveness in Suriname against both global and structural comparators (figure 5). The 2021 survey assigned Suriname a percentile rank of 27.4 on government effectiveness compared with all countries worldwide. In comparison with its structural peers, Suriname does better than Gabon (20.19), but fares noticeably worse than Belize (33.65) and neighboring Guyana (42.31). The gap between Suriname’s current capacity and that of aspirational peers is more striking. Percentile rankings range from 59.13 for Trinidad and Tobago to 77.40 for Latvia. However, rather than improving, Suriname’s government effectiveness seems to be worsening. In the 2011 survey, it was around the median (50.71) of all countries worldwide, but its score has declined progressively over the decade since. The ability of public sector institutions to implement policy is undermined by the persistent reliance on patronage to fill civil service positions. This is compounded by weaknesses in the legal framework for personnel management that set few restrictions on entry into the civil service. Political parties that come into power often recruit new civil servants from their own ethnic groups, and appointments are not always merit based. Data of the Ministry of Home Affairs show that the civil service grew by about 27 percent in 2014–20; more than 7,000 civil servants were added around the general election in 2020. Many of these individuals entered through irregular procedures and lacked proper documentation. This pattern of uncontrolled entry into the civil service has contributed to a bloated and low-capacity public sector. Though the issue is politically sensitive, the government recognizes that such large numbers of unskilled staff are not needed in public administration and that more highly skilled staff are needed to deliver on public service priorities. The current fiscal crisis was expected to become a window of opportunity for authorities to reduce the size of the civil service. The draft public sector reform program that was prepared for the Ministry of Home Affairs in early 2022 called for a reduction in the size of the civil service by 5,000 staff in the first year, followed by 5,000 the following year. Because forced departures are difficult to implement under the Personnel Act of 1965, the government is relying on financial incentives to encourage staff to leave voluntarily to work in the private sector, an initiative that would be subsidized for three years by the government. The government aims eventually to supplement this approach with incentives for voluntary early retirement. As a first step, though, the Ministry of Home Affairs has embarked on and nearly completed a database cleansing process to make sure that everyone is properly documented who receives a public sector salary. The government should then be in a better position to target individuals for participation in the incentive programs and to control more efficiently any possible reentry in the civil service. 24 FIGURE 5. GOVERNMENT EFFECTIVENESS IN SURINAME RELATIVE TO PEERS a. Government effectiveness among structural peers Country Year Percentile Rank )0 to 100) Belize 2021 Gabon 2021 Guyana 2021 Suriname 2021 0 20 40 60 80 100 b. Government effectiveness among aspirational peers Country Year Percentile Rank )0 to 100) Suriname 2011 2016 2021 0 20 40 60 80 100 c. Government effectiveness, Suriname, 2011–21 Country Year Percentile Rank )0 to 100) Costa Rica 2021 Latvia 2021 Suriname 2021 Trinidad and Tobago 2021 Uruguay 2021 0 20 40 60 80 100 Source: 2021 data of WGI (Worldwide Governance Indicators) (dashboard), World Bank, Washington, DC, http://info.worldbank. org/governance/wgi/#home. To reshape the composition of public services to include more highly skilled staff will require significant policy reform and institutional capacity building. Current policies make it difficult to attract and retain staff in many high-skilled professional positions. At the same time, employment policies have created strong incentives for low-skilled individuals to favor employment in the public sector over the private sector. While the public sector reform strategy embraces ambitious plans for civil service retraining, performance management, and the privatization of functions, the capacity to design and administer the relevant programs is deficient. Information systems for policy making are limited, 25 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC and the responsibility for personnel management is fragmented across institutions. No single entity has the mandate to carry out strategic human resource management. Weaknesses in organizational structure and management systems constrain the effectiveness of service delivery. In the Ministry of Education, for example, the mandate of senior officials is comprehensive and extends well beyond the ministry’s core areas of competence. Thus, for instance, it includes the management of construction projects. Plans do not provide the necessary strategic direction, and information systems do not enable officials to obtain an accurate reckoning of the number of nonteaching staff assigned to them. The ministry’s organizational structure, including the control that may be exercised by the permanent secretary, is an impediment to effective policy development and implementation. 2.2 ACCOUNTABILITY, REGULATION, AND ENFORCEMENT Suboptimal government information sharing with the public hampers public debate. Auditing bodies are underdeveloped, which undermines efforts to address corruption. Civil society and traditional institutions have insufficient influence to hold public officials accountable, thus increasing the risk of capture. Various representatives of civil society indicate that institutions responsible for ensuring accountability have been systematically eroded under previous governments. Open, thorough public debates about the challenges and opportunities the country faces are rare. Communication by the government with the public about needed reforms is infrequent and generally perceived as unsuccessful. In part because of the prominent role of patronage in Surinamese politics, public questioning of sectoral policy decisions is unusual. The country’s constitution guarantees freedom of the press, and the “press frequently publishes reports critical of the government.”11 Nonetheless, “some journalists engage in self-censorship in response to pressure and intimidation from authorities” (Freedom House 2022). In the World Justice Project’s 2022 rule of law index, Suriname ranked 29 in 32 countries in Latin America and the Caribbean on the measure of open government.12 On this measure, which includes the extent to which government shares information and empowers citizens with tools to hold the government accountable, Suriname’s score of 0.39 on a scale of 0 to 1 places it above Gabon (0.37), but lower than Belize (0.44) and Guyana (0.44). The effectiveness of Suriname’s Supreme Audit Institution (Rekenkamer van Suriname, RvS) is undermined by its lack of complete independence. A new Audit Act was approved in 2019, and the RvS has been working with an international partner to implement relevant components. 11 Suriname (web page), Reporters without Borders, Paris, https://rsf.org/en/country/suriname. 12 WJP Rule of Law Index (dashboard), World Justice Project, Washington, DC, https://worldjusticeproject.org/our-work/re- search-and-data/wjp-rule-law-index-2020. 26 This includes the establishment of an Audit Board to help consolidate policies on staffing, structure, and audit plans. The operational guidance of a board is essential to avoid conflicting interpretations of the act on the role and responsibilities of the RvS. Despite these aspirational goals, the current capacity of the RvS to promote transparency and accountability in the use of public resources is severely compromised by deficiencies in staffing, resources, and authority. First, the RvS is dependent on the Ministry of Finance for budget and staffing, rather than receiving a budget through Parliament. Second, the term of the RvS president is capped at five years and coincides with that of the government. Third, a follow-up on RvS audit findings is not guaranteed because the Public Accounts Committee of Parliament is effectively inactive. Fourth, and most unusually, the RvS president is not allowed to communicate audit findings to the media, which undermines the potential support from civil society for action on corruption. Suriname’s internal auditing body, the Central Government Auditing Bureau (Centrale Landsaccountantsdienst), is well positioned to support financial transparency and accountability, but it, too, suffers from significant financing and staffing constraints. It has only three chartered accountants. Budget and hiring for the bureau are the responsibility of the Ministry of Finance, which could potentially limit its autonomy. The bureau regularly audits the government’s financial statements, but its ability to do so in a timely manner is constrained by the quality of recordkeeping in ministries. Bureau findings have revealed significant problems in internal controls in public bodies, but the bureau has few means to ensure follow-up. While the bureau has been able to support the public prosecutor in financial investigations, its small number of trained staff (including chartered accountants) is a severe constraint on capacity. More staff and specialized training is considered essential if the bureau is to be able to play a greater role in identifying and analyzing irregularities in financial transactions across the public sector. There is substantial room to improve regulatory quality in Suriname, and enforcement must become more consistent. Worldwide Governance Indicators place Suriname below its two structural peers in the region, Belize and Guyana, though slightly above Gabon (figure 6). Suriname is in the 26.4 percentile among countries worldwide, which is slightly below Belize (37.5) and Guyana (34.1). However, the gap is particularly striking relative to aspirational peers. While Suriname is close to the bottom quartile among countries globally, Trinidad and Tobago is around the median, and others are approaching the third quartile. Regulatory enforcement in the rule of law index measures the extent to which regulations are fairly and effectively implemented and enforced. Suriname ranks 23 in 32 countries in Latin America and the Caribbean, but it is roughly on par with Belize and Guyana.13 The Heritage Foundation has concluded that regulations in Suriname are enforced with discretion rather than rules-based consistency (Miller, Kim, and Roberts 2022). Data of the World Bank Country Policy and Institutional Assessment place Suriname in the bottom quartile in regulatory governance among countries worldwide.14 13 WJP Rule of Law Index (dashboard), World Justice Project, Washington, DC, https://worldjusticeproject.org/our-work/re- search-and-data/wjp-rule-law-index-2020. 14 CPIA (Country Policy and Institutional Assessment) (databank), World Bank, Washington, DC, https://databank.world- bank.org/source/country-policy-and-institutional-assessment. 27 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC FIGURE 6. REGULATORY QUALITY COMPARED WITH PEERS a. Regulatory quality among structural peers Country Year Percentile Rank )0 to 100) Belize 2021 Gabon 2021 Guyana 2021 Suriname 2021 0 20 40 60 80 100 b. Regulatory quality among aspirational peers Country Year Percentile Rank )0 to 100) Costa Rica 2021 Latvia 2021 Suriname 2021 Trinidad and Tobago 2021 Uruguay 2021 0 20 40 60 80 100 Source: 2021 data of WGI (Worldwide Governance Indicators) (dashboard), World Bank, Washington, DC, http://info. worldbank.org/governance/wgi/#home. 2.3 CORRUPTION AND CRIME Corruption is pervasive, and transnational crime has a foothold in the country. While there have been legislative efforts to address corruption, the implementation of these efforts lags. In an assessment, Freedom House (2022) concluded that corruption was pervasive in both government and society in Suriname. The Worldwide Governance Indicators 2021 control of corruption indicator places Suriname in the 39.9 percentile among countries worldwide, which is lower than two of the country’s three structural peers (figure 7, panel a). The World Justice Project’s 2022 rule of law index has Suriname roughly on par with two structural peers in the region (Belize and Guyana) in 28 the absence of a corruption pillar.15 Suriname was ranked by the World Justice Project at 17 in 32 countries in Latin America and the Caribbean, while Belize and Guyana were ranked 15 and 16, respectively. The Heritage Foundation notes in the index of economic freedom that the functions in which corruption is most rampant in Surinam include government procurement, the awarding of licenses and concessions, customs, and taxation (Miller, Kim, and Roberts 2022). Transnational crime has a foothold in the country, which has raised concerns about money laundering. Although transnational crime and drug trafficking do not affect Suriname as openly as they do some countries in Central America and although violence is not nearly as pervasive, the influence of the narcotics trade has reached the top of the country. Suriname is often used as a point of transit, especially for cocaine trafficking from Colombia and República Bolivariana de Venezuela to the Netherlands, other European destinations, and the United States. Illegal gold and timber trafficking and smuggling are common and important sources of income in the interior of the country. Money laundering associated with illegal activities is a problem, despite substantial efforts to address it. Attempts to confront transnational crime appear to be limited in effectiveness. Freedom House (2022) finds that due process does not always prevail in civil and criminal cases. It concludes that “the public prosecutor’s office often pursues cases selectively,” “low wages for police encourage bribery and extortion,” and “payments are sometimes made to obtain favorable outcomes in criminal and civil proceedings.” Though the country adopted new anticorruption legislation in 2017, the impact has been meager because of underfunding and the lack of technical capacity. The establishment of an anticorruption commission was a prominent provision in the law, but the commission is not yet operational.16 The Anti-Corruption Act included complementary reforms to encourage integrity, such as whistleblower protections and asset disclosure provisions affecting public officials, but the lack of implementing regulations has rendered the provisions mute. The implementation of other anticorruption measures is also at risk because of capacity constraints and the lack of political consensus on the actions to be taken. To strengthen legislation against money laundering and the financing of terrorism, the president named a steering council that includes senior ministers, the governor of the Central Bank, and other high-level stakeholders. Measures have also been taken to establish an implementation taskforce. However, the implementation of the recommendations of an evaluation is pending. The progress of implementation has also been affected by weak coordination structures among relevant agencies charged with various aspects of these issues. Not all the agencies involved have signed a memorandum of understanding to facilitate cooperation and information sharing. Amendments to acts governing a number of these agencies need to be revisited and updated to ensure that the function of each agency is clearly elaborated and is aligned with current best practice. The Ministry of Justice acknowledges that Suriname lacks the technical capacity to implement many of the measures the National Risk Assessment has called for. 15 WJP Rule of Law Index (dashboard), World Justice Project, Washington, DC, https://worldjusticeproject.org/our-work/re- search-and-data/wjp-rule-law-index-2020. 16 At the installation of the Anti-Corruption Commission on May 5, 2023, it was acknowledged that there are still substantial decisions and government decrees pending on operating procedures and budgets to allow for the proper functioning of the commission (Office of the President 2023). 29 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC FIGURE 7. COMPARATIVE MEASURES OF CORRUPTION AND JUDICIAL INTEGRITY a. Control of corruption compared with structural peers Country Year Percentile Rank )0 to 100) Belize 2021 Gabon 2021 Guyana 2021 Suriname 2021 0 20 40 60 80 100 Source: 2021 data of WGI (Worldwide Governance Indicators) (dashboard), World Bank, Washington, DC, http://info.worldbank. org/governance/wgi/#home. b. Quartile ranking on justice-related indicators compared with Latin America and the Caribbean Justice Emerging Strong (25% - 50%) (top 50%) Challenging regulations Civil justice Courts system as a major constraint Criminal justice Integrity of the legal system Judicial independence Settling disputes 0.00 0.25 0.50 0.75 1.00 Closeness to frontier Source: CPIA (Country Policy and Institutional Assessment) (databank), World Bank, Washington, DC, https://databank. worldbank.org/source/country-policy-and-institutional-assessment. Note: Suriname compared with Argentina, Barbados, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Trinidad and Tobago, Uruguay, and República Bolivariana de Venezuela. The judicial accountability Indicator is not considered because there is no information on the base country or because of low variance. 30 The Anti-Corruption Act has strengthened the legal grounds available to the Office of the Public Prosecutor to investigate and prosecute corruption cases. Yet, staffing and funding constraints are slowing the pace of investigations. The Office of the Public Prosecutor created a special unit to pool expertise and resources for corruption cases, but institutional capacity constraints are curtailing the ability to conduct timely investigations. To address the problems, the prosecutor’s office needs specialized training and the ability to contract external experts to supplement staff. Forensic audits may be critical in building strong cases, and the Central Government Auditing Bureau has supported the public prosecutor in a small number of cases, though it lacks sufficient trained staff to do this at the scale necessary. The public prosecutor has achieved positive verdicts in at least two high- profile corruption cases, but these risk being overturned on appeal. Political support is essential if the public prosecutor is to be effective. The Prosecutor General is independent in theory, but this is not guaranteed in practice because provisions for lifetime appointment can be circumvented through the use of temporary (or acting) appointments. The judiciary functions relatively well despite considerable challenges. In the 2022 index of economic freedom, the Heritage Foundation found the judicial system “procedurally competent and free of overt government interference,” though it acknowledged it is understaffed and underfunded (Miller, Kim, and Roberts 2022, 391). Freedom House (2022) concludes that “the judiciary has enjoyed improved autonomy since the change of government in 2020,” but it believes that “judicial independence is still undermined by corruption because of a lack of resources and economic pressure.” The public prosecutor notes that the work has been helped because judges have begun to receive some training in handling corruption cases, but the country would still benefit from specialized courts. In the 2022 index of economic freedom, Suriname received a score of 45.8, which is on par with Guyana (47.4) though below Belize (70.2) (Miller, Kim, and Roberts 2022). Put into the broader context of Latin America and the Caribbean, Suriname does well on indicators of justice sector performance. Data of the World Bank’s Country Level Institutional Assessment puts Suriname in the second and third quartiles on most indicators (see figure 7, panel b). 2.4 PUBLIC FINANCIAL MANAGEMENT Rudimentary public financial management systems contribute to major vulnerability in the stewardship of public finances. Public financial management systems are rudimentary, and the path to reform has been slow. The Ministry of Finance is currently benefiting from technical assistance activities through the Caribbean Regional Technical Assistance Center.17 However, the medium-term expenditure framework 17 CARTAC (Caribbean Regional Technical Assistance Center) (website), CARTAC, Saint Michael, Barbados, https://www.cart- ac.org/. 