A scene in the public tribune of parliament on Monday.
PHILIPSBURG–With the debt of St. Maarten’s collective sector reaching close to NAf. 900 million by the end of 2019, every citizen including children have a debt on his or her shoulder of some NAf. 22.500, Finance Minister Perry Geerlings said on Monday.
He was at the time outlining the dire financial straits that the country is in to Members of Parliament (MPs) during the debate of the draft 2019 budget.
“St. Maarten is still in a state of emergency after the hurricanes hit us so hard in September 2017. Our economy and society have not recovered fully as yet, which continue to influence the lives of our people negatively,” Geerlings said.
The draft budget, he added, reflects this continuing crisis. “However, we speak and often act as if everything is back to normal. What we mostly forget, however, is that our draft budget for 2019 shows a deficit of NAf. 71 million, which means that our expenses are much higher than our income as a country, which is also detrimental for our investment climate.”
Anyone who places demands on the table are in essence telling the people of St. Maarten “that they should take more debts on their shoulders and on the shoulders of future generations to realise those wishes, proposals or demands,” the minister noted. “Not that the Kingdom Council of Ministers would allow us to do so, but as an example of the way of thinking in St. Maarten, we often like to spend money that we don’t have.
This is the real situation of our financial status: we are dependent on loans from the Netherlands for liquidity support that enables us to execute our budget and keep government functioning. … We should not forget that some 85% of our expenses are fixed contractual obligations (personnel, rent, subsidies, etc.), so the possibilities to change the budgets are very limited.”
With the country’s national debt, St. Maarten is at the maximum amount that is broadly seen as reasonable for a small developing country, which is 40 to 45% of their Gross Domestic Product (GDP). “However lately voices can also be heard that a percentage of 60% should be acceptable, like was recently stated at the Governor’s Symposium last Friday. The national debt in many countries within Europe for instance, is much higher than this 40-45%, including the Netherlands, but in most cases, they have a more diversified and less vulnerable economy. In fact, we have hardly any manoeuvrability anymore as we are also bound to act within the constraints set by the Kingdom Law on Financial Supervision.”
He said also that government must still compensate for budget deficits of the past and realise budget surpluses in the future up to an amount of probably some NAf. 300 million (including post-Irma deficits) while the current pension and health insurance systems are financially unsustainable (and) existing payment arrears of some NAf. 150 million must also be eliminated.
With St. Maarten’s current income levels, even if the GDP grows as a result of the economic recovery, the country will still be unable to maintain its current expense levels, which causes continuous deficits and payment arrears. “Therefore, the total reform of the Tax Department and our Public Financial Management are the main priorities of this government and my Ministry. The plans to do so were already approved in the Council of Ministers and the projects are ready for execution the moment the budget for 2019 is approved. These projects will take some three years to execute and will require an investment of some NAf. 57 million in total including the modernization of our tax-regime.”
These investments should create a return much bigger than the investment amounts as will be “well-spent” investments. “Our efforts are not aimed at raising government income by raising taxes. We aim for a modernization that complies with international developments and standards. We also aim to broadening our tax-base, to simplify our tax system and to strengthen our public service. But we know, however, that not every person or company is paying taxes as supposed to and like other jurisdictions, we are suffering from the consequences of having a rampant informal economy with a negative effect on the development of our income and economic growth.
“Government believes that each resident and company, should pay his/her or its fair share if circumstances reasonably allow, to make the country financially healthy and sustainable. This also means that controls and audits must be intensified in order to adhere to rules and regulations, especially focusing on those who are not compliant. This project is therefore a must.
“We expect, as a result of these efforts, that our income level will exceed our expense level by the year 2021 and create a surplus from then onwards. These surpluses have to and will be used to pay our remaining debts and payment arrears in the first place and later to be used for other purposes like improving social deficits within our society, thus strengthening our social and financial position even more. Surplus funds will also continuously be used to build up a disaster risk fund,” the minister noted.
“The end effect will also mean that St. Maarten will be less dependent on the Kingdom or other third parties for financial support, which will further strengthen its autonomy.
“As it relates to the Kingdom instruction of 2015, Geerlings said this is still not fully complied with. “We expect a decision from the Kingdom Council of Ministers soon on a prolongation of the period we still need to comply fully. That period is especially for the compensation of deficits as from October 10, 2010, and for solving the payment arears.”
Elaborating on changes to pension and sickness insurance arrangements, the minister said it has been clear for years that these systems are no longer sustainable. “We are internationally not unique because most countries were facing the same problems since the beginning of this century. We are unique, however, in the slow pace in solving these issues. Government sincerely hopes that Parliament will take its responsibility to address these issues in a timely manner.”
The Finance Minister said easy decisions “are not within our reach,” however, “our financial situation as a country leaves no room at all for the years to come. We simply must… recognise the financial crisis situation we are in since October 10, 2010, and act on that in a responsible, structural and sustainable manner.”
Government, he stressed, has put the best of its knowledge and vision for the future of St. Maarten in the draft budget. “In times of crisis, it’s easy to criticize. But we are always open for input from everyone as long as one understands our financial limits and constraints that we are facing for the time being.” He said the Committee of Financial Supervision (CFT) has referred to the draft budget as being “realistic,” while positive advice has been received from the Council of Advice and CFT.