Inside his spacious office, with tan curtains drawn to block out the scorching tropical sun, the president of Suriname expressed empathy for the teachers protesting outside his window. These educators, demanding higher wages, were just one group affected by the three years of economic turmoil that had plagued the South American country. Suriname had been hit by a combination of global crises and years of mismanaged governance, resulting in a devastating loss of purchasing power. Soaring food and fuel prices, exacerbated by the conflict between Russia and Ukraine, further worsened the situation. The country’s currency plummeted, and its economy collapsed just as the COVID-19 pandemic began spreading fear and death.
President Chandrikapersad Santokhi acknowledged that the burden on his people was heavy and that he had a moral responsibility to provide relief. However, he had little to offer in terms of immediate solutions. Suriname’s fate, with its population of 600,000, was trapped in the crossfire of geopolitics. Access to aid was delayed due to the conflict between the United States and China.
The International Monetary Fund (IMF) was set to arrive the following week to urge the Surinamese government to implement spending cuts. Budget austerity was a central requirement for the IMF’s rescue program, which consisted of a three-year, low-interest loan package worth $690 million. This would enable Suriname to continue making payments on its $2.4 billion foreign debt. Additionally, the IMF and the United States, as the most influential participant, insisted on Chinese creditors restructuring $545 million of Suriname’s debt. These loans had been used to fund infrastructure projects such as roads and housing.
Suriname’s predicament highlights a new complexity in global finance. As many middle- and lower-income countries face a growing debt crisis, the process of obtaining assistance is often hindered by the conflict between traditional Western institutions, like the IMF, and the rising power of China. In the past, the IMF, a key component of the post-World War II liberal democratic order created by the United States and its allies, was the primary source of funding for countries struggling to pay their debts. However, China has emerged as a major lender for nations across Asia, Africa, and Latin America, providing loans with fewer demands and offering an alternative to the austerity measures prescribed by the IMF.
Yet, the Biden administration and the IMF have been reluctant to provide relief without the participation of Chinese financial institutions. They argue that Chinese lenders are benefitting from debt forgiveness granted by others without contributing themselves. Jake Sullivan, the US national security adviser, called on China to step up as a “constructive force” in assisting debt-stressed countries.
China, however, has refused to comply with the demands of Washington, the IMF, or even its largest shareholder, the United States. A Chinese diplomat in Suriname’s capital, Paramaribo, emphasized that China would only negotiate with the Surinamese government and considered the IMF’s parameters regarding debt relief non-binding.
This tug-of-war between Western institutions and China underscores the tremendous pressure faced by countries such as Ghana, Ethiopia, and Pakistan, as they grapple with mounting debts, much of it owed to state-owned Chinese lenders.
Recently, Zambia celebrated an agreement that secured a three-year pause on debt payments totaling $6.3 billion, the majority of which was owed to Chinese lenders. This agreement paved the way for the IMF to release $188 million in relief funds under a $1.3 billion rescue package. However, this resolution came after arduous negotiations that left Zambia’s finances in a precarious state.
Lower-income countries often find themselves burdened by overwhelming financial obligations in the face of global crises. The current wave of calamity, fueled by years of low interest rates and exacerbated by the pandemic’s impact on healthcare systems and contracting economies, has made finding a solution even more challenging. Adding to the complexity are the ongoing tensions between the world’s two largest economies.
A framework known as the Common Framework, established three years ago by the Group of 20 nations, was meant to provide a blueprint for resolving insolvency issues in countries facing debt crises. The idea was for governments, private creditors, and institutions like the IMF to collaborate on debt restructurings, enabling struggling nations to manage their future repayments. However, the IMF serves as the default arbiter of these terms, and without China’s consent, the system tends to grind to a halt.
Daniel Munevar, a sovereign debt expert at the United Nations Conference on Trade and Development, explained that new creditors, like China, are seeking a say in shaping the rules of the game. Unfortunately, the concerns of ordinary people in heavily indebted nations often go overlooked in politically charged negotiations that prioritize the interests of creditors.
In Suriname, the impact of the debt crisis is evident in places like the Sunny Point neighborhood, south of the capital. Families like Mametoen Misiedjan’s are struggling. Misiedjan and her 4-month-old daughter are now packed into her mother-in-law’s meager two-bedroom home alongside her three sisters-in-law and their eight children. The young toddlers play in the dirt next to an open sewage ditch. Misiedjan worries about affording basic necessities like diapers and fears that her own nutrition will suffer due to rising costs of food.
The root causes of Suriname’s calamity can be traced back to its history of colonization and exploitation. The fertile soil of Suriname enticed the Dutch to set up trade in the 17th century, but this led to the enslavement of people from Western Africa and the importation of indentured laborers from Java and India. In more recent times, American aluminum company Alcoa established the region’s first aluminum manufacturing complex, powered by a hydroelectric dam that also supplied cheap electricity to the population. After Alcoa shut down the plant, the government continued providing cheap electricity, resulting in massive subsidies that contributed to Suriname’s debt crisis.
By 2016, Suriname sought assistance from the IMF and agreed to a $478 million rescue package. However, then-president Dési Bouterse, who faced murder and drug-trafficking charges, renounced the program and its budget restrictions. Instead, he borrowed nearly $1.5 billion, largely from Chinese creditors. Chinese financial institutions have become significant lenders to countries in distress, accounting for nearly one-fifth of the IMF’s activities. Since 2016, more than $185 billion in credit from Chinese lenders has been granted to nearly two-dozen countries facing debt crises.
Suriname managed to meet its debt obligations for a while due to a rise in gold prices, as gold accounted for over half of the country’s export revenues. However, the pandemic caused commodity prices to plummet while healthcare costs skyrocketed. Bouterse’s government was defeated in the 2020 election, and President Santokhi took over an economy that contracted by nearly 16% that year. The currency…
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