31 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC is under development; traditional treasury functions are limited; and budget use is not transparent to the public. The assistance of the center has particularly targeted medium-term budgeting, the chart of accounts, and core treasury operations. The last public expenditure and financial accountability assessment of Suriname was concluded in 2018. At the time, fiscal discipline was a challenge, and, in the period since, there has continued to be wide discrepancies between the budget and actual spending. Recommendations have been provided by the technical assistance center on ways to enhance commitment control and cash management. Officials have noted that pressure on the budget arises not only from line ministry expenditures, but also from inadequate revenues and unplanned subsidies to state-owned enterprises (SOEs). The public expenditure and financial accountability assessment revealed that fiscal risk reporting was particularly weak, as was the government’s transparency on expenditures incurred by budgetary and extrabudgetary units that are excluded from government financial reports. Public investment is expected to play an increasing role in Suriname’s long-term development, but the capacity to prepare and appraise projects is underdeveloped. There are no central guidelines for evaluating projects, and the government generally relies on the criteria of the financing partner to assess project soundness. Responsibility for project implementation is left to the project owner, and there is no central oversight or monitoring of project outcomes. While the fiscal space for domestically financed investment projects has been limited, a future spike in oil and gas revenues could generate an abundance of project proposals without appropriate institutional checks and balances in place. Though the Planning Bureau has taken the lead in developing the five-year National Development Plan, the fiscal implications of the plan and the criteria are currently unspecified in the plan for projects decisions. Public procurement represents a vulnerability in the stewardship of public finances, but reforms have not been implemented. The Ministry of Public Works has undertaken initiatives to enhance the transparency and efficiency of public procurement in public works. As of September 2022, new guidelines for public works had been drafted and sent to the Ministry of Justice for legal review. As a pilot program, the Ministry of Public Works started putting procurement announcements and some award notifications online. This enables the ministry to direct interested firms to the ministry’s website as the source of information on tenders. The ministry aspires to put much of the procurement process online, and ministry officials are examining the feasibility of relying on an application used by the Caribbean Community. In hopes of attracting private financing for infrastructure investment, the government is seeking assistance from partners in creating a public-private partnerships unit. However, given capacity constraints in managing public investment, the government must proceed with caution in developing a pipeline of public-private partnership projects and ensuring that appropriate institutional safeguards are in place. 32 2.5 STATISTICAL CAPACITY While Suriname’s statistical capacity and performance are comparatively strong, significant data gaps hamper decision-making. Suriname compares favorably with structural peers on World 90 Bank country-level indicators of 85,5 statistical capacity, such as the statistical performance indicator80 and the statistical capacity indicator 70 68,1 (figure 8).18 The former offers insight into relative strengths and weaknesses of Suriname’s statistical 60,7 61,8 60 performance. According to the statistical performance indicator, Suriname’s 50 50,8 performance is on par with that of other countries in the region and other upper-middle income40 countries in 42,8 linking data producers and data users and the use of numerous data sources. Because of inadequate 30 infrastructure and financial resources, however, areas of relatively weaker performance include 20 the take-up and use of data and 10 statistics and the range, accuracy, timeliness, frequency, and comparability of statistical products. 0 Suriname Average Average Average Average Average structural aspirational high LAC upper peers peers income middle peers income FIGURE 8. THE STATISTICAL SYSTEM IN SURINAME AND PEERS COMPARED a. Statistical performance indicators, score, 0–100 b. Statistical capacity indicators, score, 0–100 90 85,5 80 77,2 80 70 68,1 70 60,7 61,8 57,8 60 60 50,8 48,2 50 50 42,8 40 40 30 30 20 20 10 10 0 0 Suriname Average Average Average Average Average Suriname Average Average structural aspirational high LAC upper structural aspirational peers peers income middle peers peers peers income Source: Based on World Bank statistical performance indicators and statistical capacity scores. Note: Statistical capacity indicators are not available on high-income peers. 77,2 80 70 18 57,8 60 The statistical capacity indicator “is a composite score assessing the capacity of a country’s statistical system. It is based on a 48,2 50 diagnostic framework assessing the following areas: methodology; data sources; and periodicity and timeliness.” See SCI (Sta- 40 tistical Capacity Indicator), Metadata Glossary (databank), World Bank, Washington, DC, https://databank.worldbank.org/ 30 metadataglossary/world-development-indicators/series/IQ.SCI.OVRL. Statistical performance indicators “measure the ca- 20 pacity and maturity of national statistical systems by assessing the use of data, the quality of services, the coverage of topics, 10 the sources of information, and the infrastructure and availability of resources.” See SPI (Statistical Performance Indicators) 0 (dashboard), World Bank, Washington, DC, https://www.worldbank.org/en/programs/statistical-performance-indicators. Suriname Average Average structural aspirational peers peers 33 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC The General Bureau of Statistics (Algemeen Bureau voor de Statistiek) performs well on economic and social statistics. The World Bank recently implemented an additional assessment of the strengths and weaknesses of the bureau. The assessment evaluated the bureau on organization and structure, human resources, data collection, analysis and indicators, information technology infrastructure, and methodological approaches. It found that the bureau delivers high-quality data products using only limited resources and specialized staff. Its strengths include organizational structure, human resource policies and training programs, and data privacy policies. The bureau performs especially strongly with economic and service data and is planning a new census, which is expected to fill some major data gaps in the near future. Limited financial resources have been a major constraint on the productivity of the General Bureau of Statistics, especially in recent years. Low staff salaries and payment delays have affected staff morale and retention, with implications for the ability of the bureau to deliver statistical products. There are other challenges, too. There is no national strategy for sharing administrative data and statistics among government agencies. Most of the information and data exchanges are based on informal contacts. The bureau does not maintain or control the quality of administrative records. As a result, the public data needed in evidence-based decision-making and monitoring and to foster transparency are lacking in critical areas. There are gaps in the collection of survey data, administrative data, and social statistics (figure 9). Although the bureau regularly collects household survey data, data processing is a bottleneck. The implication is that policy makers often rely on dated or limited information to inform their decisions. Poor data sharing and dissemination practices and a restrictive legal framework reduce the opportunities for analysis and evidence gathering to underpin policy. FIGURE 9. GAPS IN DATA COLLECTION HAMPER DECISION-MAKING Surveys Types and Friequency 4 3.5 Other registers - tax 3 administration, 2.5 Censuses judiciary, etc 2 2.5 1 0.5 0 Statistical Business Economic and service Registers data collection Administrative data Social statisctics Source: Based on assessments of the General Bureau of Statistics. 34 3. CHALLENGE: THE EQUITABLE ALLOCATION OF RESOURCE REVENUE SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC The governance shortcomings increase the chances of capture and of the misallocation of oil proceeds. While the international evidence is mixed, and causality is difficult to establish (Lederman and Maloney 2008), numerous studies warn that the discovery of natural resources may adversely affect economic growth in countries with poor institutions, a phenomenon referred to in the literature as the resource curse (for example, see Arezki and van der Ploeg 2010; Boschini, Petterson, and Roine 2007; Mehlum, Moene, and Torvik 2006). Frankel (2012) and Ross (2015) discuss some of the channels through which natural resource finds (particularly oil finds) may negatively affect growth prospects. In addition to economic channels, some of which are discussed in more detail in section 3.2 below, they increase rent seeking and corruption. The government of Suriname generates revenue from the mining sector using a variety of mechanisms, including taxation, royalties, dividends, and fees. The 1986 Mining Decree governs the mining sector. It contains general rules on the exploration and exploitation of minerals and assigns responsibility for the promotion and control of exploration and mining activities to the Ministry of Natural Resources and the Geological Mining Department. Small- and medium-scale mining or quarrying operations should pay royalties to the government, with rates depending on the type of mineral and determined by government decree. The Mining Decree also provides the basis for mineral agreements. Large gold mining companies have entered into mineral agreements with the government, whereby specific conditions for conducting the operations and royalty contributions are established. The Tax and Customs Administration in the Ministry of Finance is responsible for levying and collecting taxes and royalties. The government could consider tools to promote high standards of transparency in the management of revenues generated by oil and mining. Transparency in resource revenue management would improve the investment climate by providing a clear signal to investors and international financial institutions that the government is committed to strengthening accountability and good governance. This may contribute to the prevention of conflict in the oil, mining, and gas sectors. One such tool is the Extractive Industries Transparency Initiative, a global standard to promote the open and accountable management of natural resources.19 The information provided through the initiative is crucial to mitigating the political and reputational risks negatively affecting businesses and governments. Following its application to become an implementing and compliant country in 2016, the government published two initiative reports, one covering 2016 and 2017 and a second covering 2018, 2019, and 2020. Forest carbon finance is a potentially lucrative revenue stream that has climate and environmental cobenefits. Suriname has significant untapped forest carbon finance potential. It is a high forest, low deforestation country. The government participates in REDD+ and can participate in the voluntary carbon market, generate credits, and enter into international deals to conserve Surinam’s forests.20 19 See EITI (Extractive Industries Transparency Initiative) (website), EITI, Oslo, https://eiti.org/. 20 For more details, see Redd+ (dashboard), United Nations Framework Convention on Climate Change, Bonn, Germany, https://unfccc.int/topics/land-use/workstreams/reddplus. 36 3.1 OFFSHORE OIL DEVELOPMENT Recently discovered offshore oil fields are expected to come online by 2028, with drastic implications for Suriname’s economy and public finances. The oil and gas sector is one of the more highly developed economic sectors and certainly the most promising of all. Staatsolie has historically been the most important entity in the oil sector in the country. A public limited company, Staatsolie was established in 1980. The government is the single shareholder. Staatsolie was granted the concession on oil exploration and exploitation on Surinamese soil, as well as the exclusive right to negotiate with foreign investors. It has combined its original role of agent of the state—the regulator tasked with assessing, promoting, and managing the sector—with the role of the country’s sole oil producer. Staatsolie is a vertically integrated oil company. It has a dominating presence across the oil value chain in Suriname: upstream (exploration, development, production), midstream (transport, trading), and downstream (refining, retail, bunkering). In 2021, Staatsolie produced nearly 6 million barrels of crude oil from its low-cost, onshore oilfields to feed its oil refinery, which has a processing capacity of 15,000 barrels per day (bpd). Most of the refined products are sold domestically. The surplus is exported to Caribbean markets. Staatsolie’s onshore oilfields are mature, with proven reserves of 89.1 million barrels and a five-year moving average reserve-replacement ratio of 1.2 (Staatsolie 2022). In parallel, Staatsolie is actively promoting offshore oil exploration. Offshore oil exploration has been made available to other players besides Staatsolie through competitive bidding rounds. Deepwater offshore oil exploration intensified following a study by the US Geological Survey (USGS 2012) that identified the Guyana-Suriname Basin as an underexplored basin with a potential recoverable resource of 15 billion barrels of oil (World Bank 2017). Production-sharing contracts have been signed with several international oil companies (IOCs). Since January 2020, seven oil and gas finds in deep water offshore have been reported. In addition to offshore oil production, Staatsolie has diversified through (minority) stakes in the country’s two large-scale gold mining operations and the establishment of a power division that owns and operates a thermal power plant and, as of 2020, the Afobaka hydroelectric facility. It has been estimated that the development of the first offshore project in Suriname will contribute at least US$10 billion in government income during the term of the project (15– 20 years). The first development will probably be the combination of the Sapakara and Krabdagu oil reservoirs located in what is known as Block 58, with a volume of over 400 million barrels (Staatsolie 2022). A final investment decision on the development will be made by the Block-58 partners, Total and Apache. The ongoing appraisal will determine the size of the production facility with a maximum production volume of 120,000 to 180,000 bpd. The terms of the production-sharing contract include a royalty of 6.25 percent, a ceiling on the cost oil recovery at 80 percent, and cost oil balances to be carried forward on a project-by-project basis. Staatsolie will retain a participation right of up to 20 37 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC percent at development plan approval, and the government of Suriname will receive a share of 20 percent–70 percent of profit oil.21 The impending oil revenues are expected to improve Suriname’s fiscal situation drastically. In 2022, Staatsolie contributed nearly US$300 million to Suriname’s public finances in the form of taxes, dividends, and royalties (Staatsolie 2023). This contribution is anticipated to be greatly increased by offshore oil production, starting approximately three to four years after the final investment decision and increasing sharply after another approximately four years of capital cost recovery. Figure 10 shows a projection of gross oil revenue related to the development of three oilfields in Block 58, the first on which a final investment decision will be taken by the end of 2023 or in early 2024, with a maximum capacity of 120,000 bpd and a second and third with a final investment decision in 2026 and 2028, respectively, with a maximum capacity of 180,000 bpd. The projections assume an oil price of US$65 per barrel and a profit share of 50 percent each for the government and oil companies. This assumes a total extraction of approximately 1.5 billion barrels over a period of 20 years. Discoveries in Block 58 are estimated to contain at least 5 billion barrels of oil and gas, and, while there is uncertainty about the commercial viability of the extraction of all the oil and gas discovered, it appears reasonable to assume that similar or higher revenues can be maintained over a longer time horizon. There are six other offshore deepwater blocks in which international oil companies are carrying out exploration activities. Staatsolie recently launched a competitive bidding round for six new blocks located to the east of the current offshore discoveries (Demerara High). Moreover, there is strong potential for the revenue from oil to be enhanced by the exploitation of significant offshore gas reserves. While the exploitation of these gas reserves is not the immediate priority, they have high potential in the medium term both through conversion to liquefied natural gas and electricity generation and through export to neighboring countries, including Brazil. FIGURE 10. GROSS OFFSHORE OIL REVENUE PROJECTIONS, SURINAME, 2027–40 US$, MILLION 14.000 12.000 10.000 8.000 6.000 4.000 2.000 0 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 Profit oil companies Repayment capital cost Current cost Government revenue Source: World Bank projections. 21 For details on Block 58, see News Releases (web page), APA Corporation, Houston, TX, https://investor.apacorp.com/suriname. 38 3.2 THE FISCAL MANAGEMENT OF NONRENEWABLE NATURAL RESOURCE RENTS AND THE INSTITUTIONAL SETUP Nonrenewable natural resource rents offer opportunities for economic development. Revenue volatility and resource exhaustibility call for precautionary savings and pose the challenge to transform depleting resource wealth into a portfolio of other assets to support sustained development. Resource revenue poses challenges in the formulation and implementation of macroeconomic and fiscal policies. Suriname’s resource revenue: (a) is volatile and uncertain because of unpredictable commodity prices and ongoing changes in geological conditions and prospects; (b) arises from the exploitation of resources that are exhaustible or may become obsolete; raising questions about long-term fiscal sustainability and intergenerational equity; and (c) largely originates from abroad, with possible implications for competitiveness and macroeconomic stability. The public sector plays an outsized role in the management of extractive industries as the state owns the subsoil mineral resources on behalf of its citizens and is entitled to a share of the rents generated from the extraction. The extraction of offshore oil and gas is particularly characterized by highly capital- intensive investments with long exploration and development periods and a high rent share to gross production value, part of which accrues to the government through a combination of taxes, royalties, and dividend payments. Thus, fiscal policy is critical in directing part of the resource revenue into the domestic economy. Extracting and selling nonrenewable natural resources amounts to running down capital, unless the receipts are fully reinvested in financial, physical, or human capital. Domestic investment in physical and human capital can boost long-run economic productivity, but the optimal level of such investment depends on the expenditure capacity of public institutions. Scaling up domestic spending financed by natural resource wealth is likely to be part of an optimal strategy, though this may cause the economy to bump into short- to medium term constraints. Large public spending and investment programs can overwhelm the absorption capacity of the domestic economy and put upward pressure on the price of nontradable goods and services. This phenomenon, often observed in resource dependent economies, is referred to as the Dutch Disease, whereby increased demand for domestic nontradable goods and services causes currency appreciation, which leads to reduced exports from the nonextractive tradable sector because of the higher prices on the export goods and services. Prudent fiscal policy and investment of part of the resource wealth in foreign financial assets may help smooth the business cycle and may also support intergenerational equity given that the resource may be exhausted before newer generations can benefit. There are thus strong macroeconomic and public financial management arguments for smoothing public spending at prudent and sustainable levels. The empirical evidence is strong that macroeconomic volatility and uncertainty have adverse effects on long-term growth, poverty reduction, and income distribution. In addition, sudden fluctuations in public spending may affect the 39 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC quality and efficiency of spending. Thus, prudent fiscal policy contributes to real exchange rate and overall price stability, thereby facilitating the role of monetary policy in attaining macroeconomic stability. The current fiscal framework in Suriname faces several obstacles to the conversion of resource wealth into long-term and equitable economic development. The fiscal framework consists of (a) a public debt law specifying debt ceilings and escape clauses, (b) a Savings and Stabilization Fund (SSF) setting out rules for asset accumulation and withdrawal mechanisms, and (c) a medium-term fiscal framework. The fiscal framework should be strengthened to address more effectively the challenges posed by volatile resource revenue and the transformation of natural resource wealth into other assets that support sustainable, long-term, and equitable growth. The design of the fiscal policy framework needs to reflect that resource horizons are uncertain. While a country’s resource horizon and wealth are key concepts underlying fiscal sustainability analysis, they are also highly uncertain given the unproven reserves, the new discovery potential, and the difficulties of projecting long-term prices. A fiscal sustainability framework involves determining an appropriately smooth path for public investment and government consumption. Fiscal rules and targets may then protect this path from the volatility of the actual revenues. The medium- term plan would need to be revised periodically as expectations of prices or volumes change. An adequately designed and implemented fiscal framework can strengthen fiscal sustainability and smooth output volatility. A key fiscal indicator for assessing the fiscal stance in Suriname is the nonresource primary balance (NRPB). The NRPB is defined as nonresource revenues, minus primary expenditures (that is, excluding net interest payments and income). The NRPB identifies the impact of government operations on