The 2015 annual report of the Committee for Financial Supervision CFT (see related story) spells reasonably good news for St. Maarten. Government hopes to close off 2015 with a small surplus on its capital budget after four years of consecutive deficits.
The country’s debt to gross domestic product (GDP) ratio was also moderate at 33 per cent compared to 40 per cent in Curaçao and a whopping 82 per cent in Aruba. It is noted that last year’s financial instruction to Philipsburg by the Kingdom Council of Ministers on advice of the CFT also played a role in that positive development. Nevertheless, the 2016 “shotgun budget” of the William Marlin Cabinet seems to be the first step in restoring order to the country’s public finances.
On the other hand, economic growth has been sluggish after a 10-year period during which St. Maarten did considerably better in this regard compared to the rest of the kingdom. Insufficient diversification, a still inflexible labour market, increased crime and low private-sector investments are mentioned as contributing factors, while political instability and consequential lack of continuity too had a negative impact.
Growth in stay-over tourism has slowed and the number of visiting cruise passengers even dropped a bit. Investments to promote the hospitality industry were not realised and neither was the long-awaited establishment of a St. Maarten Tourism Authority (STA) that is to handle such.
The suggestion to adopt a debt quota standard of 40 per cent with a 5 per cent “bandwidth” to mitigate shocks is well-taken. Especially if the CFT and the so-called “Consensus Kingdom Law” on which it is based are to end three years from now, there is a need to legally prevent again creating situations like that of the former Netherlands Antilles, which built up debt of five billion guilders that was largely taken over by the Netherlands as part of the constitutional reforms per 10-10-10.
Whatever policies local administrators, elected representatives and other aspiring politicians want to see executed both before and after the September 30 parliamentary elections should take these realities into account. For example, if the labour market is not flexible enough as it is, great care must be exercised when proposing matters like mandatory counterparts or further restricting the use of six-month employment contracts.
So, there is obviously a lot of work ahead to stimulate the economy and at the same time continue to contain public spending. However, balanced budgets and a stringent approach to Government’s financial household certainly can provide a solid foundation on which to build.
