Finance Minister Xiomara Maduro presented Aruba’s 2024 draft budget to Parliament last Friday. (Aruba government photo)
ORANJESTAD/THE HAGUE--The 2024 draft budget of country Aruba may show a surplus of seventy million Aruban florins, but the borrowing requirement for 2024 remains high at Afl. 302 million due to the large national debt.
Aruba Finance Minister Xiomara Maduro last Friday submitted the draft 2024 budget to Aruba President of Parliament Edgard Vrolijk on time and meeting the September 1 deadline. This was the second time in 15 years that the budget was submitted on time.
The 2024 draft budget shows a surplus of Afl. 70 million, which is also the second time in many years that the country presented a budget without a deficit. In keeping with an agreement with the Netherlands, Aruba needs to have surpluses in order to reduce the national debt, which by the end of 2024 should amount to about Afl. 5.7 billion.
Aruba’s borrowing requirement, however, remains high due to the interest that needs to be paid on outstanding loans. Aruba intends to take out a loan on the international market to cover its borrowing requirement of Afl. 302 million. About 17% or Afl. 281 million of the Aruba budget goes towards the payment of interest.
The Aruba Committee for Financial Supervision CAFT in its advice qualified the annual surpluses of more than 1% of the gross domestic product (GDP) in the coming years as a “positive development”. Per the agreement with the Netherlands, Aruba needs to have at least a surplus of 1% of GDP.
The surpluses will be used to repay the national debt, as well as for increased expenditures and to facilitate capital investment. “Using the anticipated surpluses to improve the debt position and increase investments will contribute to achieving sustainable and tenable public finances. The CAFT compliments Aruba on the ambition to give content to the deficit compensation with surpluses that exceed the norm,” the CAFT stated.
Based on the draft 2024 budget and the economic perspective, it is expected that the debt quota will gradually decrease from about 70% of GDP in 2027 to 50% in 2040. The investment level will increase from 0.4% of GDP in 2024 to 1.2% in 2028.
The CAFT said it saw “good departure points” in the 2024 draft budget, but noted that certain information about expenditures and revenues was unavailable, which made it hard to determine whether the picture painted in the draft budget was realistic.
“The draft budget provides insufficient information about the development of tax revenues, while the multi-year financing surplus is mostly due to higher revenues. Aside from the anticipated economic growth, the revenues will increase as a result of fiscal measures.”
According to the CAFT, the draft budget did not make clear whether the value-added tax (“belasting op toegevoegde waarde” BTW) would be implemented in the foreseeable future to make the fiscal system more robust. Furthermore, the draft budget lacked information on the efforts of the Tax Office to increase tax compliance.
The CAFT added that there was “insufficient control” on managing expenditures. Amounts allocated to personnel cost, goods and services and subsidies will increase next year without adequate explanation.
Personnel expenditures will go up by Afl. 9 million, which is against the 2018 agreement with
the Netherlands to reduce the annual cost of personnel. The CAFT advised to reconsider the subsidies to a number of government entities.
Aruba Prime Minister Evelyn Wever-Croes is content with the positive advice of the CAFT, the budget surplus and the fact that the budget was submitted on time. “We are on the right track of responsible and sustainable finances, but we are not there yet. We have to continue working to the benefit of our country and create tranquillity for our people,” she said.