domestic demand because resource revenues typically originate abroad. The country’s fiscal framework may be strengthened by a credible medium-term fiscal anchor. Fiscal rules are commitments to special numerical targets for some key budget aggregates, such as the NRPB. Unlike fiscal rules, fiscal guidelines are not legally binding and allow for the flexibility required in an environment undergoing substantial structural change involving also substantial future revenue uncertainties. Fiscal guidelines allow for temporary deviations from the target, subject to specific conditions, or well-explained changes to the targets (Ossowski and Halland 2016). Flexibility may also be obtained through the design and use of escape clauses. Escape clauses are a critical component of a fiscal rules framework and are triggered by a significant event or shock (Blanco et al. 2020). The NRPB as a fiscal anchor is particularly appropriate in countries with shorter reserve horizons and in small countries facing persistent commodity price shocks. Countries with relatively short reserve horizons should rely on the NRPB as a fiscal anchor because spending does not need to be adjusted abruptly if resources become exhausted, thereby creating less disruption on economic activity and the provision of public services (IMF 2012). Suriname’s current resource horizon, consisting mainly of gold production, is relatively short, which argues for an anchor that takes into account long-term fiscal sustainability (IMF 2018). The offshore exploitation of oil and gas would substantially lengthen the natural resource horizon. Nonetheless, oil and gas price shocks tend to be persistent, and Suriname is a relatively small country with limited economic diversification. This means a budget balance rule, such as the NRPB, is preferable over a structural budget balance rule, such as, 40 for example, the one successfully employed in Chile. In the case of a persistent negative commodity price shock, an NRPB target requires some procyclical fiscal consolidation, but the approach avoids the unsustainable debt dynamics (that is, the sale of assets or the accumulation of debt) necessary to finance a more permanent budgetary shortfall as would be required under a structural balance rule (Mendes and Pennings 2017). To manage the fiscal revenue from natural resources, countries around the world have established sovereign wealth funds. Many sovereign wealth funds are designed to absorb all resource revenue and limit withdrawals to a level that can be effectively absorbed in the short term without overwhelming the expenditure capacity of public institutions or distorting macroeconomic incentives. Revenues that remain in a fund can be invested in foreign financial assets, enabling a country’s natural resource wealth to generate consistent returns across generations. Investing in foreign financial assets can help manage and smooth the growth of domestic demand, thereby mitigating the Dutch Disease phenomenon (IMF 2012). Suriname established the SSF in 2017 to accomplish the following: (a) stabilize the resources available to the government for the financing of public expenditures, (b) generate an alternative source of revenue, and (c) generate revenues for future generations through savings from the state’s mining revenues. The rules for accumulating financial wealth are based on the difference between actual and budgeted mining revenues. If actual mining revenues are higher than the budgeted revenues, the Ministry of Finance would transfer the excess to the SSF. Withdrawals are permitted if actual mining revenues are less than one-quarter of the budgeted revenue, in which case the SSF would provide half the shortfall, subject to the ceilings. The law also establishes rules on steps to increase or decrease budgeted mining revenues in subsequent years (IMF 2018). The SSF, approved in 2017, has not yet become operational because no resources have been deposited in the fund. Rules for accumulating and withdrawing resources will also need to be adapted to a substantially different natural resource rent outlook once offshore oil resources come on stream. The SSF may be adjusted along the lines of many sovereign wealth funds around the world that absorb all natural resource rents accruing to the government and allow for withdrawals and transfers to the budget at a level that may be effectively absorbed and in line with the fiscal rules framework. Integrating the operation of a sovereign wealth fund with fiscal rules is highly desirable. To make the fiscal framework coherent and effective, the criteria for the accumulation and disbursement of sovereign wealth funds need to be consistent with the design and operation of the fiscal rule(s). The proper integration of a sovereign wealth fund with the overall fiscal framework may be achieved by linking the accumulation and withdrawal of funds to the targets defined in the fiscal rule, such as the NRPB proposed in the case of Suriname. This link may also help improve the transparency of the system. The SSF should be seen as a complementary policy tool, not the main fiscal policy instrument. The accumulation of financial assets in a fund for self-insurance or intergenerational objectives should be associated with actual fiscal surpluses and the government’s cash management. Sovereign wealth funds are a key component of asset and liability management, and countries with a large stock of debt might opt to pay down public debt first before accumulating financial assets (IMF 2012). 41 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC BOX 1. OFFSHORE OIL REVENUE MANAGEMENT IN GUYANA The discovery of substantial offshore oil and gas reserves and the launch of oil production in neighboring Guyana are leading to a major transformation of the Guyanese economy. Since 2015, 38 discoveries have been made in offshore Guyana, 34 of which were made at the Stabroek Block, which is estimated to contain resources of approximately 11 billion oil equivalent barrels. The Liza Phase 1 Development began production in late 2019 and reached peak capacity of 120,000 bpd in December 2020. Production at Liza Phase 2 began in February 2022 and is expected to reach peak capacity of 220,000 bpd by the end of 2023. With the coming on stream of two additional fields (Payara, at the end of 2023, and Yellowtail, in 2025), oil production is projected to reach 810,000 bpd by 2026. It is projected that, by 2027, six or seven projects will be in operation, and, by the end of the decade, Guyana’s oil production will have risen to more than one million bpd. Block 58, where the most promising offshore oil and gas discoveries in Suriname have been made, is adjacent to the Stabroek Block. Fueled by the oil sector, Guyana has been growing at an exceptional pace since 2020. Prior to the discovery of oil, the country had experienced consistent, moderate economic growth averaging 3.6 percent a year over the previous decade. With continued increases in oil production, the economy is expected to sustain annual double-digit real GDP growth rates over the next decade. The revenues from the oil sector are being deposited in the Natural Resource Fund (NRF) outside the economy, and a portion is available for budgetary spending according to the NRF Act. The Parliament of Guyana enacted the NRF Act in December 2021. The act replaced the 2019 NRF Act. All oil revenues, including royalties and profit oil, accruing to the government initially is deposited in the NRF. The act introduced a new formula for the withdrawal and transfer of funds to the budget, allowing the government to begin using the resources in 2022. A simple mathematical formula that is used to calculate NRF withdrawals may be readily understood by the public. Substantial buffers will accumulate in the NRF, the contents of which is expected to reach almost US$20 billion by 2027 (IMF 2022). The NRF Act does not provide an effective fiscal anchor, and the government of Guyana still lacks a medium-term fiscal framework. A fiscal framework that constrains the overall annual non-oil fiscal deficit to remain below the expected transfer from the oil savings fund will anchor fiscal policy in Guyana in the short term and ensure that fiscal spending increases at a measured pace to address development needs without resulting in macroeconomic imbalances. A zero overall fiscal balance target needs to be complemented by a rigorous analysis and supplemented by changes, if needed, to the transfer rule set under the NRF and to an operational target for the non-oil balance. The transfer rule must ensure that transfers to the budget are optimally set to ensure intergenerational equity and long-term sustainability. Source: Bank of Guyana 2022; IMF 2022. 42 Fiscal councils are an important institutional tool for improving compliance with fiscal rules. The adoption of fiscal rules does not necessarily mean that the rules are respected. Compliance reflects a government’s ability and commitment to observe the fiscal rules. Compliance has been a major issue in Suriname. This is clear from the multiple amendments to the ceiling on the public debt over the past decade. The fiscal rules framework might therefore be complemented by an independent fiscal council tasked with the impartial scrutiny of fiscal policy plans. The use of independent fiscal councils can reinforce the functioning of fiscal rules. Fiscal councils strengthen the commitment of fiscal authorities because they raise the reputational and political costs of deviations from a rule by monitoring compliance and sometimes by providing independent technical views on macrofiscal projections. Fiscal councils can also supply impartial assessments of the fiscal impact of policy decisions on medium-term fiscal sustainability, promoting awareness and public debate on fiscal policy choices. The existence of an independent fiscal council enhances the credibility of the overall institutional framework in which fiscal rules operate (Blanco et al. 2020). 43 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC 4. CHALLENGE: INVEST IN HUMAN CAPITAL AND PROTECT PEOPLE FROM SHOCKS 44 Can Suriname maintain sustained income growth? The concept of wealth accounting helps shed light on this question. Wealth accounting captures the value of all the assets that generate income and support human well-being. A nation’s income is generated by its wealth, measured comprehensively to include all assets: produced, human, and (renewable and nonrenewable) natural capital. GDP indicates how much monetary income or output a country creates in a year; wealth indicates the value of the underlying national assets and therefore the prospects for maintaining and increasing that income over the long term. By monitoring trends in wealth, it is possible to see whether GDP growth is achieved by building capital assets, which is sustainable in the long run, or by liquidating assets, which is not sustainable (World Bank 2021a). Examining the use of wealth and the changes in wealth per capita is particularly relevant in the case of Suriname given the importance of nonrenewable natural resource exploitation there. The abundance of nonrenewable natural capital raises special problems in the achievement of economic sustainability because rents are derived by depleting these assets. The use of wealth accounts makes clear that economic growth driven by nonrenewable natural resource depletion is unsustainable if the depletion is not offset by the accumulation of other assets. The key to increasing economic well-being in the future lies in building national wealth and transforming one type of wealth, such as nonrenewable natural resources, into other sources of wealth, including produced capital, human capital, or savings held abroad. Per capita human capital is particularly low in the case of Suriname. Comparisons with structural, aspirational, and high-income peers make clear that Suriname stands out in terms of a significantly lower human capital per capita (figure 11). The remainder of this section reflects on three areas that are critical to enhancing human capital: education, health, and social assistance. FIGURE 11. THE SHARE OF HUMAN CAPITAL IN TOTAL WEALTH PER CAPITA IS COMPARATIVELY LOW IN SURINAME 100% 80% 60% 40% 20% 0% -20% Suriname Structural Aspirational High income peers peers Net foreign assets Natural capital - non renewable Natural capital renewable Human capital Produced capital Source: World Bank 2021a. 45 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC 4.1 EDUCATION AND CHILD PROTECTION Secondary-school attainment is low, especially in the interior of the country. Resolving this requires a focus on the quality of education and recognizing underlying challenges faced by children. Suriname has achieved near universal literacy, but secondary-education outcomes lag the performance of structural peers. In 2021, 95 percent of the population ages 15 or more was literate.22 Among youth ages 15–24, the literacy rate was higher, at 99 percent for both boys and girls. Near universal literacy had thus been achieved in Suriname. By 2021, 100 percent of teachers in primary school had been trained. The net enrollment rate in primary education was 86 percent in 2018 and higher among girls (88 percent) than boys (84 percent). This pattern of girls outperforming boys in educational attainment may be observed at higher levels of education, too, and is among the most pronounced in Latin America and the Caribbean (UNESCO 2020). For instance, persistence to the last grade of primary school was94% 100% about 70 84% percent overall, but markedly higher among girls (75 percent) 77% 80% than boys (65 percent). Accordingly, in 2015, but 6458% net secondary enrollment was about 58 percent overall, 60% percent among girls and 52 percent among boys. Suriname’s net secondary enrollment rate and lower-secondary completion rate (at 45 percent) were 40% well below the rates among structural peers, suggesting there is significant room for improvement (figure 12). 20% 0% Suriname Average Average Average structural FIGURE 12. SECONDARY-SCHOOL EDUCATION OUTCOMES LAG THOSE INaspiration high PEER COUNTRIES peers al peers income peers a. School enrollment, secondary, % net b. Lower-secondary completion rate, % of relevant age-group 94% 102% 100% 94% 100% 84% 77% 80% 80% 72% 60% 58% 60% 45% 40% 40% 20% 20% 0% 0% Suriname Average Average Average Suriname Average Average Average structural aspiration high structural aspiration high peers al peers income peers al peers income peers peers Source: Based on data of WDI (World Development Indicators) (dashboard), World Bank, Washington, DC, https://datatopics. 94% 102% worldbank.org/world-development-indicators/. 100% 80% 72% 22 For the data in this paragraph, see EdStats (Education Statistics) (data portal), World Bank, Washington, DC, https://data- 60% topics.worldbank.org/education/. 45% 40% 46 20% 0% Suriname Average Average Average Educational attainment is markedly lower in the interior of the country and among indigenous and Maroon children. The United Nations Children’s Fund (UNICEF) provides more insight into school outcomes among children in of Suriname based on the 2018 Multiple Indicator Cluster Surveys (UNICEF 2019). It shows that the education completion rates among children in the interior of the country lag the rates among other groups. The primary-school completion rate, for instance, was 85 percent in the country overall and 62 percent in the interior. The school completion rates among girls substantially exceed the rates among boys. These patterns are largely mirrored in indicators on basic reading skills, mathematics, and information and communication technology skills, although there gender gaps are less pronounced. High dropout rates and limited learning in school are also important challenges facing the country. UNICEF (2019) finds that dropout rates are high in all grades of secondary school, but especially so after the final grade.23 Nearly half the children who complete secondary school do not continue to postsecondary education. The government considers reducing school dropout a high priority. Emphasis is placed on ensuring that children complete at least 10 years of education (Suriname Herald 2023). UNICEF raises concerns not only about retention, but also about the quality of education, finding that “by Grade 6, only 42 per cent [of children] have the numeracy skills and only 63 per cent have the reading skills they should have acquired by Grade 3” (UNICEF 2019, 11). It specifically signals challenges in learning among children with disabilities noting that “school environments seem less prepared to accommodate children with functional difficulties, who still do not fare as well as their peers” (UNICEF 2019, 28). The bottlenecks to serving Suriname’s multiethnic, multicultural, and multilingual society with quality education are large and contribute to unequal opportunities for children, especially those in the interior of the country. While the curriculum is mainly taught in the official language (Dutch), the population speaks about 30 different languages. This complicates instruction and affects learning outcomes. The United Nations Educational, Scientific and Cultural Organization finds that efforts are now being made to ensure that children who do not speak Dutch as their first language feel welcome (UNESCO 2020). These include multilingual sessions. However, language barriers remain pronounced for many children. Moreover, it can be difficult to find teachers willing to work in the interior of the country thus complicating the delivery of quality education services (Kambel 2020; UNESCO 2020). In consultation with the Ministry of Education, the SCD team identified multiple governance obstacles to the effort to improve education outcomes.24 There is a sense that the ministry is working in a reactive mode. Much of the attention goes to day-to-day management of schools, construction of infrastructure (school buildings), transport to schools, and emergencies such as the recent floods caused by heavy rains. Although the ministry is large, there is no team with the mandate and capacity to work on a broader education strategy and to focus on the quality of education and improvements in the curriculum. A management information system is lacking, and a basic accounting 23 The shares of children dropping out of school are 8 percent, 10 percent, 10 percent, and 13 percent, respectively, in grades 1–4 in lower-secondary school and 8 percent, 16 percent, 14 percent, and 49 percent in grades 1–4 of upper-secondary school. 24 There are some opportunities for legal improvements, too. The United Nations Educational, Scientific and Cultural Orga- nization, for instance, notes that Suriname has neither ratified the Convention against Discrimination in Education nor the 1989 International Labour Organization Convention on Indigenous and Tribal Peoples (UNESCO 2020). 47 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC of the number of teachers, where they work, and whether they are receiving pay is not in place. There is a need to reconsider school management and the size and operational model of the ministry to facilitate a focus on improvement in education outcomes. Improving education outcomes will also require other societal barriers to be addressed, including early marriage, child labor, and malnutrition.25 UNICEF (2019) finds that 24 percent of youth ages 20–24 marry before the age of 18. About 7 percent marry before age 15. Early marriage rates are higher among girls (27 percent and 9 percent, respectively) and in the rural interior (32 percent and 18 percent). The same study finds that 6 percent of children in the country engage in child labor. This share is higher among boys (8 percent) than girls (5 percent) and markedly higher in the rural interior, at 19 percent. No data on malnutrition among school children were identified for this SCD. However, in the World Bank phone survey, about one household in four reported that it had run out of food because of lack of money (World Bank 2023). The Ministry of Social Affairs and Public Housing (MOSAPH 2019) finds that 6.7 percent of children under age 5 were underweight and 8.3 percent were stunted. Early marriage and child labor both correlate negatively with education outcomes. For instance, the literacy rate among those who married before age 15 was 91 percent versus 96 percent among those who did not. Among 16-year- old children who work, only 28 percent attend school versus 82 percent among children who do not work. The International Labour Organization and the US Department of Labor provide suggestions for reducing child labor in Suriname. The US Department of Labor finds that “Suriname has ratified most key international conventions concerning child labor,” but the protection of children requires that gaps be addressed in the legal framework and that the implementation of labor laws be improved (ILAB 2021, 2). The International Labour Organization (ILO and IMWO 2018) emphasizes the need to update and execute a national strategy to address child labor, which should involve a cross-cutting approach across multiple ministries. It also argues in favor of efforts to increase awareness of child labor and its negative impacts on children.26 4.2 HEALTH CARE Noncommunicable diseases represent the leading burden of disease in Suriname. Cost increases are putting Suriname’s health care system under significant pressure and will require complicated action. Suriname’s health care system is characterized by a mandatory health insurance system and various health care delivery systems in the interior of the country and the coastal areas. The Basic Health Care (BaZo) Insurance Act that came into effect in 2014 makes health insurance 25 An additional child protection concern is that schools still practice corporal punishment (UNESCO 2020). 