WILLEMSTAD--The execution of their 2014 budgets is running its course in Curaçao and St. Maarten. If the countries continue on this path their budgets will stay balanced this year, according to the Committee for Financial Supervision CFT. Additionally, Curaçao has met "all the requirements" of the 2012 instructions since the beginning of 2014.
In its semi-annual report, CFT still urges both countries "to vigorously deal" with the risks for their long-term budgets and improvement of their financial management.
Based on the positive advice on their 2014 budgets in the first half of 2014, both Curaçao and St. Maarten have taken out loans from the Netherlands through the current tender. Curaçao used these funds to finance the construction of the new hospital, St. Maarten partly for various investments and partly to perk up the precarious liquidity position.
In its evaluation of the concrete loan requests, besides the test of the interest burden standard (rentelastnorm), CFT also took into consideration the capacity of the countries to absorb the loans. This has led to CFT agreeing to a lower loan amount than originally requested by St. Maarten.
It is "important" for Curaçao to maintain the positive image of budgetary control it built up in the past period. To this end, the government needs actually to implement the previously-intended government policy to reduce its operating cost and subsidies, CFT said in its semi-annual report covering January to June 2014. It also conveyed the message to Curaçao during its visit to there in May.
Also, looming deficits in the short-term basic insurance should be dealt with and the financial positions of public companies should be addressed. The "turnaround" plans of the government companies that are facing financial problems should be implemented to minimise their risks for the budget.
A capital injection improved the liquidity position of St. Maarten "significantly" the past half year. However, it really remains a point of concern for St. Maarten to strengthen its liquidity position in a structural way, and to build up sufficient resistance capital, said CFT.
The challenges for St. Maarten are currently mainly in the area of payment arrears. St. Maarten has not been able to reduce these debits so far, although this subject already has been discussed with the two largest creditors, the pension funds and health insurance, said CFT.
For both countries, CFT will test the identified risks for long term balanced budgets on the 2015 draft budgets. This evaluation shall take place during the second half of 2014.
CFT also will include the condition of the financial management and its consequences for the budgets in its assessment. "There is much room for improvement in this area, even though much effort is being made by these two countries to show progress."
