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Surinam devalues its currency by 33%

ECA International

Last week, on 7 June, the Central Bank of Surinam devalued the local dollar by 33% and vowed to let its value move freely according to market sentiment from now on. The official exchange rate changed from SRD 14 to SRD 21 against the US dollar, having previously been devalued from SRD 7.5 only in September last year. 

The bank's announcement stated that controlling inflation (latest annual rate was 50.4% at end-March 2021) was the aim of the currency reform, but in the short term the move will significantly raise prices, at least of imported goods. More likely, the bank is worried about dwindling foreign-exchange reserves, which it has burned through at an alarming rate trying to prop up its over-valued exchange rates.

It is worth noting that, despite the promise of a floating currency, in the few days since the latest devaluation the SRD/USD exchange rate has been curiously stable and the suspicion has to be that the central bank is still trying to control the currency's value, albeit at the new, depreciated rate. If it proves too controlling, and the new regime isn't in fact flexible, divergence with exchange rates on the black market will widen again and a further devaluation could become necessary.

While a free-floating exchange rate would probably serve the economy well in the long run, it could be destabilising in the near future and could well push inflation higher for a while.

As always, we will continue to monitor developments. In the meantime, if you need advice on this or any other global mobility issue, do please get in touch.

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