26 Based on a child labor survey, the International Labour Organization finds a lower prevalence of child labor (2.2 percent) than the study by UNICEF. See ILO and IMWO (2018); UNICEF (2019). 48 mandatory for all and provides a government subsidized health insurance to the population age under 16 or more than 60 and lower-income households. The formal working population is mainly insured through employer health insurance programs. Primary care or the first point of consultation is provided by medical missions in the interior (see also Eersel et al. 2018), regional health services in rural coastal areas, and either regional health services or general practitioners in the more densely populated urban areas. Private clinics operate mainly in urban areas and are supported through private insurance schemes or out-of-pocket payments. Most general practitioners are in private practice. They provide services to people who are covered by the State Health Foundation, Ministry of Social Affairs, private insurances, or private companies, or who are self-paying patients. Many large corporations, public and private, also run private firm clinics for their employees. Under this system, Suriname’s life expectancy has been steadily increasing. Noncommunicable diseases now represent a leading share of the burden of disease. Suriname experienced a significant increase in life expectancy at birth over the past 20 years (and in fact also over the decades before), from 65.5 in 2000 to 72.6 in 2020. Its life expectancy at birth exceeds that of its structural peers. Noncommunicable diseases represent the majority (58 percent) of lost productive life years. The World Health Organization (WHO) reported the top four causes of death in 2019, as follows: ischemic heart disease, stroke, diabetes mellitus, and kidney diseases.27 The Pan American Health Organization’s (PAHO 2023a) country profile of Suriname provides insight into Suriname’s burden of noncommunicable diseases. It notes that, in 2016, 58.9 percent of the population was overweight or obese, while insufficient exercise was reported among 88.9 percent of the population. It adds that “Cardiovascular diseases, diabetes, and cancers all increased in importance between 2000 and 2019.” Progress in reducing illness and mortality from infectious diseases is mixed. Combined with maternal and neonatal mortality and nutritional disorders, communicable diseases now represent 27 percent of lost productive life years.28 Suriname has made especially laudable progress on the eradication of Malaria. So much so that, in January 2023, WHO awarded it a “Special Recognition Award for progress toward Malaria elimination” (PAHO 2023b). The award considered the period up to 2021, but progress continued into 2022 when no local malaria cases were identified and the only positive cases were observed in travelers coming to Suriname from other Malaria endemic countries. PAHO (2022b, 1) notes that, because of “the reemergence of the Aedes aegypti mosquito in Suriname, dengue has become a primary public health problem with progressive increases in incidence and geographical spread.” Moreover, it highlights the “dramatic spread and morbidity linked to” two other viruses spread by insects: chikungunya and zika. COVID-19 overwhelmed health systems in Suriname, but there has now been a recovery. About 45 percent of the population have been at least partially vaccinated, and the rate of new cases is low. No such strong decline in either HIV or tuberculosis has been observed over recent years.29 27 Global Health Estimates: Leading Causes of Death (dashboard), Global Health Observatory, World Health Organization, Gene- va, https://www.who.int/data/gho/data/themes/mortality-and-global-health-estimates/ghe-leading-causes-of-death. 28 Accidents represent the remaining 15 percent. 29 See Incidence of HIV, Ages 15–49 (per 1,000 Uninfected Population Ages 15–49): Suriname (dashboard), World Bank, Washington, DC, https://data.worldbank.org/indicator/SH.HIV.INCD.ZS?locations=SR; Incidence of Tuberculosis (per 100,000 People): Suriname (dashboard), World Bank, Washington, DC, https://data.worldbank.org/indicator/SH.TBS.INC- D?locations=SR. 49 74 SURINAME 72 SYSTEMATIC COUNTRY DIAGNOSTIC 70 68 66 64 62 FIGURE 13. HEALTH OUTCOMES COMPARE POSITIVELY 60 WITH THOSE OF STRUCTURAL PEERS 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 a. Life expectancy at birth, years b. Life expectancy at birth, years 85 82,7 74 80 72 76,8 70 75 72,6 68 70,7 66 70 64 65 62 60 60 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Suriname Structural Aspirational High income Source: Based on data of WDI (World Development Indicators) (dashboard), World Bank, Washington, DC, https://datatopics. worldbank.org/world-development-indicators/. 85 82,7 Suriname has yet to reach global targets for maternal and child mortality.30 WHO (2022) 80 finds that Suriname performs well on antenatal, delivery, and postnatal care. For instance, the share 76,8 of births attended by skilled personnel and the probability of a postnatal checkup within two days 75 of delivering 72,6 are comparatively high, at 98.4 percent and 91.1 percent, respectively. While maternal and 70 child mortality 70,7 compare favorably with those of structural peers, the comparison with rates aspirational peers suggests there is significant room for improvement on both outcomes (figure 14). 65 Indeed, in its country profile of Suriname, PAHO (2023a) states that it expects “progress in implementing strategies and programs such as the National Maternal and Neonatal Health Strategy 2021–2025.” 60 Suriname Structural Aspirational High income 30 Sustainable Development Goal target 3.1: reduce the global maternal mortality ratio to less than 70 maternal deaths per 100,000 live births by 2030. 50 26 25 20 17 15 10 9 5 2 0 FIGURE 14. CHILD AND MATERNAL MORTALITY RATES COMPARE FAVORABLY Suriname WITH THOSE Structural Aspirational High income OF STRUCTURAL PEERS a. Child mortality, per 1,000 live births b. Maternal mortality, per 100,000 live births 161 160 148 26 140 25 120 20 100 17 15 80 9 60 10 40 32 5 2 20 3 0 0 Suriname Structural Aspirational High income Suriname Structural Aspirational High income Source: Based on data of WDI (World Development Indicators) (dashboard), World Bank, Washington, DC, https://datatopics. worldbank.org/world-development-indicators/. Sexual and reproductive 161 health indicators lag and changing this situation requires legal 160reform 148and addressing governance and institutional challenges. Demands for modern 140contraceptive methods for family planning, for instance, often go unsatisfied (met in 57.5 percent of 120cases), and many indicators related to HIV prevention are suboptimal. The same holds for indicators 100related to adolescent sexual health. At 59 births per 1,000 women ages 15–19, the adolescent fertility 80rate is roughly on par with that of the entire Latin America and Caribbean region.31 WHO (2022) 60describes various gaps in laws and policies on sexual and reproductive health, such as those related to 40 32 planning. Governance and institutional challenges are a barrier to abortion, maternity care, and family 20 3 Ministry of Health (MOH 2020, 27), improving this situation. As discussed by the 0 Suriname Structural Aspirational High income while key policies are developed or being developed, a major challenge remaining is the lack of adequate structures and mechanism to ensure coordinated and integrated implementation of policies and programs. Currently, the area of sexual and reproductive health is part of the portfolio of the Department of Family Health at the Bureau of Public Health. However, capacity at this department is insufficient for adequate coordination. Sexual and reproductive health and rights encompass protection against gender-based violence and for gender minorities (box 2). 31 Adolescent Fertility Rate (Births per 1,000 Women Ages 15–19): Suriname (dashboard), World Bank, Washington, DC, https://data.worldbank.org/indicator/SP.ADO.TFRT?locations=SR. 51 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC BOX 2. PROTECTION AGAINST GENDER-BASED VIOLENCE AND FOR GENDER MINORITIES Gender-based violence is a challenge in Suriname. The Inter-American Development Bank’s 2019 national women’s health survey (Joseph, Pemberton, and Phillip 2019) found that a quarter of female respondents had experienced sexual violence. Among women who had ever been in a partnership, nearly one-third had experienced sexual or physical intimate partner violence. Some of the factors that predict exposure to intimate partner violence, according to the study, include low educational attainment, early unions, and Afro-descendent ethnicity. Survivors of intimate partner violence commonly report injuries and mental health problems as well as negative impacts on their earning potential and the well-being of their children. Common coping strategies among survivors include either staying quiet or talking with their mothers. The study provides various recommendations for addressing gender-based violence, including support services for survivors and their children, raising public awareness, changing patriarchal attitudes, regular data collection, training police and health workers, and sensitizing religious leaders. While the legal situation of lesbian, gay, bisexual, transgender, queer, and intersex (LGBTQI) individuals has improved, there is ample room for progress. As discussed by the US State Department (2021, 20), Suriname’s “law prohibits discrimination and hate speech based on sexual orientation, specifically protecting the LGBTQI+ community.” However, laws in Suriname prohibit same-sex marriage and do not include legal provisions that allow legally changing gender and do not recognize nonbinary gender. Moreover, in practice, the freedoms of LGBTQ individuals are violated. The US State Department (2021) finds that “activists stated there were few official reports of violence against lesbian, gay, bisexual, transgender, queer, and intersex (LGBTQI+) persons, primarily due to fear of retribution and because authorities did not take seriously complaints filed by members of the LGBTQI+ community.” According to Freedom House (2022), “discrimination against LGBT+ people has resulted in no openly gay politicians in the country.” The Ministry of Health (MOH 2020, 29) finds that the sexual and reproductive health rights of LGBTQI individuals are neglected and concludes that these groups experience structural stigma and discrimination at home as well as in public places. Stigma and discrimination manifest itself in domestic violence, public violence by the police and by people in the street, as well as through social media channels, such as face book. They are often faced with humiliation, exclusion, and dismissal, including in workplaces. 52 Poor mental health indicators are an increasingly important policy challenge in Suriname. According to PAHO (2018, 1), “mental, neurological, substance use disorders, and suicide . . . cause 17 percent of all disability- adjusted life years (DALYs) and 34 percent of all years lived with disability.” PAHO (2018, 2) signals gender differences in the distribution of these disorders: “While men are mostly affected by suicide, alcohol use disorders, and depressive disorders, women are mostly affected by depressive disorders, headaches, and anxiety disorders.” In a 2017 adolescent and youth health country profile, PAHO (2017) shows suicide as one of the leading causes of death among adolescents and youth. Lack of (economic) opportunities is identified by some studies as a factor contributing to poor mental health outcomes. Gunther et al. (2017), for instance, identify the following risk factors for mental disorders: younger age, female gender, lower education level and unemployment. Based on data from the district of Nickerie, Graafsma et al. (2006) argue that poverty, domestic violence, and lack of perspective contribute to high suicide rates. Various studies point to regional and ethnic disparities in health outcomes, often arguing in favor of targeted health policy sensitive to the needs of various ethnic groups. Gunther et al. (2017) thus find that the risk of mental health problems is higher among Maroons. Prüst et al. (2020, 1) find that “women of African descent had the highest stillbirth rate and two times the odds of stillbirth . . . compared to women of other ethnicities.” Verschueren et al. (2020) find that women of Maroon ethnicity exhibit appreciably greater probability of experiencing serious maternal complications. According to Smits et al. (2018), worse socioeconomic outcomes drive the lower use of secondary health care in the interior of the country.32 Krishnadath et al. (2016) examine prevalence and risk factors for hypertension and conclude that the highest prevalence was among Creoles, Hindustani, and Javanese. Gopie et al. (2021) find that tuberculosis rates were highest among indigenous and Creole people. The latter two studies respectively call for ethnic-specific research and prevention and intervention programs and targeted national intervention programs-with special attention given to the vulnerabilities of susceptible ethnic groups-and improved data collection. Differences in health literacy may contribute to regional and ethnic disparities in health outcomes, which are generally moderate at the outset (Diemer et al. 2017). The use of mercury in small-scale artisanal gold mining appears to have deleterious effects on the health of those living in the interior of the country. Several studies examine the exposure to mercury among pregnant women, pointing to the risk of small-scale artisanal gold mining for public health in the interior of the country. One study found that pregnant women in Suriname have elevated total mercury hair levels (Gokoel et al. 2019). Another found that “Pregnant women from interior communities have significantly higher concentrations of both total and methylmercury in hair . . . compared with pregnant women from two urban coastal cities” (Wickliffe et al. 2021, 117). A third argues in favor of “effective risk reduction measures [related to mercury exposure] in support of Indigenous mothers, families, and communities” (Baldewsingh et al. 2021, 1). 32 According to this study, the use of secondary health care was balanced by gender, and primary health care was balanced by both region and gender. 53 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC Improving the efficiency of the health system is an important agenda. Suriname’s progress in life expectancy during 2014–19 coincided with a significant increase in general government health expenditures from 2.0 percent of GDP in 2014 to 7.0 percent in 2019 (see figure 13).33 According to PAHO’s (2023a) country profile of Suriname, this is the highest level of health expenditure as a share of GDP in the Americas after Cuba, the United States, and Canada. Lack of proper criteria and transparency in the granting of government subsidized BaZo insurance contributed to a rapid increase of government health expenditure. While recognizing the importance of investment in health, under the current policies and epidemiological trends costs are projected to continue to increase and outrun government expenditure according to the WHO Country Cooperation Strategy (WHO 2018). As part of a revision of funding to keep care affordable, reforming the currently operating open funding system to a closed budget system is being considered. A recent expert review of Suriname’s health sector, however, signals that these and other changes will be challenging to implement and concludes that Suriname’s health care system is in a downward spiral.34 Challenges raised by the expert review include a fee-for-service approach that drives up costs, lack of data to inform decision-making, and lack of trust and capacity among the parties involved in improving the health care system. An additional problem is the drain on human resources (box 3). BOX 3. THE DRAIN ON HUMAN RESOURCES The education and health sectors are both experiencing the emigration of experienced and skilled individuals (teachers, nurses, general practitioners, and medical specialists). Emigration is fueled by higher wages abroad, in the case of Suriname, mainly the Netherlands or the Dutch-speaking Caribbean (Aruba, Curacao, and Sint Maarten). Figure B3.1 shows the extent of the intention to migrate, which is 37 percent on average and 42 percent among people with tertiary education. Intention to migrate increased as a result of the pandemic. While the prospect of emigrating and acquiring higher wages abroad might stimulate the well skilled to pursue greater educational attainment in the home country (the brain gain hypothesis), an empirical analysis demonstrated the negative long-run effects of emigration on human capital formation in secondary and tertiary education in Suriname in 1972–2009 (Dulam and Franses 2015). In addition to recruitment based on merit rather than ethnic background, collaboration between Suriname and, especially, the Netherlands on the development of tertiary education opportunities, improving institutions through technical training, and transferring technology may help reduce the drain on human resources. 33 GHED (Global Health Expenditure Database), World Health Organization, Geneva, https://apps.who.int/nha/database. 34 Expert Opinion Gezondheidszorg, by Bas Leerink, Geert de Kousemaeker, Wietse Rypkema, and Jeroen Struijs (2022). Doc- ument not public. 54 42% 37% 37% 37% 37% 40% 31% 20% 0% Men Overall Women Secondary Primary or less Tertiary or more FIGURE B3.1. A LARGE SHARE OF SURINAMESE INTEND TO MIGRATE Gender Education level a. Intention to migrate, % b. Changes in intention to migrate, post-COVID-19 outbreak 42% 80% 37% 37% 37% 37% 40% 31% 60% 20% 40% 20% 0% 0% Men Overall Women Secondary Primary or less Tertiary or more Men Women Overall Secondary Primary or less Tertiary or more Gender Education level Gender Education level Increased Same Decreased 80% Source: Based on World Bank 2023. 60% 40% 20% 0% 4.3 SOCIAL ASSISTANCE Men Women Overall Secondary Primary or less Tertiary or more Suriname is underdelivering Gender on its Education social assistance targets. Lack of a social registry is level an impediment Increased Same to broader and more agile and targeted social assistance. Decreased The main features of the social protection system include BaZo health insurance and the minimum wage. In addition, there are four main social assistance cash transfer programs. The algemene kinderbijslag (general child benefit) pays a monthly allowance for each child under age 18 in the household. The algemene oudedagsvoorziening (general old-age pension) pays a monthly allowance to the elderly (ages 60 or more). The financiële bijstand aan mensen met een beperking (financial assistance to persons with disabilities), and the financiële bijstand zwakke huishoudens (financial assistance for households in a situation of vulnerability), respectively, provide allowances to the disabled and a comparatively small group of vulnerable households. At about 1.3 percent of GDP, social assistance programs are underdelivering on targets in the recovery program. The main social assistance cash transfer programs are categorically targeted based on criteria such as age, disability, and the presence of children in the household. The Ministry of Social Affairs has no social registry that would allow the programs to be expanded to other vulnerable groups or to target deliberately those most in need. This is problematic, not only because it limits the ministry’s capacity to structurally expand the provision of social assistance 55 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC benefits, but also because it limits the ministry’s ability to provide targeted support in response to emergencies. Based on conversations with the ministry, it is not clear that there is a plan and a timeline for addressing this challenge. During the COVID-19 pandemic, some of the constraints of the social assistance system became clear. The government provided financial support to help households cope with lockdowns and reduced income. However, because there was no social registry to aid in targeting, the government raised the benefit amounts received by existing beneficiaries of social assistance programs (sometimes referred to as vertical expansion). This included one-off payments to households receiving benefits through the programs on the child benefit, old-age pension, financial assistance to persons with disabilities, and financial assistance for households in a situation of vulnerability and structural increases in the benefit amounts provided by these programs. These increases were certainly needed and helped limit a rise in poverty during the height of the pandemic (box 4). However, the system did not allow for expansion to households in need that were not already benefiting from the main social assistance programs. Improvement in the delivery of social assistance is fundamental to many of the government’s objectives. These improvements could relate to the targeting of social assistance (instead of or in addition to the categorical provision of transfers) and the adjustment of social assistance in line with inflation. First, effective social assistance is necessary in the face of faltering economic performance and rampant inflation, which has widely affected Suriname’s population. But there are other reasons for prioritizing improvements in social assistance. By lowering child poverty, effective social assistance can contribute to improved learning outcomes. By providing an effective safety net, it can help generate the political support needed for other fundamental reforms, such as much-needed public sector reform. Enhancing social assistance could be a conduit for improving financial inclusion. The improved agility of the social assistance system would be vital in responding to climate shocks and can support the implementation of payments for ecosystem services. A well- developed social assistance system could play a role in the distribution of oil revenue (box 5). It is worth considering the possibility of more well targeted social assistance, which could allow for greater efficiency in the social protection sector and the opportunity to provide a targeted approach to health insurance, energy subsides, and also to shock response. 