--Foreign currency IDR at 'B';

--Local currency IDR at 'B+';

--Country ceiling at 'B'.

The Rating Outlook is Stable for both ratings.

Comparatively low external and public debt ratios as well as manageable debt service requirements support Suriname's ratings. Nevertheless, Suriname's vulnerability to international commodity price shocks, a weak macroeconomic policy framework and slow progress in the implementation of structural reforms remain as credit weaknesses. Furthermore, the foreign currency rating continues to be constrained by material outstanding arrears with Brazil and the US, which account for 45.6% of total public external debt.

Fiscal consolidation combined with sustained moderate growth underpinned the steady decline of Suriname's government debt-to-GDP ratio since 2000, which reached 24.1% in 2007 below the 'B' category median of 33.4%. 'Nevertheless, Suriname's public finances and debt dynamics are sensitive to shocks that could arise from a relaxation in the fiscal stance, perhaps related to wage pressures, or a decline in revenues due to a lower commodity prices,' said Erich Arispe, Associate Director in Fitch's Sovereign Group.

With its external position considerably strengthened, Suriname has turned into a net public external creditor. Net public external debt (NPXD) as a proportion of export receipts (CXR) declined to -7.3% in 2007 from 9.2% in 2006. This year, Suriname's liquidity ratio is more than double the 'B' median as a result of strong reserve accumulation in 2007 and comparatively lower debt service. However, this ratio is less than 100% when adjusted to account for the high level of foreign currency in the financial system.

Rising international food and oil prices have put upward pressure on domestic inflation. Consumer prices rose to 16.1% on a yearly basis last April, accumulating 7.5% in the first four months of 2008. In spite of the external nature of this shock, 'authorities still need to adjust monetary and fiscal policies to avoid jeopardizing the sustainability of the current growth cycle, hard earned macroeconomic stability, and, hence, current positive debt dynamics,' said Arispe.

The government's recognition of external debt obligations on behalf of Surinamese private sector companies, combined with poor public finance management led to the accumulation of arrears with a variety of bilateral creditors. In spite of progress in recent years, the arrears situation with the US and Brazil has yet to be resolved and remains a key constraint on Suriname's sovereign ratings. Nevertheless, total arrears declined to 5.8% of GDP in 2007 from 7% in 2006 mostly reflecting GDP growth.

Suriname's creditworthiness would benefit from the settlement of arrears with bilateral creditors. Similarly, progress on structural reforms which result in a strengthening of the macroeconomic policy framework and an improved private sector business environment could also be positive for creditworthiness. By contrast, a poor policy response to an eventual decline in commodity prices or rising inflationary pressures could negatively affect the sovereign's credit standing.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Story Source: Business Wire