Published On: Tue, May 26th, 2020

Central Bank postponed 40-million bond issue

CBCS Central Bank in St. Maarten - 2020040502 JH

PHILIPSBURG – The Ministry of Finance has sent a reminder to the Netherlands about a 40 million-guilders loan financial supervisor Cft approved in August of last year. While the Netherlands has a “current subscription” to these loan requests, so far it has not acted upon it and Finance Minister Ardwell Irion has now urged his counterparts on the other side of the ocean to honor the agreement.

The consensus kingdom law financial supervision obliges the Netherlands to subscribe to loans requested by St. Maarten, based on article 16.7: “The Dutch state has a current subscription to the loans, every time for the requested amount and against the yield on government bonds of the relevant term.”

This rule however applies to loans that are contracted based on an open tender procedure from the Central Bank. The Central Bank advises about such loans.

The Cft issued a positive advice about the 40-million bond on August 19 of last year. The Central Bank announced October 18 as the date of two bond issues on September 24 – one for 40 million and one for 21.3 million. But in a press release issued on October 9, 2019, The Bank announced that they had been postponed, without providing a reason for the postponement. Since that date the Central Bank has not issued new announcements about them.

The ministry’s press release states that it asked the Netherlands to subscribe to the 40-million guilders bond, but it is unclear whether this request went out before or after the announcement by the Central Bank.

The Cft noted in its advice that the bond is earmarked for two objectives: the restructuring of the Tax Inspectorate and “necessary investments for the Justice Department.” The investments at the Tax Inspectorate aim to modernize its information and communication technology.

At the same time, the Cft noted that a large part of 2019 had already gone by and that it would, therefore, be a challenge to execute the intended capital investments or to make commitments for them.

The 2020 budget lists a capital investment of 11 million guilders in 2020 for the restructuring of the Tax Inspectorate (down from 32 million in 2019) and another 11 million for 2021.

Investments for the Ministry of Justice total 4.5 million guilders, though elsewhere the budget mentions an amount of 1 million for 2020 and 5 million for 2021. These investments are related to the construction of a new prison. For the second phase of the prison project, the budget lists an investment of 42.6 million in 2022.

Altogether the intended investments in 2020 for restructuring of the Tax Inspectorate and the prison add up to 12 million guilders and for 2021 to another 16 million.

The press release of the Finance Ministry states that the Netherlands does not act in line with the kingdom law financial supervision by not subscribing to the 40-million guilders loan request, but it does not make any reference to the decision by the Central Bank to postpone the bond issue.

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