56 BOX 4. SIMULATING THE PROTECTIVE EFFECT OF SOCIAL ASSISTANCE DURING THE PANDEMIC During the height of the pandemic, the World Bank simulated the impacts of the COVID-19 pandemic on poverty rates in Suriname. These simulation results should be interpreted with caution. They are based on the Inter-American Development Bank Survey of Living Conditions, a survey not officially recognized by the government of Suriname (Beuermann, Muñoz, and Flores Cruz 2018). They project an international poverty rate, but this poverty rate was not formally calculated through the World Bank partnership with CEDLAS.a Moreover, any simulation has limitations and critically relies on the accuracy of (often difficult to test) assumptions (see annex D). The team estimated that about 39.3 percent of the population was living below the upper-middle-income poverty line of US$5.50 (2011 purchasing power parity) used by the World Bank in 2016 (figure B4.1). The projected poverty rate in 2020, when Suriname simultaneously experienced a macroeconomic crisis and was hit by COVID-19, was nearly 9 percentage points higher, at 47.9 percent. In the interior of the country, nearly 7 Surinamese in 10 were estimated to be living below the poverty line. In the absence of the vertical social assistance expansion described above, the simulations project an increase in the poverty rate to 50.9 percent. According to the projections, the expansion of social assistance benefits was estimated to have reduced the rise in the poverty rate by 3 percentage points, from 11.6 to 8.6 percentage points. FIGURE B4.1. SIMULATED 2020 POVERTY RATE Pre-shock 2020, National 2020, By Region G. Paramaribo: 45.8% Poverty Rate Poverty Rate Coastal: 49.2% 2016: 39.26% 2020: 47.9% Interior: 69.0 Source: Based on World Bank 2023. a. See SEDLAC (Socio-Economic Database for Latin America and the Caribbean), Center for Distributive, Labor, and Social Studies, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, La Plata, Argentina, and Equity Lab, Team for Statistical Development, World Bank, Washington, DC, https://www.cedlas.econo.unlp.edu.ar/wp/ estadisticas/sedlac/. 57 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC BOX 5. THE DIRECT DISTRIBUTION OF RESOURCE RENTS Natural resource rents are most reliably transformed into sustainable development if a government can make credible intertemporal commitments to its citizens and if the political regime is inclusive such that the government faces the incentives to use resource rents to provide public goods that enhance collective welfare (Barma et al. 2012). The abundance of natural resources obviates the need for domestic taxation, thereby hampering the emergence of systems of checks and balances that promote accountability, transparency, and efficient resource use. To foster accountability, it has been suggested that a portion of the resource revenue be transferred directly to the population and then clawed back through taxation (for example, see Devarajan and Do 2023; Devarajan et al. 2010). The idea is that citizens will be more vigilant of the state’s natural resource management because their dividend is at stake. Because the state relies on the taxation of citizens to cover the cost of public services, citizens would have an incentive to demand greater accountability in public spending. The large-scale direct distribution of resource revenue has not been tested anywhere in the world. While there are arguments to support the view that the direct distribution of resource wealth may result in stronger institutions and accountability, it is unclear whether this will be sufficient to improve resource revenue management (Gupta, Segura-Ubiergo, and Flores 2014). A more modest direct transfer of a portion of the resource revenue to citizens to reduce the discretion of the state over such resources and to foster accountability could be considered as an alternative. Such a transfer could be progressive and involve a more pro-poor approach than most government spending. The program could replicate the Alaska Permanent Fund, for instance, which pays dividends to individuals financed from income arising from saved resource revenue. It could build on the broader international experience with (conditional) cash transfers. Either way, running an effective, efficient, and transparent cash transfer program will be highly demanding in terms of institutional capacity and governance. An ongoing and increasingly urgent attempt to phase out energy subsidies and compensate households through a subject subsidy offers an example. The government of Suriname provides extensive subsidies on fuel and electricity. Under its reform program, it is trying to wind down these energy subsidies. An attempt is being made to compensate poorer households through a more well targeted subject subsidy. However, progress has been slow and insufficient, and the plans have run into fierce resistance and popular protests (StarNieuws 2023). Meetings of the SCD team indicated that the lack of progress has been partly caused by limited capacity to implement targeted compensation to poorer households in the absence of a social registry. 58 5. CHALLENGE: CREATE ALTERNATIVE EMPLOYMENT THROUGH A THRIVING PRIVATE SECTOR SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC Suriname is a small, open economy that benefits from abundant natural resources. Among exports, gold and petroleum predominate and, along with modest exports from the agricultural, forestry, and fishing industries, represent the economy’s foreign exchange earning capacity. The mining industry is the backbone of the economy and is supported by investments of multinational companies and the state-owned oil company, Staatsolie. The government receives rents (royalties, income taxes, and dividends) produced by the mining industry and disperses them across the economy through public sector employment, subsidies, and transfers. The private sector is dominated by small family firms and concentrated in nontradable services. Micro, small, and medium sized enterprises are dominant in the economy, accounting for 98 percent of all firms and about 50 percent of total private sector employment. There are around 200 large private companies with more than 100 employees, which outside of mining tend to sell financial or other nontradable services or import goods (Julien 2014). Minerals and natural resources do not generate much employment. The upcoming offshore oil and gas sector requires massive amounts of investment but creates few direct jobs. While operating at very high levels of productivity, its capital-intensive nature limits its employment potential. Development of the sector may generate significant indirect employment in the transportation, logistics, food and hospitality and financial and accounting services if the country addresses some of its key vulnerabilities and is able to create a more-favorable business and investment climate. Suriname has significant untapped potential as an agriculture producer. Suriname has abundant land and water and a favorable growing environment for many products that could supply domestic demand and be exported to the Caribbean and global markets. Agriculture has been a traditional growth sector in Suriname but has now been in decline for decades. The sector’s contribution to GDP diminished from a peak of 17 percent in 1987 to about 10 percent in 2021. Rice, bananas, fish, shrimp and wood are important export products contributing about 10 percent of export earnings. About 1.5 million hectares are theoretically suitable for agricultural activities, of which 85 percent are in the coastal plains and 15 percent on the river terraces in the interior. However, much of this land is hard to access and requires drainage infrastructure. It is estimated that as much as 230,000 hectares (15 percent of the total) were cultivated in the past. Currently, only around 60,000 hectares are farmed. Of the 60,000 hectares under production, about 50,000 are for rice, almost all in Nickerie District in the west of Suriname. Fisheries are an important component of Suriname’s agricultural sector—and face multiple sustainability issues. Fishing accounts for 35 percent of total agricultural production and 35 percent–40 percent of the total export value. Issues threatening the sector’s sustainability include overfishing, high bycatch (in some fish categories), high number of fishing licenses issued (beyond the levels that the fisheries can sustainably support), multiple vessels illegally using the same fishing license, vessels fishing outside of established zones, illegal export of fish to Guyana, and other monitoring, control, and enforcement challenges (MvLVV 2013, 2019, 2021; WWF Guianas 2020). Although catches had climbed in recent years, the 2018 and 2019 total catches fell sharply, with 24,000 tons in 2019 versus 39,993 tons in 2017. Illegal practices combined with sea level rise, warmer temperatures, and other climate change impacts threaten to damage the sector and livelihoods of the Surinamese fishers (Misiekaba-Kia 2023). 60 Despite its potential as an agriculture producer, Suriname is primarily an importer of agricultural products. Challenges to reach its potential as an agriculture producer include poor physical infrastructure hampering logistics, risks of flood and droughts, lack of finance and credit for producers, poor image of the sector making it hard to find workers, limited expertise, small-scale production, poor land use planning and rights, climate change and pollution. To increase agricultural production, including diversifying products and targeting new export markets, there is significant need to stimulate new private agribusiness investment in Suriname. Given the investment climate constraints facing the sector, proactive reforms by the government of Suriname will be necessary to improve the enabling environment for agribusiness investment (World Bank 2017). The supply and quality of infrastructure is not perceived as a binding constraint to private sector development though additional investment should be well planned and managed. Business surveys such as the global competitiveness index (Schwab 2014) do not signal the supply or quality of infrastructure as one of the more problematic factors of doing business or as one of the major challenges to be addressed. Nonetheless, as public investment in physical assets and infrastructure will play an increasing role in the country’s longer-term development strategy, policy makers may want to focus on transport and connectivity for people and goods markets as well as affordable access to and improvement of basic urban services (electricity, internet, public transport, water and sanitation, waste management). Increasing resilience to extreme weather events and flood prevention also require additional investment, maintenance and (re-)construction of the road infrastructure and drainage systems. In this vein, the government has been looking for public-private partnerships in financing part of its infrastructure investments which will require an adequate regulatory and institutional framework. 5.1 BUSINESS ENVIRONMENT AND PRIVATE SECTOR DEVELOPMENT Burdensome procedures, a large backlog in adopting crucial legislation and a lack of economies of scale contribute to a high cost of doing business, and a relatively undiversified economy. The 2014–15 global competitiveness index ranks Suriname 110 in 144 countries (Schwab 2014). The index shows that Suriname is ranked better for basic requirements, at 86, but that it is ranked worse for efficiency-enhancing factors (121) and innovation and sophistication factors (123). According to the executive opinion survey of the 2014–15 global competitiveness index, the most problematic factors for doing business are inefficient government bureaucracy (19.4 percent), corruption (16.7 percent), access to financing (13.7 percent), and an inadequately educated workforce (11.3 percent). The most significant challenges are related to the goods market efficiency, labor market efficiency, financial market development and market size. Suriname performs poorly in all four areas, ranked 129, 117, 118, and 137, respectively (Schwab 2014). Domestic competition is limited to relatively few companies that dominate markets for goods and services (86), a situation that is aggravated by a largely ineffective antimonopoly policy (125). The entry of businesses that could increase competitive pressure is heavily restricted through administrative and regulatory barriers to 61 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC entry. Not all private stakeholders are in favor of increased competition because some incumbents benefit from the government’s tight control over the economy and from the cumbersome nature of government regulation and procurement (IDB 2014). The latter is consistent with recent evidence about monopolization of imports that account for higher prices in the nonresource tradable sector of natural resource dependent economies as a way of private sector rent extraction (Arezki et al. 2023). State ownership remains important in many sectors of the economy limiting the possibilities for private sector expansion and competitiveness. Partially or fully state- owned entities are important in oil, banking, agriculture, energy and utilities, transportation, and tourism. There has been little or no progress on privatization. The Ministry of Finance is working on developing a data base for SOEs and has identified 47 parastatals and 57 foundations that are state owned (US State Department 2022). SOEs frequently undertake quasi-fiscal activities, including regulatory functions and subsidized service delivery. SOEs formally report to line ministries though the management and accountability framework remains a crucial challenge. Many of the SOEs are loss making or require public funding calling for more centralized oversight to determine their viability and pertinence of public ownership or of recipients of subsidies and transfers. Financial reporting has been particularly weak and the Ministry of Finance has only recently been able to publish annual reports on larger SOEs from 2015 to 2018. The labor market in Suriname is rigid, and the skills gap is significant. Hiring and firing regulations are strict as each layoff requires permission from the Ministry of Labor. Accordingly, hiring and firing practices are ranked as heavily impeded by regulations in the 2014–15 global competitiveness index (126 in 144). Meritocracy is limited in the country’s business culture as reflected in a weak relation between pay and productivity (120) and moderate reliance on professional management (104). The capacity to retain talent was ranked 112 in the 2014–15 global competitiveness index. A sustained characteristic of the Surinamese labor market is the public sector employment offering lifelong positions with social benefits, competing with private sector job opportunities. Access to finance is an important bottleneck to private sector development in Suriname. The financial sector is small, being composed of only a handful of banks, with a large concentration of lending and deposits at the three largest banks. Credit to the private sector is limited and often using real estate as collateral. There is no credit bureau or moveable assets registry. Additional financial instruments that would deepen financial intermediation are not available. Such instruments might include the expansion of the market for government bonds, thereby promoting saving and investment by individuals and firms; leasing; factoring; secured transactions; and the revitalization of the stock exchange (IDB 2014). Local markets are considered key to the economic development of Suriname. More efficient functioning, and better design and regulation are expected to stimulate national production, innovation, and diversification among producers. By starting locally and nationally, entrepreneurs will be better prepared for regional and international markets. This approach may result in fairer and more stable consumer prices and a more sustainable consumption and production pattern. Aside from reformed and stronger government institutions and organizations that regulate and oversee local markets, better consumer and producer protection is considered indispensable (WTO 2019). 62 Suriname can accelerate the development of the private sector, support the economic recovery, and create jobs by addressing key vulnerabilities and implementing a more favorable investment climate, as identified in the forthcoming Caribbean Regional Private Sector Diagnostic.35 Several of the constraints listed above are common to other Caribbean countries. Greater regional integration and collaboration will be crucial in helping overcome these constraints and achieving more viable and effective solutions in the medium to long term. Economic diversification and in particular a broadening of the country’s exports has been elusive and may become even more challenging with significant investments in the oil and gas industry. Nonetheless, public policies may address major constraints identified in the development of the private sector in Suriname and create the basis for a more diversified economy and better jobs, while fostering an environment more conducive to trade, investment and growth. 5.2 LABOR MARKET Limited knowledge and skills have led to the expansion of low-productivity, public- sector and service jobs. Enhancing formal education and training is critical in creating more productive employment opportunities. Moderate population growth and aging are leading to modest growth among the economically active population. While overall annual population growth over the past decade is estimated at 1.4 percent, the average growth of the economically active population is approximated at 0.8 percent per year. Overall labor force participation, that is, the share of the economically active in the population ages 15–64, averaged 60.9 percent in 2012–18 according to a household survey of the General Bureau of Statistics.36 The gender-specific averages show an average labor participation rate among men of 72.7 percent and among women of 48.3 percent in 2015–18. A comparison with data on 2004–12 confirms a trend toward somewhat higher labor participation. This may be mainly attributed to the rising female labor participation rate from 41.2 percent in 2004 to 46.8 percent in 2012. Despite this steady increase over the past two decades, female labor participation is significantly lower in Suriname than in other countries in the region. Unemployment is particularly prevalent among women and the younger entrants into the labor force. While overall unemployment is correlated with economic conditions in the country, unemployment among women and youth is significantly higher. The average unemployment rate in the 35 Jointly produced by the World Bank and the International Finance Corporation, the Regional Private Sector Diagnostic covers 12 countries: Antigua and Barbuda, The Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, and Trinidad and Tobago. 36 Labor statistics published by the General Bureau of Statistics are collected through the census, business surveys among larger firms, national accounts estimates and household surveys (ABS 2018). Data for the latter are published for the dis- tricts of Paramaribo and Wanica that account for about 70 percent of the economically active population. 63 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC districts of Paramaribo and Wanica was 7.7 percent in 2015–18. The unemployment rate among women was 13.6 percent. Similarly, the average youth unemployment rate (age 15–24) over the same period was 20.8 percent. Young women entering the labor force face a particularly high unemployment rate, 34.7 percent. The loss of formal employment and the loss of purchasing power among earnings in the current economic crisis have likely pushed more people into the informal economy. There are no exact figures available on informal employment or the size of the informal economy. Estimates point to a share of the informal sector in the total economy in 2006 of 18.2 percent, expressed in terms of GDP (ABS 2013). As productivity and earnings in the informal sector are generally lower than in formal economy, the share of informal labor is likely to be higher. Labor statistics from the household survey of the General Bureau of Statistics or census do not directly report on the formal/informal status of employment, though informality is likely higher among own account and unpaid family workers. The household survey for Paramaribo and Wanica shows that these categories made up 14 percent of total employment in 2018, up from 11.5 percent in 2015. Informality in the agricultural sector as well as in the rural area and the interior of the country is much higher and is estimated to be as high as 80 percent in the agricultural sector and about 50 percent in the nonagrarian sector (Beuermann, Muñoz, and Flores Cruz 2018). In addition, the surveys and census report the status of the main activity of an individual while many public sector workers are mentioned to have a second job in addition to their regular appointment, often in the informal economy. Another indication of a significant informal economy is the moderate share of labor income in the national account statistics at nearly 42 percent in 2019. The results of the World Bank phone survey show that the share of the employed population in formal work declined by 10 percentage points upon the 2020/21 economic crisis and COVID pandemic (World Bank 2023; see figure 4). More information on informality in Suriname is needed to formulate adequate policy. Informality is often associated with low earning, high vulnerability and a small tax base. The informal sector is, on average, less productive than the formal sector because it tends to employ more low- skilled workers, have more restricted access to funding, services and markets, and lack economies of scale. Policy actions can unleash the growth potential of the informal sector’s resources by promoting their transfer to the formal sector and providing better public services and social safety nets to protect vulnerable groups who remain in the informal sector. There tends to be a wide heterogeneity in informal activity, calling for differentiated policy responses. While informality is often perceived as a problem of regulatory evasion or avoidance, other informal activities fall outside any regulation as their natural size is well below any threshold that government regulation may have imposed. While, by its nature, informality is difficult to observe and measure, better measurement and characterization of informality should allow for differentiated policy approaches, ranging from reform of business and tax regulation, enhanced education and skill development to a combination of contributory and noncontributory social protection programs. 