Unrealistic scenario

Unrealistic scenario

Finance Minister Ardwell Irion has confirmed (see Thursday paper) that liquidity support will still be needed in 2022, despite an economic growth of 14.4 per cent predicted by the Central Bank of Curaçao and St. Maarten (CBCS). Next year’s estimated deficit will be 128 million Netherlands Antillean guilders and while the 2021 financial shortage is now expected to end up about NAf. 67 million less than originally projected by the International Monetary Fund (IMF) – NAf. 174 million instead of NAf. 241 million – the 2022 budget will realistically remain in the red.

This might seem surprising, considering that wage subsidies to compensate for lost earnings due to the COVID-19 pandemic for businesses to keep their staff as well as the income assistance for sole proprietors, individual operators and people left jobless have all ended since October 1. However, people should keep in mind that the gross domestic product (GDP) dropped by 22.3 per cent in 2020 and will rebound by only about 3.4 per cent this year, while full recovery of the dominant hospitality industry is going to take time.

The Dutch government will therefore be asked for more soft loans, which – as known – come with conditions. They include executing a so-called “country package” of restructuring measures but also investments monitored by the Caribbean Body for Reform and Development COHO.

Several of these are controversial, such as raising the mandatory wage limit for Social and Health Insurance SZV up to NAf. 120,000 per year, practically excluding all private health coverage. The Employers Council as well as the Windward Islands Chamber of Labour Unions (WICLU) have objected to this because it could increase cost for both the companies and their workers.

Some, such as the United St. Maarten Party (US Party), are calling for the three laws regulating income and benefit reductions in the public sector to be withdrawn, although recently upheld by the Constitutional Court. Independent Member of Parliament Emmanuel for his part told government-owned companies and -related entities not to rush into implementing these austerity measures.

Aruba recently announced that its 12.5 per cent cuts for personnel in the (semi)public sector must be maintained until at least the second quarter of next year. With St. Maarten requiring more financing from the Netherlands, reversing the steps taken earlier to qualify for such at this point seems like a rather unrealistic scenario.