CFT: “An adopted 2018 budget and get the economy rolling again are top priorities for Sint Maarten”

Philipsburg — The Cft board has visited St. Maarten and Saba this week. It was the first visit of Cft after the devastating Hurricanes Irma and Maria in September.

On Saba we discussed financial and reconstruction matters, and concluded that financial management is of a high level.

For Saba, the year 2018 promises to be one with many opportunities and challenges, for example the restoring of the harbor and the airport runway renovation.

St. Eustatius has not been visited this week due to the announcement on Monday of the law on dereliction of duties and its passing on Monday and Tuesday by the Dutch parliament and Senate. In the coming weeks and months, we will be in deliberation with the Dutch authorities what our involvement with financial matters will be.

Let me now come to Sint Maarten. As is usually the case during the visits of the Board of financial supervision to Sint Maarten and Curacao, meetings were held with the Governor, the Minister of Finance, the Council of Ministers and the Parliamentary Committee of Finance. The Cft also paid a visit to the commission for reconstruction, the board of the airport, the harbor and the hospital and also did a tour around the island. We acknowledge the extraordinary circumstances in St. Maarten after the hurricanes, but also the strong ability of the people and businessmen to rebuild their country.

We have had an intensive and constructive discussion with the Minister of Finance, Mr. Ferrier and his staff. During this meeting we discussed several issues.

2017
First, we discussed the budget 2017. The latest insights of the administration of Sint Maarten show that there will be a deficit in 2017 of 153 million guilders, which is 69 million euros. However, insights in the last months of 2017 is still lacking and there are indications that the actual deficit will be somewhat smaller. A related issue is the liquidity position. Based on the situation in 2017, there will be a need for liquidity of approximately 70 million guilders as also has been communicated by the previous Minister of Finance. As there still is an unspent loan for capital expenditures of 21.7 million guilders in 2017, the Dutch government has sent a proposal to Sint Maarten for a loan of 50 million guilders with no repayments in the first five years to support liquidity of Sint Maarten. Based on this, the Minister of Finance will send as soon as possible an amendment in the budget for 2017 to Parliament, so that 21.7 million guilders can be used for general expenditures and the loan can be signed. As Cft we arranged to give an advice in 24 hours. After that it will be up to Parliament to decide on the budget amendment and I urge the Parliament to decide on this law as soon as possible as well, given the current liquidity position of Sint Maarten.

2018
I will now get the 2018 budget. The draft budget which was sent previous week to Cft for a so-called article 11 consultation and has a deficit of 254 million guilders, which is 117 million euros. In terms of GDP this is 15%. Given the current financial situation, Sint Maarten expects that the shortage of the liquidity in 2018 is almost equal to Sint Maarten’s deficit. Therefore, it is important to update this budget also on information of the last months of 2017 and take measures to cut expenditures and raises income and taxes, for example by broadening the tax base. Of course, it is the government of Sint Maarten, and ultimately Parliament which should decide on these measures. So, in the draft budget which will be sent to the Parliament the deficit can be smaller but definitively it will not be a balanced budget. Therefore, to our view a large deficit is unavoidable and also in 2018 there will be the need for liquidity support. As far as we know now this shortage is liquidity is dooming up already in the first half of 2018 and perhaps already shortly after the first quarter, although exact information is still lacking. Therefore, we made appointments with the Minister of Finance for extra information on this. But more importantly, it is very important to have a budget adopted by Parliament for March 1, 2018, as we also advised in December 2017, and based on this, budget discussions should be started between the Netherlands and Sint Maarten on liquidity support and under what circumstances.

Financial management
Since the third quarter of 2016, the government of Sint Maarten, and the ministry of finance in particular, suffers from IT problems. These problems make it harder for the minister of Finance to have a good oversight on expenditures and efficiently allocate the limited available funds. Also, the Minister of Finance’s possibilities to publish quarterly reports on the financial situation of Sint Maarten are limited. And since these reports are not available, also Parliaments insight in the financial situation is limited. In the opinion of Cft this situation needs to be resolved urgently. Therefore, the Cft advised the government of Sint Maarten to ask the Dutch government for technical assistance and capacity building. In our opinion, strong financial management would be beneficial for both Sint Maarten and the Netherlands.

Get the economy rolling again
Furthermore, I would like to comment on the economy. It is very important to get the economy going. The Reconstruction Fund to which the Dutch Government has pledged 550 million euros, plays a vital role in restarting the economy of Sint Maarten and get a better life for the people of Sint Maarten. Importantly, a boost in economic activity will have a positive influence on government’s finances and the deficit will shrink. As tourism is very important for Sint Maarten, Cft visited several tourism related entities these week. We express appreciation for the work that has been done at the cruise terminal and the harbor after Hurricanes Irma and Maria. But still a lot has to be done. We took notice of the intensive discussions between the government of Sint Maarten, the Dutch government, the World Bank and also the IMF this week. Although as Cft we have no official role in this, we have confidence that the projects of the Reconstruction Fund will be on its way. We hope that this talks lead to an arrangement in the coming weeks. Let me end with a final note. The process to rebuild St. Maarten and the sustainability of public finance as well will take quite some time, but the resilience and the unity shown by the people should be mentioned as well. Thank you for your attention.