64 BOX 6. LEGAL GAPS AND WEAK INSTITUTIONS ARE CONTRIBUTING TO DISADVANTAGES AMONG WOMEN Suriname has steadily improved its position in global comparisons of equality between women and men. Suriname ranks 44th out of 146 countries on the latest World Economic Forum (WEF 2022) global gender gap index (and 11 out of 22 countries in the Latin America and Caribbean region). Suriname’s performance is fairly even across the four domains captured in the gender gap index: economic participation and opportunity (46 globally), educational attainment (69), health and survival (61), and political empowerment (53). Suriname stands out in the index in a few respects. It is listed as the only country in the region that has not achieved parity in the sex ratio at birth. And it performs comparatively poorly in terms of women’s labor force participation (107), earned income (82), and literacy (91). Despite progress, Suriname experiences challenges related to gender targets including because of legal gaps and weak institutions. Several state-led reports reflect on the situation of women in Suriname (MOHA 2018, 2019). The Ministry of Home Affairs (MOHA 2019) highlights several areas of progress and achievement, including: legal context, development of policies and plans, access to health, education, and social services, and availability of information for monitoring purposes. It also mentions the following challenges: economic hardship, poverty and disparate access to services, continued challenges in the improvement of sexual and reproductive health outcomes, and weak government institutions. The World Bank’s women, business, and the law index, examines the legal context for women in eight domains.a In Suriname, it identifies legal barriers especially in the workplace and in entrepreneurship. For instance, there is no legislation on sexual harassment in employment, nor are there criminal penalties or civil remedies for sexual harassment in employment. The law does not prohibit discrimination in access to credit based on gender and women cannot register a business in the same way as men. a. WBL (Women, Business, and the Law) (dashboard), World Bank, Washington, DC, https://wbl. worldbank.org/en/wbl. A significant gender gap in formal education is observed in the labor market. Whereas nearly half of the employed women have higher-secondary vocational or tertiary education, less than a third of employed men have attained this level of formal education. However, because men make up a larger share of the employed population (62.2 percent), the overall share of employed with higher education is about 36.7 percent. The labor participation rate of women with higher educational attainment is 53.5 percent, which is higher than the average female labor force participation rate (48.3 percent), though still significantly below the male labor force participation rate (72.7 percent) or the rate among men with higher education (75.5 percent). An increase in the labor participation of women, particularly among women with higher levels of education, would allow for a rapid increase in the overall skill level of the labor force. However, this would require legal and institutional reforms (box 6). 65 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC Gaps in skills and training stifle the growth and productivity of firms. An inadequately trained workforce was the second-most serious concern identified by firms in Suriname in the 2020 Innovation Firm Performance and Gender Survey (Compete Caribbean 2020).37 The ongoing structural transformation of the economy, with a decline of agriculture and expansion of services, has created a disconnect between labor market needs and the labor force’s knowledge and skills. Moreover, the COVID-19 pandemic created a need for more services to be delivered digitally, highlighting the scarcity of local digital capabilities. The loss of skills from migration is also high in the country. Enhancing the competitiveness of the workforce requires improving secondary education and expanding access to tertiary education. Enhancing the quality and relevancy of secondary and tertiary education are critical to developing a productive labor force and a competitive private sector. Improved secondary education will better prepare students for the transition to higher education or the job market. Tertiary school enrollment rates‫ ﷟‬are below the Latin America and Caribbean regional average of 46 percent, limiting opportunities for people to find quality employment (Palmisano 2022). 5.3 DIGITAL TECHNOLOGIES The digital economy can create new growth opportunities and increase productivity in the public and private sectors. Building strong foundations for the digital economy will require a robust digital infrastructure, a larger pool of talent with advanced digital skills, and well- functioning digital payments. Public policies can facilitate the development of a larger pool of talent with advanced digital skills and take the lead in digitizing public services and in fostering the development of digital financial services, while innovative public-private partnership models could support the expansion of high-speed broadband connectivity. Widespread, reliable, and affordable digital infrastructure is crucial to the development and integration of the digital economy. A National Broadband Project implemented starting in 2018 improved the network in coastal areas, introducing a glass fiber network that allows for higher broadband speed. As a result, 87 percent of the population is now covered by at least a 4G mobile network, and 79 inhabitants in 100 had active mobile broadband subscriptions in 2021.38 Nearly 55 percent of households reported they had internet access at home in 2019, and about two thirds of individuals use the internet. The currency depreciation and decline in economic activity and income did increase the cost of the mobile data and voice basket from 3.0 percent of per capita gross national income in 2018 to 7.7 percent in 2021. 37 Innovation, Firm Performance, and Gender Survey (dashboard), Compete Caribbean, Christ Church, Barbados, https:// www.competecaribbean.org/docs/ifpg-survey/index.html. 38 Statistics (dashboard), International Telecommunication Union, Geneva, https://www.itu.int/en/ITU-D/Statistics/Pages/ stat/default.aspx. 66 Digital technologies could be transformational, improving service delivery, enhancing firm productivity, and connecting firms to foreign markets. The COVID-19 pandemic has increased awareness and usage of digital technologies, but their uptake by both the public and private sectors has yet to meet its potential. Digital technologies have the potential to reshape traditional sectors, such as agriculture, mining, and logistics; and to create new export opportunities. Global growth of trade in intermediate business services (such as accounting, administrative assistance, online client assistance, graphic design, information technology help staff and software engineering) has been exceptionally dynamic over the past few decades as these services can be supplied virtually, face less barriers to trade, are not subject to significant economies of scale, and benefit from huge global demand (Baldwin 2022). Digital technologies can also transform the quality and efficiency of public services delivery, from health services to firms licensing. The digital transformation requires a strong pipeline of talent with digital skills, and public policies need to facilitate the development and utilization of such skills. The pandemic has amplified the urgency of developing digital applications for commerce, work, and the delivery of services to the population, while technological progress requires agile skill adaptation from workers. A pool of digital talent would allow the export of information and communication technology–related services, overcoming the small size of the domestic markets. Most public services, both for individuals and for firms, remain unavailable in digital format, which has reduced the potential demand for digital talent (the World Bank’s forthcoming Caribbean Regional Private Sector Diagnostic). Digital financial services, especially digital payments, are essential blocks of the digital economy. They support e-commerce, enhance the efficiency and transparency of government payments, and foster access to finance. Digital payments—including payment cards, as well as online or mobile payments linked to e-money or traditional bank accounts—are often the entry point to a wider set of digital financial services. The government can also use digital financial services to increase the efficiency and accountability of various payment streams, including the disbursement of social transfers and receipt of taxes and business payments. Notably, digital channels can ensure that government payments reach their intended beneficiaries and do so on a timely basis, especially in rural areas, where they also reduce the need to transport cash. Despite a recent acceleration prompted by the pandemic, the digital financial ecosystem is evolving slowly in Suriname, compared with the pace of change observed globally. Suriname does not feature a broad and diverse suite of digital financial services. Cash remains central, while debit cards are widespread, but the use of credit cards or online payments is limited. The pandemic has boosted the use of digital payments for certain government transfers, but most payments from citizens to governments continue to rely on traditional channels. Indeed, the findings of the recent World Bank phone survey suggest that increasing access to digital financial technology has the potential to increase financial inclusion and meet the needs of population segments that are not the main target of traditional financial services models (World Bank 2023). While about two-thirds of the population have accounts in financial institutions, only a small minority use mobile wallets (figure 15). Developing a comprehensive digital financial services ecosystem is critical to fostering the broader digital-economy agenda and expanding access to finance. A digital financial services ecosystem needs support from appropriate legal and regulatory frameworks (for example, to allow 67 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC market entry and innovation), robust financial infrastructure (for instance, national payment systems and credit reporting systems), and low-cost delivery channels (for example, agents, point-of-sale devices, automated teller machines, and mobile phones). Use of digital financial services is driven by access to a basic transaction account, which allows individuals to receive and send digital payments, and to initiate a shift to more-advanced services such as savings, insurance, and credit. The low usage of basic transaction accounts stems primarily from a dearth of innovative players in the market, high fees driven by the market dominance of banks, lack of interoperability in digital payment instruments, outdated payment infrastructure, and limited financial literacy. A slow transition to e-government and continued reliance on paper-based payment instruments for tax collection have compounded these factors. Current trends suggest that, without proactive government intervention, the use of cash will remain prevalent. 70% 68% 68% 66% 64% 64% 62% 61% FIGURE 15. TWO-THIRDS OF SURINAMESE HOLD ACCOUNTS IN FINANCIAL INSTITUTIONS; 60% FEW USE MOBILE WALLETS 58% 56% Men Women Overall a. Adults with accounts in financial b. Adults who use mobile wallets, % institutions, % 60% 70% 68% 68% 50% 66% 64% 64% 40% 62% 61% 30% 60% 58% 20% 56% 10% Men Women Overall 0% iti ru Ur e a Co me Su ia na ca y r as El nica a n R ica Ho ia do il aic ua Ha Pe gu l uc Ch ub b ur ya a aR lva m ug m .L ra rin i nd ep m Gu lo Ja 60% St st Sa Do Co Ni ca ini m 50% Do 40% Source: Based on World Bank 2023. 30% Seizing on the momentum of the past two years, the government has an opportunity to raise 20% its ambition for the digital economy. Appropriate digital strategies call for policies that incentivize 10% investment in infrastructure and talent, and allow for innovative solutions to be deployed across the 0% economy. i ru ile a it st e ia na ay r as El nica a n R ica Ho ia do m aic Ha Pe gu l uc Ch ub b u ur ya ina aR lva m ug m .L ra i nd ep m Gu lo Ja ca r Ur St Sa Su Do Co Co Ni ca ini m Do 68 6. CHALLENGE: PROTECT SURINAME’S FOREST, INVEST IN FLOOD PROTECTION, DECARBONIZE 69 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC Suriname is one of only three carbon negative countries in the world. It is one of the most densely forested countries in the world with 93 percent forest cover. Moreover, it has the capacity to meet a large part of its electricity needs through a hydropower dam and (to a lesser extent) the potential for solar power. Yet, illegal gold mining puts the forest at risk. And the impending offshore oil extraction could make hydrocarbons the cornerstone of the country’s economic growth for decades to come. Suriname is significantly exposed to climate change; most of the population lives near the shore at sea level, and disasters driven by climate change are increasing. Box 7 illustrates relevant governance issues. BOX 7. THE GOVERNANCE OF CLIMATE CHANGE ADAPTATION AND MITIGATION The government and stakeholders undertook significant effort to establish the necessary environmental protection framework and adhere to international reporting obligations. The government ratified the main climate conventions and protocols. It described pathways to decarbonization in its second Nationally Determined Contribution (NDC) (Office of the President 2019), has an up-to-date national adaptation plan, and is preparing to publish its third national communication to the United Nations Framework Convention on Climate Change. It has a National Coordination Center for Disaster Management that leads on disaster risk preparation and response. And, in 2020, it established the Ministry of Spatial Planning and Environment to coordinate many of these efforts. Nonetheless, the first voluntary national review of the Sustainable Development Goals (MFA 2022, 94) concluded that there is still a need to further build capacity of government and nongovernment stakeholders in data management, and the ability to conduct assessments to advise policy and design proposals for climate investment. Overall, the limited institutional and human capacity as well as lack of reliable and current data, outdated laws and regulations, unfamiliarity with environmentally friendly technologies, and the capacity to mobilize funds effectively are challenges that continue to hamper the optimal implementation of environmental policy. a. Through the Global Facility for Disaster Reduction and Recovery Trust Fund, the World Bank is supporting the creation of a comprehensive flood risk management program. 70 6.1 FOREST PROTECTION Suriname’s forests are a global public good. Maintaining them requires action to address small-scale artisanal mining. Suriname’s forests, part of the Amazon and Guiana Shield Region, are an asset of local, regional, and global importance. Suriname is committed to protecting them. Forests cover 93 percent of Suriname’s surface and over “80% of the country is made up of pure, undisturbed rain forests” (Republic of Suriname 2022, 22). Suriname’s forests “provide ecosystem services important on global and local levels, including climate change mitigation, biodiversity preservation, cultural values, livelihoods and food security for communities” (SSB 2022, 13).39 According to the Nationally Determined Contribution (NDC) (Office of the President 2019), Suriname’s forest stores 13.1 Gigatons of CO2, while Suriname emitted 2.2 million tons of CO2 in 2020. Suriname “is committed to implementing policies and projects that contribute to sustainable development and the conservation of its carbon sinks” (Republic of Suriname 2022, 15). Although Suriname has maintained much of its forest cover, its forests are under pressure. According to Global Forest Watch, a platform monitoring global forests, “from 2000 to 2020, Suriname experienced a net change of −57.8 kha (−0.42 percent) in tree cover.”40 The actual loss in tree cover was larger, at 1.5 percent, since 2000 and resulted in 161 Mt of CO2 emissions.41 The pace of tree cover loss accelerated in the later years of this period. The pick-up in the pace of deforestation is illustrated in a background study for Suriname’s Redd+ strategy (NIMOS 2017), which indicates that much of the deforestation takes place in the east of the country, but the precise locations shift over time. As described by the National Institute for Environment and Development in Suriname (NIMOS 2017, 11): “Mining (especially unplanned artisanal small-scale gold mining) has been identified as the chief direct cause of deforestation, followed by infrastructure development, urban development, and agriculture.” Artisanal gold mining, which involves the heavy use of mercury, poses the main threat to Suriname’s forests. Seccatore and de Theije (2017) describe how small-scale, artisanal miners produce about two-thirds of Suriname’s gold. They argue that the social context in which miners work contributes to the use of heavily polluting and inefficient extraction technologies, including the use of mercury. In particular, the employment of artisanal miners is informal and insecure, and many miners are immigrants (mostly from Brazil). While no recent estimates of the damage caused by (both artisanal and professional) gold mining were identified for this SCD, it is clear that the impacts on Suriname’s 39 Suriname’s forests feature some of the highest levels of biodiversity and endemic species in the world. In 2019, Suriname identified 2,020 animal species and 7,906 plant species. Beyond intrinsic value, preserving Suriname’s biodiversity is im- portant for the integrity of its ecosystems (and maintaining ecosystem service supply) and benefits to humans such as medicinal plants and pest control. Protecting Suriname’s biodiversity is also vital to safeguard other economic and employ- ment opportunities such as ecotourism (ABS 2020; Republic of Suriname 2019). 40 Suriname: Forest Change (dashboard), Global Forest Watch, Washington, DC, https://www.globalforestwatch.org/dash- boards/country/SUR/. 41 An additional challenge is the decline in habitat for Suriname’s wildlife resulting from deforestation (for example, see Ver- heij 2019). 71 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC forests are devastating (for example, Giljum et al. 2022; NIMOS 2017; Rahm et al. 2015).42 Maroon and indigenous peoples in the interior of Suriname are disproportionately affected by artisanal, small-scale gold mining and the damage it inflicts on the environment. As discussed in the health subsection, the use of mercury in small-scale artisanal gold mining has deleterious effects on the health of those living in the interior of the country. In part, this is because it poses a direct threat by contaminating water sources used by communities in the interior of the country. But the impacts of small-scale artisanal gold mining are broader than that. The gold mining industry damages the entire eco-systems on which these communities depend for their livelihoods, affects biodiversity, and can be a significant source of greenhouse gas emissions. Reducing the impact of the mining sector and implementing forest-smart artisanal and small-scale mining Standards are not straightforward (World Bank 2019, 2021b). Suriname is a party to the Minamata Convention, the treaty aiming to protect human health and the environment from the adverse effects of mercury.43 The reform of the legal framework and policies governing the gold mining industry, however, has been difficult (Buddingh 2018). Indeed, Suriname’s first full national report for the Minamata Convention, published in 2021, indicates that the development and implementation of a national action plan to address the use of mercury in small-scale and artisanal gold mining was still in progress. Nonetheless, various indigenous and Maroon communities continue to vie for such reforms (Lyons and Espinosa 2022). NIMOS (2017, 16) identifies governance and institutional constraints as critical to addressing the impacts of the mining sector. These include weak monitoring and enforcement of existing regulations; lack of mandatory legislation on the evaluation and management of environmental and social impacts; lack of transparency in policies regarding ASGM [artisanal and small-scale gold mining], such as no public availability of information on concession titles and difficulties for obtaining information. Moreover, informal artisanal mining, deep in the interior of the country, is hard to regulate. As Dezécache et al. (2017) discuss, there are regional links in the enforcement of laws against illegal gold mining. Efforts to limit illegal gold mining in neighboring French Guiana, for instance, can increase illegal gold mining in Suriname (and vice versa). Other pressures on Suriname’s forests are increasing (NIMOS 2017). The second most important cause of deforestation is infrastructure development and, especially, roadbuilding. Roadbuilding contributes directly to deforestation, and, by enhancing accessibility of the interior regions, it also indirectly facilitates industries responsible for deforestation (such as small-scale mining). Other drivers of deforestation include urban development and agriculture. While both are responsible for only limited deforestation, the trend is increasing. The impacts of agriculture are compounded by “weak monitoring and enforcement of agrochemical use,” which can result in forest degradation (NIMOS 2017, 18). 