WILLEMSTAD, Curacao:— During its visit to Curaçao, the Board of financial supervision Curaçao and Sint Maarten (Cft) indicated that the implementation of the 2017 budget was under great pressure. Revenue enhancing and tax mitigation measures are necessary to prevent a budget deficit in 2017. Challenges are related to lagging tax revenues en social funds premiums and the control of expenses. In addition, the stimulation of the economy is an important challenge.
Probable positive closing of 2016 budget
The year 2016 appears to have closed with a positive result on the ordinary service, on account of incidental windfalls. With this, Curaçao presents for the fourth consecutive year a balanced ordinary service. The 2016 annual accounts have not yet been audited by the government accountant and the National Audit Office, so a final conclusion is not yet feasible. Despite disappointing incomes from tax and sale of goods and services, the total income has been higher than the total expenses as a result of a substantial windfall in dividend income. The Cft warns for a policy that relies on incidental revenues as a means to realize a balanced budget, and therefore emphasizes, amongst others, the importance of a structural dividend policy for government corporations.
2017 Budget execution inadequate
The realization figures for the first half of 2017 are of concern. The 2017 budget is under great pressure. The Cft has advised the government to immediately introduce a commitment stop and compliance enhancing measures, in order to balance the budget and keep it that way. The charges, especially grants and transfers, consumption of goods and services and the additional allocation to the swing fund, are higher in the first half of the year compared to the forecast, while income, in particular from taxes, property, goods & services and premiums for the social funds keep lagging far behind the forecast. As a consequence, the forecast is exceeded with a total amount of ANG 77 million as per the end of June. The Cft chairman: “The government must take steps to evade a deficit by the end of 2017”.
The liquidity position has fallen below a healthy and sustainable level. The Board advises the government to take appropriate measures as soon as possible to improve the liquidity position. In addition, Cft advises the government to improve the information provision on Hospital Nobo Otrobanda, considering the possible financial consequences for the budget. This applies not only to the Cft but also to society as a whole. The Board, therefore, insists on an update of and insight into the business case. Lastly, the Cft also refers to the resilience capacity that needs to be strengthened in order to make it possible to still balance the budget during economically less prosperous times.
Economic growth necessary in coming years
In recent years, the economic growth has stagnated on Curaçao. Calculations show that for 2017 a real economic growth of -1.8% and for 2018 0.3% of GDP can be expected. The economy needs a boost. The government can create a better entrepreneurial climate by eliminating barriers (such as red tape) by investing in ICT, modernizing legislation and effectively implementing efficiency-enhancing measures, in particular in government-owned enterprises in the energy sector. There are also opportunities for economic growth resulting from the possible participation of Guangdong Zhenrong Energy (GZE), the investments in the dry dock enterprise and the second Megapier, where currently significant steps are being taken.
Cft visit with new chairman and member on behalf of Curaçao
The visit to Curaçao on October 4th was the first headed by the new Cft chairman Raymond Gradus. The Board has meanwhile been reinforced with the arrival of the new member on behalf of Curaçao, Mr. Gregory Damoen. The Cft looks back on a fruitful visit to Curacao. Meetings were held with the Governor, the Council of Ministers, the Minister of Finance and the Parliamentary Financial Committee. The Board also met with the Central Bank of Curaçao and Sint Maarten. In addition, the impact of hurricane Irma on the economies of Curaçao and Sint Maarten was discussed.
The Cft expresses its compassion with all who have been affected by the recent natural calamity. The Cft considers it not fitting at this moment to visit Sint Maarten. “The government’s focus is now on providing emergency relief and restoring the public order,” the chairman stated. Perhaps the Cft will make a separate visit to Sint Maarten by the end of this year.
CFT Press Release