Curaçao meets most CFT demands, instruction is off

THE HAGUE/WILLEMSTAD–The Curaçao Government has convinced the Committee for Financial Supervision Curaçao and St. Maarten CFT that it is taking the anticipated 2017 deficit of NAf. 116 million very seriously and that it will implement a set of measures. An instruction by the Kingdom Council of Ministers is off, at least for now.

During a visit to Curaçao this week, the CFT urged the local government to take measures to achieve a balanced budget. The CFT wants the 2017 deficit to be compensated as soon as possible. Curaçao should also tackle the structural causes. The CFT concluded that in addition to lagging tax revenues and exceeding expenses, there are various other risks that may have a negative impact on the 2017 result and the 2018 budget.

The Curaçao Government has prepared a set of measures to meet these challenges. The CFT reached an agreement with Minister of Finance Kenneth Gijsbertha about the monitoring of the effects and the implementation of these measures. A risk analysis was promised to the CFT.

Curaçao has a budget deficit for the first time since 2012. As such it does not meet the standards of the Financial Supervision Kingdom Act, which dictates a balanced budget for the countries Curaçao and St. Maarten. The 2017 deficit, which is expected to amount to NAf. 116 million, is partly caused by revenue that is falling behind. This will also have an effect on the coming years. Moreover, there are several setbacks in regard to expenditures.
“Budgetary balance forms the basis for sound public finances. It contributes to creating a favourable investment climate and is therefore a prerequisite for the stimulation of economic growth,” CFT Chairman Raymond Gradus stated in a press release on Wednesday.
The Curaçao Government prepared a set of measures in December 2017. An adjusted version, submitted to the CFT early this week, largely met the CFT’s objections regarding the Finance Minister’s previous proposal.

According to the adjusted version, the 2017 deficit will be more than one-third compensated in 2018. In addition, two measures were replaced by alternatives in line with the CFT’s request. “However, some of the measures have not been sufficiently substantiated as yet. As such, it cannot be established that the 2018 budget complies with the financial supervision law standards and that the 2017 deficit will be fully recovered,” Gradus stated.

Curaçao has indicated that it will further substantiate these measures. If this proves to be sufficient, an instruction of the Kingdom Government will not be necessary. The CFT further observed that the measure of prior supervision has been reinstated. This will further strengthen internal control.

According to the CFT, various risks may adversely affect the execution of the 2018 budget. The Curaçao Government has promised to prepare a risk analysis which will include the financial situation of the Postal Services Cpost, possible setbacks as a result of the new hospital HNO project and the state of affairs of the current St. Elisabeth Hospital.
Also playing a role are the uncertainty regarding the dividend payments by government-owned companies. Developments concerning the refinery and the economic impact thereof were discussed as well. “A thorough risk analysis is needed, so that possible setbacks can be anticipated,” said Gradus.

The CFT was further of the opinion that it took too long for the country’s annual accounts to be adopted by the Curaçao Parliament. The CFT only received the adopted annual accounts for the years 2012 and 2013 in January 2018. This needs to improve, as the annual accounts are an important part of the process of financial accountability.

Source: The Daily Herald