42 In the words of NIMOS (2017, 16), artisanal and small-scale gold mining is associated with extensive environmental deg- radation, including deforestation, severe erosion, river siltation and mercury pollution. Most often no efficient vegetation removal is carried out, large trees are slashed and the rest is burned. Due to the fact that many operations lack a mining permit, small miners tend to work far from access roads, and selling the wood becomes impossible or unprofitable. 43 Minamata Convention on Mercury (dashboard), United Nations Environment Programme, Geneva, https://mercuryconven- tion.org/en. 72 While not currently considered one of the largest contributors to deforestation, it is nonetheless important to take logging into consideration. NIMOS (2017, 11) argues that “the forestry sector does not contribute to direct deforestation” in Suriname. Nonetheless, NIMOS (2017) does recognize that logging is a risk. Growing global demand is reflected in Suriname’s increasing timber production.44 Biodiversity losses from forest fragmentation because of logging are cause for concern (Hansen et al. 2020). And, as described by NIMOS (2017, 11), “forest degradation results from cases of overexploitation or poor logging practices, and forestry contributes to 25 percent of the REDD+ related GHG emissions.” Accordingly, Zalman et al. (2019) find that there are opportunities to reduce the carbon emissions from logging through better road planning and improved bucking practices. DeArmond et al. (2023) argue that lower intensity logging can contribute to a more sustainable and less impactful logging industry. NIMOS (2017) identifies governance and institutional constraints as a critical impediment to improved logging practices. These include law enforcement, regulatory status of operational guidelines and procedures, limited resources in responsible organizations, and lack of capacity in the private and public sector. The above underlines the importance of efforts to preserve Suriname’s forest with international financial and technical support. Limited deforestation and forest degradation help to preserve Suriname’s role as a carbon sink and are thus a global public good. Suriname’s transition from the REDD+ preparatory phase to the implementation of policies and pilots, will require significant institutional efforts and governance improvements. According to the United Nations Food and Agriculture Organization’s Suriname Forest Finance Strategy (in progress), core elements of an approach to protect Suriname’s forests must include lowering the impact of small-scale artisanal gold mining while increasing the value and sustainability of ongoing logging activities. An additional critical element of the preservation of Suriname’s forests is the creation of alternative economic opportunities for those living in the interior of the country. As mentioned above, poverty rates are highest amid the population living in the interior and limited economic opportunities for those in the interior contribute to drivers of deforestation such as gold mining and logging. Alternative economic opportunities could include development of other forest products, eco-tourism, and payments for ecosystem services discussed next. Suriname has the potential to derive economic benefits from its REDD+ participation, engagement in voluntary carbon markets, and payment for ecosystem services schemes. The government has successfully gone through the REDD+ readiness phase and has reported the REDD+ results twice to the United Nations Framework Convention on Climate Change. As it moves from readiness to implementation and the results-based payment stages of REDD+, it could realize revenues from the voluntary carbon market and by generating credits from standards suitable for high forest, low deforestation countries. In 2021, the government received revenues from carbon credits by signing a US$50 million carbon credit deal with TotalEnergies (EIU 2021). Neighboring Guyana—also a high forest, low deforestation country—has had recent success in utilizing forest carbon finance and generated substantial revenue through a recent carbon credit deal of US$750 million (Business Wire 2022). Strong regulatory structures and appropriate benefit sharing need to be in place to ensure an effective REDD+ system. The mangroves, rivers and creeks, forests, and planted forests of Suriname have particularly high supply capacities for ecosystem services. Some of the highest capacity ecosystem services provided by these land use, land cover types include carbon storage and global or local climate 44 Illegal logging, the exact scale of which is difficult to assess, is adding to the pressure on Suriname’s forests. For mentions in the media, see, for example, ANI (2021); India Narrative (2021). 73 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC regulation, wild animals and their outputs, freshwater for drinking purposes, materials and fibers, plants and resources for medical use, maintaining nursery populations and habitats, pollination and seed dispersal, hydrological services, erosion control, storm and flood protection, and cultural and recreational services (Sieber et al. 2021). Schemes for payment for ecosystem services could be developed to compensate Suriname for maintaining these valuable resources, many of which have both local and international positive externalities. The same study found that these ecosystem services extended across borders in the case of Suriname and neighboring French Guiana (Sieber et al. 2021); project proposals for regional payment for ecosystem services could be attractive for international finance entities and may be worth exploring. Enhancing the role of indigenous and Maroon communities’ in forest management may open economic and conservation opportunities. Enhancing the role of these communities would have to involve a focus on land rights, a long-standing source of contention. An exception in the region, Suriname does not have comprehensive legislation recognizing the rights of indigenous and tribal communities (Ooft 2021). Indigenous and Maroon communities and the state of Suriname often have conflicting claims to lands in the interior. Efforts to put land rights on the legislative agenda have a long history, but have not been concluded (Apapoe 2020; Mulokot Foundation, VIDS, and Cultural Survival 2021). Several new legislative initiatives aim to enhance the basic collective rights of indigenous and Maroon communities over their lands (IWGIA 2022; Lyons and Espinosa 2022). However, although there appears to be agreement over the importance of granting such rights, natural riches on these lands complicate the debate. A focus on land rights would need to be complemented by investment in the forest management capacity of communities. The government of Suriname issues permits for community forests to indigenous and Maroon communities in the interior of the country. Currently, there are about 140 community forests covering an area of a little under 800,000 hectares. Permits are provided for a period of at least 10 years, nowadays to village-level committees. Van Kanten and Razab-Sekh (2020) discuss some of the challenges of the community forest mechanism and highlight that it is not uncommon for communities to enter into contracts with commercial loggers to monetize forest resources. The profits of these commercial logging activities tend to be captured, and the benefits to the livelihoods of most community members tend to be limited. Van Kanten and Razab-Sekh therefore argue for strengthening the capacity of communities to manage forests and enter into sustainable partnerships. 6.2 FLOOD PREVENTION AND DISASTER RISK MANAGEMENT Suriname’s preparedness to deal with climate disasters, and flooding in particular, is limited and will become an increasing priority in the coming decades. Suriname is significantly exposed to heavy rains and flooding. In international rankings, Suriname does not immediately come out as one of the countries most heavily exposed to climate risks. The global climate risk index ranks Suriname relatively low on the impacts of climate-induced 74 extreme weather events (Eckstein, Künzel, and Schäfer 2021). The same holds for the Notre Dame global adaptation index, which lists Suriname among the countries with relatively low vulnerability to climate disruptions, but also among countries that are relatively less well prepared to deal with climate risks.45 However, Suriname is significantly exposed to heavy rains and floods, as underlined by recent events.46 Although Suriname is situated outside the hurricane belt, the aftermath of the hurricanes that proliferate in the Caribbean region are often experienced in the form of heavy rainfall. Suriname is regularly confronted with (the implications of) extreme weather conditions, such as flooding, heavy winds and saltwater intrusion. In recent years there also seems to be a pattern of increasingly severe flooding in the interior areas of Suriname (2006, 2008, 2021 and 2022).47 The impacts of heavy rains are exacerbated by the fact that the drainage systems are outdated. Their storage capacity is insufficient to handle the excess water after heavy rainfall, because of overdue maintenance of the water infrastructure and pumps. Heavy rains and floods in 2022 are a case in point and illustrate the challenges facing Suriname’s population. The problems started in March, typically a relatively dry time of the year. Because of heavy rains, rivers crossed their banks in multiple locations and water had to be released from the Afobaka dam, causing floods in Brokopondo and other districts especially in the interior of Suriname. There were reports of the impacts of the floods on education, water, hygiene, mosquito prevalence, crop losses, and hunger (Davies 2022a, 2022b). PAHO carried out multiple assessments during that time, describing how nearly 1,500 people were displaced as a result of the floods (for instance, see PAHO 2022a).48 These rains also illustrated the vulnerability of Suriname’s transport infrastructure to flooding, as several roads were impacted in the southern areas challenging relief and emergency assistance to impacted communities (CDEMA 2022). Indeed, households commonly perceive heavy rain as a threat. Only a minority of households indicate that they are prepared to handle this type of threat (figure 16). This can be inferred from the World Bank phone survey in which, respectively, 61 percent and 41 percent of households indicated that they are threatened by extreme rainfall and floods (World Bank 2023). Most households (57 percent) indicate that they are not prepared to deal with an emergency or disaster, indicating the need for elevating disaster risk preparedness as a policy area. The share of households not prepared for an emergency or disaster was somewhat higher among woman-headed households than man-headed 45 ND-GAIN Country Index (University of Notre Dame Global Adaptation Index) (dashboard), University of Notre Dame, Notre Dame, IN, https://gain.nd.edu/our-work/country-index/. 46 Climate change also has the potential to compound public health issues. Climate projections for Suriname indicate that, while heavy rains might increase, total annual rainfall could decrease as temperatures continue to rise. This creates favor- able conditions for vectorborne diseases, such as dengue and malaria, and can result in additional obstacles to improving health outcomes, including implications for cost control of the country’s already stressed health care system (Kulkarni, Du- guay, and Ost 2022). Also see Suriname, CCKP (Climate Change Knowledge Portal) (dashboard), World Bank, Washington, DC, https://climateknowledgeportal.worldbank.org/country/suriname/vulnerability. 47 One of the two active World Bank lending operations in Suriname, the Saramacca Canal System Rehabilitation Project, aims to address flooding risks by upgrading critical drainage infrastructure in the Saramacca Canal and other secondary and tertiary systems. It will also optimize the overall maintenance of the canal and navigation, reduce the inundation time for property and businesses, develop a flood forecasting service, and implement an emergency response in the event of a natural disaster. 48 Also see Flooding in Suriname, 2022 (dashboard), Pan American Health Organization, Washington, DC, https://www.paho. org/en/flooding-suriname. 75 SURINAME 100% 90% SYSTEMATIC COUNTRY DIAGNOSTIC 80% 70% 61% 60% 50% 41% 40% 33% 28% households (64 percent versus 59 percent). (The links between gender and disaster risk preparedness 49 30% 20% are discussed in more detail below.) 11% 10% 0% Extreme Floods Earthquake Drought Other rainfall FIGURE 16. FEW HOUSEHOLDS ARE PREPARED TO DEAL WITH NATURAL DISASTERS a. Disaster threats perceived by households, % b. Household preparedness for disasters, % 100% 100% 90% 90% 80% 80% 70% 70% 57% 59% 61% 64% 60% 60% 50% 41% 50% 40% 33% 40% 28% 30% 30% 20% 20% 11% 10% 10% 0% 0% Extreme Floods Earthquake Drought Other Male-headed Female-headed All rainfall Very prepared Somewhat prepared Not prepared Source: Based on World Bank 2023. In the longer term, rising sea levels are a significant threat. Almost 30 percent of the country lies only a few meters above sea level, making it susceptible to coastal flooding. Nearly 80 percent 100% of Suriname’s population (including the population in the capital of Paramaribo) and most of the 90% country’s fertile land and economic activities are located in the 384 kilometer-long coastal plain. 80% sea level rise 64% Therefore,57% 70% presents significant 59% development challenges including expansion of the agricultural frontier into the interior. Suriname’s mangroves play a critical role in the protection of its 60% shores (as well as a critical ecological role). Deforestation and coastline settlement represent risks to 50% 40% Suriname’s mangroves, increasing the risks of flooding. However, mangrove rehabilitation pilot projects 30% are under way to support the protection offered by this vital natural defense against flooding and 20% erosion 10% (for example, see Flores Aguilar and Alleng 2020; Toorman et al. 2018). 0% Natural disasters may Male-headed have gender-differentiated Female-headed All impacts. Palmisano (2022) discusses that women SurinameSomewhat in prepared Very more vulnerable may beprepared to natural hazards because of their traditional roles and Not prepared responsibilities in the household and community, cultural practices affecting their access to health services, occupational sex segregation limiting their economic opportunities, increased risk of gender- based violence, among others. Cultural traditions limiting women’s mobility and access to information 49 The International Finance Corporation Resilience Building Program for the Caribbean has identified significant market gaps in the region for enhancing climate resilient housing and buildings (both new constructions and retrofitting existing build- ings), which has the potential to boost Suriname’s resilience and preparedness to deal with climate disasters. 76 may influence the resilience of women and men in Suriname. Despite this, concrete efforts have been made to increase women’s involvement in disaster risk management, also thanks to matriarchal structure and traditions in Indigenous and Maroon communities. Governance challenges pose a formidable challenge to improving disaster risk preparedness and addressing the increasing risks of flooding. In 2017, the National Coordination Center for Disaster Relief published a Disaster Risk Reduction Country Document for Suriname. The document concluded that “awareness of disaster risk, and thus awareness of the need to reduce this risk, is lacking on all levels of society” (Schmeitz 2017, 9). It highlighted numerous challenges, including lacking legislation, need to improve coordination between plans, and shortage of staff in the National Coordination Center For Disaster Relief. In 2021, the Inter-American Development Bank published a scathing new assessment based on its index of governance and public policy in disaster risk management (iGOPP). It found that “the overall iGOPP score for Suriname is 5.59 percent, the lowest score in Latin America and the Caribbean” (Lacambra et al. 2021, 5). The document identified major problems and limited progress in all domains covered by the iGOPP: the governance framework, risk reduction, disaster preparedness, disaster recovery, and financial planning. 6.3 DECARBONIZATION AND ENERGY Suriname has the potential to supply all electricity through renewable sources. Reducing emissions from transport and agriculture is possible, but less straightforward. The NDC aims for a cost-effective pathway to decarbonization of sustainable economic development. It recognizes the importance of “maintaining the integrity of natural forest acting as a carbon sink” (Office of the President 2019, 2). Suriname’s NDC was set up to align with the Policy Development Plan 2017–2021 (Republic of Suriname 2017). The NDC focuses particularly on the four sectors that are jointly responsible for about 70 percent of Suriname’s emissions: forests, electricity, agriculture, and transport. Forests are discussed above; this subsection focuses on the remaining three sectors. Renewables play an important role in Suriname’s electricity production. Continued investment is required to maintain and expand their role. Suriname partly relies on a hydro- power dam and some solar power to for its electricity. These renewable sources supply (on average, depending on weather conditions) about half of the country’s electricity needs. The bulk of this electricity is generated by the Afobaka hydropower dam in Brokopondo District. The other half of Suriname’s electricity is generated from diesel and heavy fuel oil. Investment in additional renewable energy sources is needed to keep up with demand, which is expected to double by 2030 (for example, 77 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC NIMOS 2017).50 In fact, some argue that the government and stakeholders could be more ambitious and that “Suriname has potential for (near) 100 percent renewable energy supply, for the mid-term horizon (2030)” (Donk et al. 2021, 57). Investment would require a focus not only on expanded hydropower for the main grid supplying Paramaribo and the more densely populated coastal areas (combined with wind energy), but also sustainable generation of electricity for mini-grids in the interior of the country, for instance through solar power. In the longer-term such investment could also contribute to electric mobility uptake. Demand for energy could be dampened by reducing electricity and fuel subsidies. According to the NDC, in 2011–16, the value of electricity subsidies equaled about 3.3 percent of GDP. Although the current government is removing these subsidies as part of the recovery program, electricity and fuel continue to be heavily subsidized. In the interior of the country, electricity is entirely free, although provision is irregular and less reliable. An attempt is being made to compensate poorer households for the removal of subsidies through a more targeted subject subsidy (see above), but progress has been slow and insufficient. The government has been planning to speed up the process, but these plans have run into fierce resistance and popular protests (StarNieuws 2023). Meetings of the SCD team indicated that lack of progress has been due in part to absence of systems to implement targeted compensation to poorer households (see above). The NDC examines various priorities in the REDD+ strategy that could contribute to reducing the emissions of the agriculture and transport sectors. In the agriculture sector, these include a land use planning system, which would help reduce the impact of agriculture on deforestation, the enhanced diffusion of knowledge related to climate-smart agriculture, and scale back the use of shifting cultivation in the interior of the country. To understand the impacts of road transport on emissions and to consider approaches to reducing the emissions of this sector, one might zero in especially on the greater Paramaribo area. The NDC concludes that private vehicle traffic in Paramaribo is growing rapidly. Car ownership has doubled in the course of a decade, contributing to rising emissions. Infrastructure has not been upgraded accordingly, nor have public transport opportunities. Efforts to expand the private sector and agricultural production need to comprise a transition to climate-friendly technology and approaches. The upfront cost of adopting climate-smart approaches in key sectors, such as agriculture or tourism, may be prohibitive given the small size of local markets and firms. Green finance, especially for micro, small, and medium enterprises, as well as de- risking and credit-enhancement tools to crowd in the private sector could be part of the solution. Green or blue bonds that offer access to a wider pool of institutional investors, while benefiting from slightly lower interest rates than conventional bonds, are proving attractive to many countries. However, significant barriers to green finance persist across Suriname and the wider Caribbean, including: misalignment of financial-sector policies and incentives with climate and environmental objectives; poor transparency and labeling of green assets; and low penetration and availability of insurance products. 