Published On: Fri, May 15th, 2020

Knops maintains: Solidarity is a two-way street

THE HAGUE – “The vulnerability of the economies of the Caribbean islands is significant, not only because of the dependency on tourism but – in the case of St. Maarten – also because of the aftermath of Hurricanes Irma and Maria, and because in the past sufficient structure-strengthening measures have not been taken,” State Secretary Raymond Knops (Kingdom Relations) writes in a letter to the Second Chamber. The letter contains answers to questions about liquidity support for Aruba, Curacao and St. Maarten.

The first stage of liquidity funding was for emergency support. Aruba received 42.8 million guilders, Curacao 105 million, and St. Maarten 50.2 million.

“Solidarity is a two-way street.”

Knops describes the conditions attached to this funding as “loan-conditions” but he adds that conditions for future liquidity support will be linked to measures designed to strengthen the countries’ social-economic structure, “in such a way that spending Dutch taxpayers money will result in concrete accountable improvements. Solidarity is a two-way street.”

To broaden the options for the countries to borrow, the Dutch government is considering under which conditions it is possible to implement structural reforms. These reforms relate to the economy, the labor market, the capital market, the pension system, the social benefits system, the healthcare system, the civil service, and governance. Knops stated that the countries will make agreements with financial supervisor Cft about these reforms and about the conditions the Netherlands will impose for additional funding. What these conditions will be exactly is still under discussion.

“…an agreement is an agreement…”

The VVD-faction asked Knops what St. Maarten has learned from the process of support after Hurricane Irma, considering the resistance against the conditions for the reconstruction of the airport. “It will now be clear to St. Maarten that an agreement is an agreement,” Knops responded.

The outstanding loans of the Netherlands to Aruba, Curacao and St. Maarten per April 30 of this year total €1.4 billion ($1.52 billion); Curacao has 1.1 billion ($1.2 billion) outstanding, St. Maarten €306 million ($331.9 million) and Aruba €29 million ($31.5 million). These amounts include the liquidity support the Netherlands provided on April 9.

St. Maarten has to repay this year €35 million ($38 million) in interest and installments and €19 million ($20.6 million) in 2021.

Knops reports in his letter that St. Maarten’s debt to GDP ratio is 51 percent (compared to 54 percent for Curacao and 73 percent for Aruba). “It appears that Curacao and St. Maarten don’t or hardly consider repayment on interest-free bullet-loans. The Cft has therefore advised issuing long-term loans as much as possible as sinking bonds; that way, contrary to the current practice, the debts will be repaid automatically.”

The Netherlands has withheld €3 million (roughly 5.8 million guilders) from the 50.2 million in liquidity support for 2019 as payment for the detention of inmates in the Netherlands. The faction of D66 asked Knops why this payment was linked to the corona-crisis.

Knops wrote that St. Maarten agreed in the Kingdom Council of Ministers’ meeting of April 14 to pay the detention costs out of the liquidity support. “This does not change the amount of the loan,” Knops emphasized.