St. Maarten’s 2018 budget has deficiencies, says CFT | THE DAILY HERALD

THE HAGUE/PHILIPSBURG–The Committee for Financial Supervision CFT is not entirely satisfied with the approved 2018 budget of Country St. Maarten which, in the CFT’s opinion, lacks information to back up the figures.

The CFT is concerned about missing information on the financial status of the government entities, including the government-owned companies, and the risk that they might pose to the budget. Also, the St. Maarten government is urged to arrive at an agreement with The Hague regarding additional liquidity support for 2018.
The CFT has released its advice dated May 25 regarding the 2018 budget which was adopted by the St. Maarten Parliament on May 10. The CFT concluded that this budget does not comply with the norms of the Financial Supervision Law.
The fact is that the Kingdom Council of Ministers decided in March to allow St. Maarten to deviate from these norms for the 2017 and 2018 budgets due to the special circumstances in which St. Maarten finds in since Hurricane Irma caused widespread devastation, which had an adverse effect on the island’s economy and, by extension, the government’s finances.
The NAf. 197 million deficit in the approved 2018 budget is within the maximum NAf. 254.7 million that was set by the Kingdom Council of Ministers in March, but according to the CFT, St. Maarten has not indicated sufficiently what measures it intends to take to limit the 2018 deficit.
The CFT understood that the St. Maarten Council of Ministers was to present a package of measures shortly. The CFT advised taking cost-saving and revenue-boosting measures as soon as possible, also considering the late approval of the 2018 budget. The financial consequences of these possibly unpopular measures will require a budget amendment.
The CFT also found the substantiation of the projected expenditures (NAf. 500.5 million) and revenues (NAf. 303.4 million) on the regular account to be insufficient as well as the explanation regarding the projected investments on the capital account. The CFT did include a positive note that St. Maarten is not surpassing the interest charges norm.
The CFT is concerned about the absence of an agreement with the Dutch government for the additional liquidity that St. Maarten expects to need this year to cover its expenditures. The Kingdom government has commanded that St. Maarten needs to consult the CFT when it intends to secure a loan.
“The CFT has not received such a request from St. Maarten as yet and will not be able to vet this request if the information to back the financial figures is lacking,” stated CFT Chairman Raymond Gradus in the letter to St. Maarten Minister of Finance Mike Ferrier. The CFT advised the St. Maarten government to enter into consultations as soon as possible to discuss how this information can be supplied.
The 2018 budget includes information that is too limited about the financial position of the collective sector and the government-owned companies and entities while it may be assumed that these organisations are dealing with financial blows since the hurricane and may need financial support. The CFT wants to see this information in the next budget amendment.
Until mid-2017, St. Maarten was well on its way to complying with the 2015 instruction of the Kingdom Council of Ministers where it concerned compensation of earlier deficits and elimination of payment arrears. The situation changed after the hurricane and compliance with the instruction is in jeopardy.
The 2018 budget no longer covers the compensation of past deficits and a solution to the payment arrears. There is also a delay in taking measures regarding the sustainability of the old age pension and health care systems. The CFT advised jointly arriving at a new and realistic timeframe within which St. Maarten expects to deal with the instruction.
The CFT was critical of the budgetary and accountability cycle. This year’s budget was very late, but in past years, St. Maarten was also unable to present an adopted budget in a timely manner. In 2016 and 2017, St. Maarten did not comply sufficiently with reporting obligations and there was not enough accountability regarding the budget’s execution.
The CFT noted that it needs to receive a monthly overview from the St. Maarten government as to the execution of the 2018 budget to determine how the deficit will evolve and how much the country will need in liquidity support. “If the CFT does not acquire the relevant information, it cannot properly execute its tasks.”
Lastly, the CFT once again reminded St. Maarten of the need for improvement in the area of financial management. The associated projects need to be carried out, but the implementation has stagnated. Technical assistance is indispensable, according to the CFT.

Source: The Daily Herald