50 The NDC commits to 35 percent electricity from renewables by 2030, which would represent a substantial decline in the share of electricity generated from renewables. 78 7. HIGH-LEVEL OUTCOMES 79 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC This concluding section derives HLOs—outcomes that are critical to improve the well-being of the poorest and most vulnerable—from the diagnostic. The HLOs describe how the priorities identified in this SCD contribute to – and can be part of a multisectoral approach to achieve – concrete improvements in lives and livelihoods. The purpose of the HLOs is twofold. First, the HLOs help to coherently organize the priorities identified in the SCD. Second, the HLOs are an input for the upcoming process of preparing the new partnership framework between Suriname and the World Bank. In establishing the HLOs and the associated policy priorities, the SCD applied four main criteria. First, achieving the HLOs needs to contribute to the World Bank’s twin goals of poverty reduction and shared prosperity. Second, the HLOs and the priorities need to be evidence-based and reflect the key development challenges identified in the diagnostic. Third, they need to contribute to addressing the main priorities that came up during the consultations in country and outlined in Suriname’s Multi- Annual Development Plan 2022–2026 (Republic of Suriname 2021). Fourth, although ambitious, it should be possible to make significant progress against the HLOs in the medium term. The process of developing the HLOs has consisted of multiple iterations. The generous conversations with many stakeholders in country enabled the team not only to get a sense of the main development challenges, but also informed their thinking about the HLOs at the early stage. Based on these conversations and initial analysis, the team outlined a first set of HLOs for discussion during a concept note review with experts from a wide range of backgrounds within the World Bank Group. Based on the feedback received at concept note, combined with the more in-depth literature review, benchmarking and data analysis presented in this report, the team prepared an updated set of HLOs. The SCD team was generously supported in this process by the global team providing advice on HLOs. The SCD team circulated the updated HLOs for review and feedback with select stakeholders within the World Bank Group before submitting them for a second internal decision review. A note on uncertainty of revenue from offshore oil. No international oil company engaged in exploration in Suriname’s offshore oil fields has yet made a final investment decision. It is thus not confirmed that any of the oil fields will come on stream. Moreover, even if they do, the revenue they generate will depend on multiple factors, including the prominent one of international oil prices. The proposed HLOs were prepared with this uncertainty in mind. The SCD team argues that the HLOs are relevant and important for Suriname, even if offshore oil revenues ultimately do not materialize. Achieving improvements in government and institutions is a sine qua non for making progress against the HLOs. Because it does not represent a direct improvement in the well-being of the poorest and most vulnerable, improving government and institutions is not presented as an HLO, but rather as an underlying constraint. Priorities for improving government and institutions include: · Public sector reform for a smaller, higher-capacity civil service · Better provision of information from the government to civil society to enhance public debate · Higher budgets and autonomy for auditing bodies to promote transparency and accountability · Translate legislative efforts to address corruption into concrete action 80 · Improve public financial management to facilitate fiscal discipline and public procurement · Increase financial resources for statistics and enhance data exchange between government entities The HLOs are presented in figure 17. FIGURE 17: HIGH-LEVEL OUTCOMES IDENTIFIED IN THE SCD Objective Reduce poverty and boost shared prosperity Opportunities Opportunities: Expected oil revenues & impetus for and challenges change under government reform program Challenges: Political instability, low institutional capacity & short window of opportunity 1. Equitable 2. Invest in 3. Create more 4. Protect allocation human capital and better forest and living High-level of resource and protect jobs through environment revenues people from a thriving in the interior objetives supports growth shocks private sector and adapt and poverty to increasing reduction flood risks Overarching Improve governance and institutions challenge Source: SCD team based on World Bank data. HLO 1: EQUITABLE ALLOCATION OF RESOURCE REVENUES SUPPORTS GROWTH AND POVERTY REDUCTION · Set up a fiscal framework to smooth public spending at prudent and sustainable levels by · Adopting and maintaining high transparency standards for the management of oil & gas and mining revenues · Adopting a fiscal rules framework · Establishing an SSF with accumulation and withdrawal of resources in line with fiscal rules framework · Adopting and implementing a Fiscal Council 81 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC · Convert natural resource wealth in increased human and physical capital including through: · Strengthening annual budget allocations in the education, health and social assistance sectors · Enhancing the Public Investment Management framework of planning, allocating and implementing public investment in infrastructure · Creating of a pipeline of projects to enhance transport and connectivity infrastructure as well as create affordable access to and improvement of basic urban services HLO 2: INCREASE HUMAN CAPITAL AND PROTECT PEOPLE FROM SHOCKS · Lower school dropout, enhance learning in school, address a reverse gender gap in education outcomes, and boost completion of secondary and tertiary education by: · Preparing and implementing an education strategy focused on education quality · Better catering education to children whose first language is not Dutch · Addressing child marriage, child labor, and malnutrition · Increasing the quality and relevance of secondary and tertiary education · Reconsidering school management and the size and operational model of the ministry · Improve the delivery of social assistance: · Increase social assistance expenditure to offset the worst effects of the economic crisis and reduce poverty · Develop a social registry to allow for more agile expansion of social assistance and consider expanded use of targeted transfers · Consider the use of digital social assistance payments to reach the interior and expand use of mobile money · Assure universal access to quality health care and respond to pressing burden especially of noncommunicable disease and poor mental health outcomes: · Control cost in the health care system, based on examination of the most recent health financing data and trends in the past two years · Ensure that health policy is sensitive to the needs of different (ethnic) groups · Improve health literacy · Address the use of mercury in small scale artisanal mining · Address brain drain, particularly in the education and health sector 82 HLO 3: CREATE MORE AND BETTER JOBS THROUGH A THRIVING PRIVATE SECTOR · Address the backlog in adopting business-related laws and regulations placing barriers in the way of private sector development · Improve regulations and financial oversight of all parastatal companies and foundations, publish their annual financial statements, rationalize public support to SOEs and reduce their fiscal risks · Facilitate economic inclusion and diversification through investments that build competitiveness and address enabling environment constraints in priority sectors · Increase labor force participation (and well-being) of women by: · Addressing legal barriers to women’s employment and entrepreneurship · Implementing legal reforms and investing in institutional capacity to improve sexual and reproductive health outcomes · Enhancing awareness of harmful social norms driving gender-based violence · Facilitate the development of the digital economy by: · Enhancing digital knowledge and skills through the formal, secondary and tertiary, education system as well as on-the-job training · Taking the lead in digitizing public service to transform the quality and efficiency of public service delivery · Developing a comprehensive digital financial services ecosystem and digitalizing government receipts and payments, including the disbursement of social transfers HLO 4: PROTECT FOREST AND LIVING ENVIRONMENT IN THE INTERIOR AND ADAPT TO INCREASING FLOOD RISKS · Protect the interior of the country by preserving Suriname’s forests: · Stop deforestation driven by small scale artisanal gold mining · Monetize the role of Suriname’s forests as a carbon sink, a global public good · Adopt and enforce climate-smart and forest-smart mining standards · Create alternative, sustainable economic opportunities in the interior of the country: · Enhance the sustainability of Suriname’s logging industry and ensure that it benefits local communities 83 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC · Develop alternative forest value chains, including through nonwood production, eco-tourism, and eco-services · Invest in reduced emissions from road transport · Promote more sustainable agricultural production through adoption of climate-smart agricultural technologies and targeted investments in agri-food systems · Adapt to increasing flood risks: · Update drainage systems to better handle heavy rain · Prioritize mangrove protection to protect Suriname’s shores from erosion · Plan for rising sea levels · Involve indigenous and tribal communities in protection of the interior of the country: · Adopt comprehensive legislation recognizing the rights of these communities · Invest in the capacity of these communities to contribute to forest management · Raise ambition to 100 percent renewable electricity generation in the medium term 84 8. DATA AND ANALYSIS GAPS 85 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC A reflection of the constraints in the production of data for policy described in Section 2.5, some of the data sources on which this SCD draws are dated. The constraint is more pressing in some areas than in others. National account, balance of payments, monetary and macrofiscal statistics are comparatively recent, also because they serve as an input for the government’s reform plans and the International Monetary Fund program. Similarly, estimates of offshore oil revenues appear to be relatively reliable and up to date, despite the uncertainty about exploration until final investment decisions are taken. In contrast, as explained in Section 1.5, recent microdata are not available to document the latest poverty and inequality trends. The same holds for labor market statistics; the most recent official labor market statistics the SCD team could use are for 2018. The SCD team tried to mitigate this concern by collecting phone survey data (World Bank 2023; see annex B), but of course a phone survey is necessarily parsimonious and cannot remedy all data gaps. Moreover, because of differences in methodology, the phone survey may give results that differ from official statistics that would have been generated through a more detailed in-person survey. Although lack of recent data is problematic, the SCD team’s impression is that the presented diagnostic does provide a reasonable approximation of the situation in the country and the most fundamental challenges it faces. Because Suriname is a small country, the academic and policy literature to draw on is more limited than in some other countries. Moreover, because the World Bank’s engagement in Suriname is comparatively limited, there were fewer internal World Bank resources for the SCD team to draw on. The SCD team carried out an encompassing literature search when it developed the diagnostic. A few limitations are worth highlighting though. The breadth and depth of the academic literature on Suriname is comparatively limited. Moreover, few literature reviews within the thematic areas covered by this SCD could be identified. Hence, the SCD team attempted to interpret and summarize the literature where relevant. The SCD team also ran into specific data and evidence gaps. One example relates to teaching quality and training, including among teachers working in technical and vocational education and training. Prior work is indicative of significant challenges, including lack of adequately trained teachers and few professional development opportunities for teachers.51 Recent strikes by teachers in technical and vocational education and training because of unpaid overtime suggests that challenges continue (SNC.com 2023). However, the SCD team could not rely on systematic insights to describe these. Other gaps include causal analysis on the drivers of high levels of school dropout, the lasting impacts of the pandemic on learning and school retention, the incidence of corruption across various government services, the extent of informality in the labor market, and the impact of informality on earnings in the interior and rural areas of the country. The World Bank is planning to carry out two additional core diagnostics for Suriname. These diagnostics should be considered complementary to this SCD and will provide deeper follow-up analysis and address information gaps within specific domains. The first is a Poverty and Equity Assessment. The objective of the Poverty and Equity Assessment is to provide more up-to-date insight into poverty and inequality (and its drivers) based on new data sources. The second is a Country Climate and Development Report. The report will aim to capture the interplay between development (including 51 For example, see Ndahi (2021); Suriname, Progress LBO: Teaching and Leading for Quality TVET (dashboard), VVOB, Brus- sels, https://www.vvob.org/en/programmes/suriname-progress-lbo. 86 poverty reduction, growth, inequality), climate change and climate policies. The report will investigate how climate change and global decarbonization may impact Suriname’s development path and priorities. And it will aim to describe potential areas for action in resilience, adaptation and mitigation to improve development outcomes. Together, the SCD, the assessment, and the report are expected to provide a strong foundation for partnership between the government of Suriname and the World Bank. Finally, it is worth noting that, because it covers many domains, the SCD necessarily stays “high-level” in its recommendations. There are certainly multiple steps from these recommendations to concrete reforms of public policies and spending instruments that the state could use to spur sustainable, resilient and inclusive growth. As an illustration, consider the recommendation to invest in sustainable electricity generation with the aim to achieve 100 percent renewable energy supply. This will require deeper analysis of many steps including establishment of a robust renewable energy governance framework, assessing least cost options for solar/wind/storage expansion, digitalizing the power grid, upgrading critical transmission and distribution infrastructure that could not be covered in detail in this SCD. Discussions on the country-partnership framework are expected to contribute to more concrete policy recommendations in selected domains. 87 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC 9. REFERENCES 88 ABS (Algemeen Bureau voor de Statistiek, General Bureau of Statistics). 2013. 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METHODOLOGY: PHONE SURVEY The phone survey is based on the setup of the high-frequency phone surveys the World Bank implemented in 2021 to assess the impact of the coronavirus pandemic on the welfare of Latin American and Caribbean households. The survey provides information on the welfare of households and the impacts they experienced during the pandemic along multiple dimensions, including changes in employment and income, coping mechanisms, access to health and education services, gender inequalities, and food insecurity (World Bank 2023). The survey is representative at the national level for households with a landline and households in which at least one member has a cellphone. Similarly, the survey is representative of individuals of ages 18 and above who have an active cellphone number or a landline at home. Eligible respondents for the HFPS were adults of ages 18 and above. Only one respondent per household was interviewed. Respondents answered both individual and household-level modules, including a module on education of children in school age living in the household. A little more than 800 interviews were completed. The phone survey followed a random digit dialing sampling methodology. This methodology relies on a dual sampling frame of cellphone and landline numbers that consisted of all possible phone numbers under the national phone numbering plan. Numbers were screened through an automated process to identify active numbers and cross-checked with business registries to identify business numbers not eligible for the survey. This method ensured coverage of all landline and cellphone numbers active at the time of the survey. Sizes of the samples drawn from the frames were determined based on the assumption of a 10 percent response rate for both landline and mobile phones, and a target of 800 completed interviews. Sampling weights were computed for 99 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC households and individuals and included adjustments for nonresponse, calibration of individual and household weights, using external demographic data from official sources (adjusted by the national phone coverage). ANNEX C. METHODOLOGY: GENERAL BUREAU OF STATISTICS SELF-ASSESSMENT As part of the assessment, the General Bureau of Statistics was asked to respond to a questionnaire designed by the World Bank. This questionnaire was designed in collaboration with leading experts in the field and draws from many reviews, interviews, and data sources. It aims to provide insight into the strengths and weaknesses of a country’s national statistical office and national statistical system. The questionnaire was originally developed for – and refined in collaboration with – the respective national statistical offices in all 16 Southern Africa Development Community countries. The questionnaire is divided in six categories or dimensions, as follows: · Organization and Infrastructure; · Analysis and indicators · HR issues · Information technology infrastructure and systems · Data collection · Methodologies A series of questions is included for each dimension. The bureau was also asked to rank items on a 0–4 scale. If they were unable to choose a score for an item, they were encouraged to provide relevant note. Items were selected through expert consultations and analyzing the state of the art on statistical capacity building toolkits. Although additional dimensions could be considered, these six dimensions are the minimum to integrate a basic organizational and managerial model to produce and disseminate official statistics. The questionnaire is available from the SCD team on request. ANNEX D. METHODOLOGY: MICROSIMULATIONS The microsimulations presented in box 3 start with Inter-American Development Bank Survey of Living Conditions data (Beuermann, Muñoz, and Flores Cruz 2018). The income sources reported by households in the survey were used to calculate household and per capita income and to classify individuals as living above or below the international upper-middle-income poverty line. Subsequently, an attempt was made to project changes in household income. The first step was to simulate the following pre-pandemic trends: preelection expansion in the number of government workers (number inferred from conversations in country), pre-pandemic inflation (based on data of the Central Bank of Suriname), and purchasing power parity changes (based on the World Bank development indicators). In simulating the expansion of the number of government workers, the assumption was made that the distribution of government workers across sectors remained unchanged. Subsequently, the impacts of the pandemic on household income were simulated as follows: employment losses by sector and gender (based on Arteaga, Beuermann, and Khadan 2021), income losses for those who remained employed (based on Arteaga, Beuermann, and Khadan 2021), reduced remittances (based on Arteaga, Beuermann, and Khadan 2021), elevated 2020 inflation (based on data of the Central Bank of Suriname, assuming that wages were not corrected for inflation), and the vertical expansion of social assistance programs (based on MOSAPH 2021). In simulating job losses by gender, the assumption was made that the ratio of male to female job losses was identical across sectors. Income losses for those who remained employed were assumed to be spread equally across formal and informal workers. 100 SURINAME SYSTEMATIC COUNTRY DIAGNOSTIC 102