THE HAGUE / PHILIPSBURG – St. Maarten’s needs 61.2 million guilders in liquidity support until the end of 2020 but the government will not get this money yet because it does not meet the requirements for the second tranche of liquidity support and because it has not yet agreed to the conditions for the third tranche.
This appears from a letter State Secretary Drs. Raymond Knops (Kingdom Relations) sent to the Second Chamber after Friday’s meeting of the Kingdom Council of Ministers. Knops writes that, according to financial supervisor Cft, St. Maarten has made “meaningful progress” with attempts to meet the conditions for the second tranche. It is however necessary that the country meets all conditions: it will have to execute measures immediately and begin the process of preparing national ordinances.
While St. Maarten has met the condition of the 12.5 percent cut in labor conditions for civil servants in 2020, it still has to implement this measure “until further notice.” The government also has to apply cuts to all government entities and foundations and institutions that are financed for 50 percent or more from the national budget.
Related news: St. Maarten negotiations on the 3rd tranche of liquidity support start today
Knops reported to the Dutch parliament that talks with St. Maarten about the conditions for the third tranche of liquidity support have started. The most important condition is an agreement about the establishment of the Caribbean Reform Entity.
Because the economies of Aruba, Curacao and St. Maarten are suffering from the impact of the COVID-19 pandemic, the kingdom allows all countries to deviate from the demand that they maintain a balanced budget. For St. Maarten the maximum deficit in 2020 is 185.5 million guilders ($103.6 million), for Curacao 685 million ($382.7 million) and for Aruba 808 million ($451.4 million).
For loans articles 15 and 16 of the consensus kingdom law financial supervision apply, Knops points out in his letter. This means for instance that St. Maarten is not allowed to exceed the interest burden standard (5 percent of the average state revenue over the past three years) and that the intention to contract loans has to be part of the national budget that is subject to scrutiny and approval by the Cft.
Capital investments will only be allowed for projects that are part of the reform agenda and for “necessary replacement-investments with a high urgency.”
St. Maarten is now lagging behind Aruba and Curacao. Aruba will get immediate access to 209 million ($116.75 million) in liquidity support, after it agreed with the conditions for the third tranche, while Curacao agreed to these conditions on November 2. The country received already 105 million ($58.6 million) in liquidity support but after an advice from the Cft, which showed that the needs of Curacao amounted to 286 million ($159.8 million), the Netherlands provided another 181 million guilders ($101.1 million) for the third tranche.
For Aruba the agreement signals “a new chapter of voluntary multi-annual cooperation, but one that is not without obligations,” Knops wrote to the Dutch parliament.
At Aruba’s request, the Netherlands will grant a loan of 177 million guilders ($98.9 million) in 2021 and another one for 346 million ($193.3 million) in 2022 at an interest rate of 2 percent. The term for these loans is seven years and repayment is due every six months after two years. According to Knops this arrangement saves Aruba 82 million guilders ($45.8 million) in interest charges compared to commercial loans.
The Netherlands will furthermore structurally invest more than €17 million ($20 million) in safety and security on Aruba. Support for the Royal Marechaussee and the Customs department could reach €9.3 million ($11 million), while another €7.7 million ($9 million) is available for the fight against corruption.
