CFT warns that ENNIA-loan poses risk for Curacao
PHILIPSBURG — If the Netherlands decides to extend a 1.2 billion guilders loan to St. Maarten and Curacao to save insurance company ENNIA, it will have dire consequences for the future of in particular Curacao. This appears from the confidential advice of financial supervisor CFT that has been made public by State Secretary Alexandra van Huffelen (Kingdom Relations).
The Ennia-loan has become an issue in the debate about the refinancing of the liquidity loans St. Maarten and Curacao received during the corona pandemic. To qualify for a low interest rate of 3.1 percent, the countries have to come up with a financially solid and sustainable solution for the financial problems at Ennia. The pensions of 30,000 policy holders are at risk.
CFT-chair Lidewijde Ongering writes that her organization has been informed verbally and confidentially about the intended solution for Ennia and that it is concerned about it.
“The solution is a subordinated loan from Curacao and St. Maarten to Ennia. The Netherlands finances this loan. This will result especially for Curacao in a significantly higher national debt.”
There is a difference between a subordinated loan and an ordinary loan. With a subordinated loan the creditor that has extended the loan comes last in case of bankruptcy. All other creditors will get paid first.
The Cft points out that because of the combination of the Ennia-loan with the refinancing of the liquidity loans Curacao will directly or very soon exceed the 5 percent interest burden standard.
This standard is part of the kingdom law financial supervision. It sets the ceiling for annual interest payments for each country at 5 percent of its average revenue over the previous three years.
“The explanation whereby interest payments are compensated by interest revenue from Ennia is not in line with the law,” the Cft writes in its advice.
The financial supervisor fears that the increased interest burden will seriously limit Curacao’s ability to finance economically profitable investments and that the debt to GDP ratio would also increase.
The governments of Curacao and St. Maarten will also be exposed to financial risks because they will be the shareholders and the provider of the subordinate loan.
At the end of 2022 the national debt of Curacao was 4.144 million guilders; St. Maarten’s national debt was 1.109 million.
The CFT emphatically advises to reconsider the chosen solution for Ennia with the objective of working towards sustainable public finances.
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