Suriname - Fitch Revises Suriname's Outlook to Positive; Affirms L-T Foreign Currency IDR at 'B'

In addition, Fitch has affirmed Suriname's:

--Local currency IDR at 'B+'; Outlook Stable;

--Country ceiling at 'B'.

The Positive Outlook on the long-term foreign currency IDR reflects Suriname's progress in clearing external arrears and increased resilience to external shocks.

The government reached an agreement with Brazil, its largest external creditor, and settled outstanding debt arrears of USD118 million or 37% of year-end 2008 public external debt, in August 2009. Nevertheless, arrears with the U.S. still account for 14.1% of total public external debt. 'Outstanding external arrears remain a key constraint for the sovereign's foreign currency rating, as Suriname is the only sovereign in the 'B' rating category to have material arrears with bilateral creditors,' said Erich Arispe, Director in Fitch's Sovereign Group.

Fitch believes that Suriname's resilience to external shocks has improved due to increasing diversification of the country's export base and rising international reserve levels. 'The growing importance of oil and gold in Suriname's exports reduces the economy's traditional dependence on the performance of the aluminum industry,' added Arispe.

Suriname's position as a net public external creditor, at 6.6% of current account receipts (CXR) in 2008, is set to strengthen further in 2009 due to continued international reserves accumulation and debt repayments. Hence, the country's liquidity ratio could rise to 790% in 2010, considerably higher than the expected 'B' median of 181%. Even when adjusted for the country's high level of financial dollarization, Suriname's liquidity ratio remains comparable to the peer median.

On the fiscal side, consolidation and sustained growth in recent years have affected debt dynamics positively and reduced financing requirements. Central government debt reached 21.6% of GDP in 2008, less than half the 10-year 'B' median. While the central government deficit is expected to reach 1.4% of GDP in 2009, financing requirements (central government deficit plus amortizations) should remain manageable at 6% of GDP and decline in 2010 in spite of a higher deficit. Fiscal accounts, though, have structural weaknesses in terms of high revenue volatility and considerable spending inflexibility due to the weight of interest payments, public-sector salaries, transfers and subsidies.

Moreover, Fitch considers that the macroeconomic policy framework could be strengthened further, as it is highly dependent on the credibility of the current economic authorities rather than on institutional mechanisms. As a result, elections in May 2010 could generate uncertainty about the continuity of the policies that have underpinned fiscal consolidation, lower inflation and healthy growth in recent years.

Clearance of remaining external arrears could lead to an upgrade of Suriname's long-term foreign currency rating. Over the medium term, macroeconomic policy continuity as well as reforms designed to strengthen the policy framework and improve the competitiveness of the Surinamese economy would be viewed positively by Fitch. By contrast, a sharp departure from prudent fiscal and monetary policies which results in macroeconomic instability and negative debt dynamics could undermine the sovereign's positive rating momentum.

Additional information is available at 'www.fitchratings.com'.

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