It may come as a surprise to some that Aruba is at risk of getting a financial instruction. After all, the Wever-Croes Cabinet showed great responsibility during the unprecedented COVID-19 crisis and its devastating impact on the island’s dominant tourism industry. It was the first Dutch Caribbean country to introduce a reduction in public sector benefits of 12.6% to offset for tax income taking a nosedive, followed by cuts of 12.5% in both Curaçao and St. Maarten.
This became one the main conditions for coronavirus-related liquidity loans from the Netherlands. The latter enabled extra badly needed support for government, local employers and their personnel who also had to contribute 20%, sole proprietors, people left jobless, etc.
Aruba was also the first to recently get permission from the Kingdom Council of Ministers RMR in The Hague to begin phasing out its austerity measures, starting with restoring 5%. Within a matter of weeks, the same RMR is now being asked to issue an instruction for the government in Oranjestad.
That may seem contradictory, but it has to do with national debt. According to the Aruba Financial Supervision Committee CAFT, in the current scenario this will further increase until 2026 and exceed 6 billion Aruban florins, of which Afl. 4 billion must be repaid between 2023 and 2027.
As a comparison, the debt of neighbouring Curaçao, which has more than double the population, stood at 4.4 billion Netherlands Antillean guilders in March, NAf. 30 million less than at the end of 2021. CAFT also said Aruba is headed for a deficit of Afl. 227 million this year, 4% of gross domestic product (GDP).
Numbers don’t lie, but much of this goes back to investments made during the former Eman Cabinets, to compensate for the island’s oil refinery closing by stimulating business activity. The latter appears to have worked well, but expenses incurred became a bigger problem under dire financial circumstances largely due to the pandemic.
While CAFT is doing its job chiefly from a fiscal point of view, any government, including the RMR, must always take socioeconomic factors into account too. Considering the present inflation, insisting on even lower spending right now might indeed not be very realistic and could even prove counterproductive.
