~ Says CFT Chairman Gradus ~
By Suzanne Koelega
THE HAGUE--Getting the St. Maarten economy rolling and securing a 2018 budget are two top priorities for St. Maarten, in the opinion of Committee for Financial Supervision CFT Chairman Raymond Gradus (55), who took over the reins from his predecessor Age Bakker six months ago.
While acknowledging the extraordinary circumstances in St. Maarten after Hurricanes Irma and Maria, Gradus said it was very important for the country to have an adopted 2018 budget. So far, the CFT, which supervises the budgetary process of the St. Maarten Government, has not received an adopted 2018 budget.
As things look now, the St. Maarten Government will start 2018 without a budget, whilst the law prescribes that this should already have been dealt with. This presents an urgent situation – one which, by the way, Aruba also faces due to a switch in government. In an interview with The Daily Herald, Gradus called on the St. Maarten Government to at least secure the 2018 budget within the first months of next year.
The CFT decided last week Thursday to send an advice to the Kingdom Council of Ministers to give St. Maarten an instruction to secure an adopted 2018 budget by March 1, 2018. This decision was based on the Kingdom Financial Supervision Law RFT. The CFT informed the St. Maarten Parliament last week Friday that it had sent an advice for an instruction to the Kingdom Government.
St. Maarten will need budgetary support for 2017 and 2018. The Dutch Government has plans to provide 30-40 million euros in liquidity support for 2017, to help the St. Maarten Government bridge the financial gap for this year. Dutch budgetary assistance will also be needed next year.
“The fact is that there is a gap. It is clear for everyone that the 2018 budget will not be balanced. The coffers will be empty next year. We will need to have that discussion,” said Gradus.
He said it was important for the Dutch and St. Maarten Governments to look at how to deal with the finances in the period after the hurricanes. This concerns both the liquidity position and the loans St. Maarten has secured through the Netherlands, as St. Maarten will have a hard time meeting its financial obligations.
Enormous challenges
Gradus said the Dutch Government has shown comprehension of the financial situation. But on a government level, St. Maarten will have to take a number of steps, including the arranging of the 2018 budget and an indication of the borrowing needs. The challenges are “enormous,” said Gradus.
“The financial consequences of the hurricane for St. Maarten are substantial. The 2017 revenues have dropped significantly and this is expected to also be the case in 2018. That is a fact. We are concerned about St. Maarten’s liquidity position,” he said.
Deferring payments to Social and Health Insurances SZV and General Pension Fund APS is not wise, in Gradus’ opinion, especially when considering that the St. Maarten Government needs to clear the payment arrears to these two entities, based on an instruction of the Kingdom Council of Ministers.
Depleting the reserve for capital investments for liquidity purposes, an option that has been suggested by the St. Maarten Government, is not a good idea either. “Those funds are there for a reason; namely, to make the necessary investments in the economy,” said Gradus.
He called it “very unwise” to sell some government-owned entities and assets, a move that was recently hinted at by Finance Minister Richard Gibson. “That is not a solution for the problem. Selling your silverware for a price that is too low is not responsible financial management.”
The transparency of the government-owned companies and their financial positions remain important issues. The CFT has expressed concerns about the lack of transparency of some government-owned entities and the risk they might pose for the Government’s budget. St. Maarten’s Audit Chamber shares these concerns.
“This matter also needs addressing. This is in the people’s interest too,” said Gradus, who expressed appreciation for the work that has been done at the cruise terminal and the harbour after Hurricanes Irma and Maria.
He said it was now especially important to get the economy going. The Reconstruction Fund to which the Dutch Government has pledged 550 million euros plays a vital role in restarting the economy. A boost in economic activity will have a positive influence on government’s finances.
Added value
The liquidity assistance offered by the Netherlands shows the added value of the Kingdom. Gradus said that “naturally” there were conditions that needed to be complied with, in addition to a proper system of checks and balances. He said he expected that liquidity support would also be needed in 2018, but not in 2019. The World Bank will be in charge of disbursing the Dutch contribution to this fund. The CFT will not be involved in this process. “The World Bank is better equipped for this task.”
The process to rebuild St. Maarten will take quite some time, said Gradus, adding that many positive things were also happening. He mentioned the resilience and the unity shown by the people. “We also have to count our blessings.”
Gradus had two suggestions for the near future which should be beneficial in case of a hurricane or other natural disaster: the establishing of a joint natural disaster fund and a common insurance fund, both at a Kingdom level to share the burden and enhance solidarity. “This would be a great way to give further content to the added value of the Kingdom.”
Instead of having the Netherlands foot the bill for St. Maarten’s reconstruction on its own, there could be a special Kingdom fund for natural disasters to which all countries would contribute. St. Maarten, for example, would receive a financial contribution from this fund during a decline of the economy as a result of a hurricane.
Gradus’ second idea is to create a public-backed insurance, a type of mortgage guarantee for some occasions that already exists in the Netherlands, which would spread the risk and keep insurance affordable for the common man.
“Under-insurance is a social problem which could get worse if the insurance companies decide to increase their premiums and own risk. It would not be a good development if only the happy few can afford to insure their property,” he said.
St. Eustatius, Saba
In the interview with this newspaper, Gradus also touched on the finances of the Governments of Bonaire, St. Eustatius and Saba. “Saba is doing very well. The Saba Government has shown that it has the capability and the will to improve. Don’t forget that it takes two to tango.”
There is definitely room for improvement in Statia and in Bonaire, said Gradus. The CFT has concerns about Statia’s finances, especially its financial management. “There is a reason why St. Eustatius is under preliminary supervision, which we have been carrying out since September this year.” However, there have also been positive developments, such as the approval of the 2018 budget, he added.
Gradus, a professor of public economics and administration at Vrije Universiteit, Amsterdam, since 2004 with a vast experience in the area of public finances, said it has been a special six months since his appointment in July this year. “It is a most interesting job, also considering the special constellation of the Dutch Kingdom.”
He sees the CFT as a reflection of the Kingdom with members from all countries and islands, working in the best interest of the public finances and therefore the people. “The CFT certainly has a bridging function and it has shown its value since its inception in 2010.”
The RFT will be evaluated in 2018 and, even though it is technically possible to revisit this law at that stage, Gradus said that in his opinion financial supervision would remain necessary for a while.
“We are not there yet. There is still a lot to do. Some parties seem to think that they are ready to do away with financial supervision, but I don’t see it that way. I think that financial supervision and the CFT will be around for some more time.”
The CFT board will visit St. Maarten, St. Eustatius and Saba in the first week of February.
