Published On: Thu, May 21st, 2020

NRPB negotiates extension of trust fund deadline

PHILIPSBURG – “A high-level overview of the Trust Fund, applicable procedures, ongoing projects and challenges.” This is how the National Reconstruction Program Bureau (NRPB) describes the Focus Audit on the Reconstruction Funds for St. Maarten the General Audit Chamber published this month.

The report is a new type of audit: it only presents facts and does not contain recommendations or conclusions.

Looking at the numbers, the audit has one inevitable flaw: the exchange rate used convert available Euros into US dollars. The Audit Chamber used an exchange rate of $1.167, whereas the current exchange rate for the euro (per May 21, 2020) is $1.09635. The €470 million that remained in the trust fund after the disbursing of €80 million in emergency assistance was worth $548.5 million based on the higher exchange rate, but at the current rate, this has gone down to $515.3 million.

All dollar amounts mentioned in the report are therefore currently a bit more than 6 percent lower. Per the end of 2019, the Netherlands had deposited $307.5 million into the Trust Fund at the World Bank; six projects were in progress and projects worth $203 million had been approved. The Trust Fund had paid out $32 million for projects while eight projects with a combined worth of $177 million were approved.

The report notes that accelerating the disbursement of trust fund money is a major challenge. This is because the trust fund agreement expires on December 31, 2025. If there is any money left in the fund on that date, the World Bank will return it to the Dutch treasury.

The NRPB, in a reaction to the report, said that it is already negotiating an extension of the 2025-deadline.

The main challenge for St. Maarten is capacity, it appears from the report. Due to insufficient capacity to draft plans for approval schedules are not met. “Developing a plan how to achieve additional capacity is also a challenge,” the report states.

Another challenge is finding local companies to execute urgent works: ‘The local market is limited, businesses are small and there is competition for labor.”

Involving these companies in trust fund projects is also a stumbling block because they are unfamiliar with World Bank tendering procedures. “This slows down the execution of projects.”

The urgency to get trust fund plans approved goes beyond the 2025 deadline, because per January 1, 2021 the Netherlands is no longer obliged to transfer money into the fund. Two of four installments – worth $307.5 million) have been deposited and after the liquidity support provided in 2018, the remaining balance is $222 million.

The audit established that the NRPB currently employs ten people and ten consultants. The bureau expects that it will have to expand its workforce to 46.

The audit’s main objective was to establish how much of the trust fund money had been paid out by the end of 2019. Here is the answer: while the fund earned $10.9 million in interest (bringing the available balance from $305.7 to $316.6 million) it paid out $46.1 million for projects, while elsewhere the report mentions an amount of $32 million (5.83 percent).

The World Bank receives 3 percent of the amount of each grant agreement. The associated costs for the World Bank were per the end of 2019 $14.1 million.

Eight projects with a combined worth of $177 million are in preparation but have not been approved yet. Examples are the school resilience project ($30 million), the solid waste management and environmental improvement project ($5 million) and the enterprise support project ($30 million).

The Emergency Recovery Project I was approved on July 10, 2018. Worth $55.2 million, the trust fund disbursed $11.46 million of the available funds for it by the end of 2019. The project contributes to the reconstruction of basic facilities like public buildings, houses, schools and shelters.

But while the government’s lack of capacity may be a contributing factor to the slow execution of projects, the COVID-19 crisis has thrown a new spanner in the works according to the report: “What should be done first given the scarcity of resources?”

National Recovery Planning Bureau NRPB office building - 20200223 JH

Photo caption: File photo of the NRPB office building on the Walter Nisbeth Road on the Pondfill in Philipsburg.

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Relevant links:
St. Maarten Trust Fund dashboard