By Hilbert Haar
So now St. Maarten is saddled with a bunch of loans it is unable to repay. The only way out: refinancing. I am curious to see what kind of agreement our country will be able to make with the Netherlands about this issue. Until then, I remain more than a bit worried.
See related article: Cft advises to refinance loans St. Maarten is unable to repay
The advice of the Cft about the repayment of these loans makes a couple of things clear. First, St. Maarten has not repaid anything on loans that date back fifteen years ago, to October 2010. Most of these loans are so-called bullet-loans. That sounds attractive because you do not have to make annual repayments, you only have to pay the full amount on or before the day such loans expire.
I assumed that our government would make reservations it its annual budgets for these obligations. But no: this has never happened and now the country’s financial management has once again become an embarrassment.
Refinancing assumes that parties make an agreement with more favorable conditions. For instance: lower interest rates. But I figure that whatever agreement the Netherlands and St. Maarten are going to make will include another crucial element: an expiry date far into the future.
This would only mean that the country will have more time to repay the loans, but it also means that it will make more payments. That could make the loans more expensive.
The difference between ten annual payments of, say, 3 million guilders and thirty annual payments of one and a half million is, to say the least, substantial – 30 million versus 45 million.
This does not seem to concern our current crop of politicians because they will argue that the problem has been solved, without mentioning that the burden is now on future generations.
Unfortunately, this is the way it is going to work. There is a big difference with, for instance, a car loan or a mortgage. If you fail to make your payments your car will be repossessed, your house will be auctioned and you will probably live indebted for the rest of the foreseeable future.
St. Maarten has in this respect one thing in its favor: the Netherlands will not (and cannot) repossess St. Maarten if the country fails to come up with the money. That’ll be the last thing on their mind.
Jokes aside, this situation makes clear that our country has to take a more serious and responsible approach towards its financial management. It will have to allocate money in its budgets to prevent further embarrassment. If you cannot pay, you become a beggar and I just cannot imagine that St. Maarten wants to be in such a position.
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Related article:
Cft advises to refinance loans St. Maarten is unable to repay
Editorial: The True Cost of Refinancing
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