Although the government, particularly the Central Bank of Suriname (CBvS), has been silent on the ever-increasing exchange rates of the US dollar and euro, some believe action should be taken through Open Market Operations (OMOs) to curb these rates. It has been suggested to increase the interest rate to around 40 percent to reduce pressure on the available foreign exchange reserves.
Economist Winston Ramautarsing argues that this is currently the only way to prevent the exchange rate from rising further. Interest rates are low and unattractive to investors. When OMO rates were around 90 percent, people exchanged their dollars for SRD. Now, with the low interest rates, the opposite is happening: people are seeking dollars. In an interview with SUN Web TV, the economist noted that the current interest rate offered is 15 percent.
OMOs are intended to influence the liquidity level within the banking system and signal the direction of monetary policy. Based on the target for the base money supply, the amount of liquidity needed in the economy is calculated to meet a specific inflation target. By using its monetary instruments, the CBvS aims to adjust liquidity to the calculated level. The instruments used by the bank for its monetary policy include term deposits (TDs) and Central Bank Certificates (CBCs).
Ramautarsing states that, despite claims to the contrary, Suriname is far from emerging from the crisis. Fundamental cuts in government spending have yet to be implemented. Increasing production is also urgently needed to bring stability to the economy. The economist admitted he is unsure of what will happen with the exchange rate. The Central Bank remains silent, while, according to him, citizens and businesses want to know the direction of the Surinamese economy.
