ORANJESTAD, Aruba:— The year 2017 is expected to be closed with a financial deficit of 3.1% GDP. According to the National Ordinance on temporary financial supervision (LAft) a financial deficit of 0.5% is allowed. In order to be able to comply with its responsibilities, Aruba has taken out additional loans to the amount of AWG 130 million. It is expected that this will increase the debt quote up to 87% GDP as per the end of 2017. In 2018 the public finances threaten to get in disarray as well. It is therefore of the utmost importance that the government of Aruba presents as soon as possible a financial plan in which measures for 2018 are incorporated.
Deficit norm LAft greatly exceeded
The progress report on the third quarter of 2017 displays a troublesome sight. The collective sector of Aruba has a preliminary deficit of 2.6% GDP over the period up to the third quarter. This is 2.1% more than the lawfully permissible deficit norm of 0.5% GDP for 2017. The memorandum to the 2017 budget amendment shows that the deficit of 2017 has further deteriorated in the recent months and will amount to 3.1 GDP according to calculations. The deficit of 2017 is amongst others caused by dissatisfying (non) tax revenues of AWG 50 million and the write-off of the budgeted earnings of the Refineria di Aruba amounting to AWG 73 million. The loan amount thus had to be increased by AWG 130 million to an amount of AWG 569 million. During 2017 it became increasingly clear that it was no longer feasible for Aruba to comply with the LAft norm.
Budgetary cuts as of 2018 unavoidable
Aruba is facing a huge financial challenge for 2018. Based on the LAft, a surplus of 0.5% GDP must be realized, and according to the LAft the deficit of 2017 also has to be fully compensated in 2018. Seeing that in 2018 there is no possibility to spread the deficit compensation over multiple years, the LAft norm seems out of reach in 2018.
Aruba recognizes the precarious financial situation and wants to come up soon with a financial plan. It is now crucial that these measures start and yield effect in 2018, and form part of the adopted budget for 2018. Actions will also be needed after 2018 in order to get prospect on sustainable public finances. A package consisting of structural measures from Aruba to cut costs is therefore inevitable. In addition, the economy must be strengthened in a sustainable way. The reopening of the refinery has again been delayed and at the moment it is unclear what exactly will happen to the refinery.
Work visits CAft
As is usually the case during the visits of the Board to Aruba, meetings were held with the acting Governor, the Minister of Finance, the Council of Ministers and the Parliamentary Committee of Finance, Economic Affairs and Government Organization. The CAft also paid a visit to the Central Bank Aruba and met with the Aruba National Audit Office. Furthermore, the Board received information about the tax system in Aruba and its necessary reform.
CFT Press Release
Source: St. Martin News Network http://www.smn-news.com/st-maarten-st-martin-news/28285-caft-chairman-raymond-gradus-the-financial-situation-of-aruba-is-of-concern-compliance-with-the-laft-norm-2018-getting-out-of-sight.html