Published On: Wed, Mar 13th, 2019

Draft 2019 budget closes with 67.2 million deficit

Minister of Finance Perry Geerlings - 12 Mar 2019

PHILIPSBURG — The draft 2019 budget closes with a deficit of 67.2 million guilders. The government projects 478.8 million in expenditures this year and 411.6 million guilders in revenue. According to the elucidation with the budget, Finance Minister Perry Geerlings expects that budget deficits over the years 2017 to 2020 will amount to 250 to 275 million guilders, while there are still 64 million in deficits on the books over previous years. “From 2021 St. Maarten will have to deal for ten years with annual deficit compensation of 30 million guilders a year.”

The capital investment budget for 2019 is 132.3 million; the government has extended loans to the tune of 5.2 million guilders while there is 40 million in borrowed funds on the books.

If the parliament approves the budget it authorizes the finance minister to borrow 126.5 million guilders to cover the government’s operational expenses, to borrow up to 40 million – and if need be 63.9 million – for “the priority projects Tax Inspectorate and Financial Management.” Furthermore the approval authorizes the finance minister to conduct all legal actions related to the $100 million in grants and loans from the World Bank and the European Investment Bank for the airport.

The government says in the elucidation that execution of the National Recovery and Resilience Plan (NRRP) requires 4.2 billion guilders but that there is currently only 2 billion available from the trust fund and expected insurance payouts. “St. Maarten has to set priorities and look for additional financing.”

The draft budget is “poor in new policy;” the main focus is on a complete overhaul of the Tax Inspectorate and the improvement of financial management. The tax office project requires a 60 million guilders investment. Twenty million is for the replacement of obsolete IT-systems, 10 million for arrears and 30 million for the construction of a new building.

According to unidentified experts quoted in the elucidation, the average tax revenue – currently around 19.5 percent of gross domestic product (GDP) – should over time increase by 3 percent due to increased tax compliance, thus generating an additional 50 million guilders in revenue.

Based on a recovering economy, increased tax compliance and measures to increase revenue and to cut costs, the government expects to increase revenue from 19.5 to 27.6 percent of GDP by 2022.

While the budget will still show a deficit in 2019 (67.2 million) and 2020 (10.9 million), the government plans should lead to structural surpluses starting in 2021 (41.6 million) and 2022 (65.8 million).

The government expects to achieve these objectives by increasing revenue and keeping expenditures under control. Bases on the numbers presented in the draft budget, revenue is projected to increase by 33.9 percent to slightly over 551 million by 2022, while over the same period expenditures are projected to increase by just 13.4 percent to 485.2 million guilders.

For the current budget year the government expects to bring in 3 million more in revenue and to decrease expenditures by 2.5 million.

That additional revenue is not going to come from measures that will affect ordinary citizens. “The population cannot be affected in an unreasonable way; we prefer to target tax payers who do not play by the rules.”

Starting in 2020, the government wants to force each ministry to cut their expenditures each year by 1.5 percent. This means for example for the ministry with the largest budget – Education, Culture, Youth and Sport – that it will have to find ways to bring its 123.4 million current budget down by more than 1,851,000 guilders next year.

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Download the complete DRAFT 2019 BUDGET here