On May 4, 2017, Suriname’s parliament unanimously approved the Law on the Savings and Stabilization Fund (SSSF), the country’s first and so far only sovereign wealth fund, which will come into operation in 2018. The fund will improve the transparency and stability of public finance.
Our country’s economy relies heavily on income from gold and oil, and has been hard hit by the rapid and drastic declines of world market prices of these commodities.
Prospects in the Suriname mining industry are improving, however, not the least due to the recent opening of a new gold mine and upstream evolution into oil refining by the national oil company. The SSSF will harbor any windfall revenues from the mining extractive industry.
The fund will grow as mining production and exports increase because above certain thresholds (at steady state, above 4.4% of growth) the extra mining income will be saved into the SSSF. It will be much harder to disburse from the fund. In case of a shortfall of income from the projected levels only half of the discrepancy could be transferred from the fund for budgetary spending allocation. Also, the fund is protected from any withdrawals during the next five years, no matter the cause of the shortfall. There are exceptions for when a natural disaster occurs and only with approval of two-third of votes in parliament.
The strict rules in place accentuate the savings characteristic of the SSSF. Next to mining revenue accumulation, the fund’s assets are also expected to grow as a result of the financial investment strategy. Moreover, in the event of allowable withdrawals, minimally USD 200.000 of assets will need to remain in the fund. With mining resources being ultimately finite, our goal is for future generations to profit from these savings.
The SSSF will also serve to stabilize government revenues. Income streams from the extractive industry to the budget will be moderated, acting as a brake to Dutch disease. At the same time, the budget could count on financial support from the SSSF, albeit under very strict rules, and obliging government expenditures to contract in times of less income.