WILLEMSTAD, Curacao:--- Stable public finances are essential for the recovery of the economy. That is what the Board of financial supervision (College financieel toezicht - Cft) indicates in its annual report on 2013. After the restructuring of the public finances in Curaçao, economic recovery is expected in 2014, but it is too early to already speculate about cost reductions or new expenditures. In Sint Maarten the finances and the growth developed balanced during the past years. The aging population there will also increase and thus measures are necessary to keep the social security and care payable. On the public entities the financial situation has improved during the past years. The level of provisioning on the area of health care and education has increased, but loss of purchasing power and the poverty amongst parts of the population, remains an important task.
Annual report
In its annual report 2013 the Board identifies that in its five years of their existence important lessons were learned. The effectiveness of the financial supervision stands or falls with the commitment of the government and the elected representatives to the necessity of the budget discipline and timely reporting. Hereby it has turned out to be necessary to keep a close eye on the developments with regard to social security and in the government companies and foundations, with the focus on possible risks for the public finances. Furthermore, the liquidity position is of great interest. The financial management remains a point of concern that really has to improve in the coming period. In the annual report the Board describes how the crisis, which started in 2008-2009, came on top of a structurally weak situation in the Caribbean region. Extensive debts, deficits on the current account and a bad competitive position characterize the region. The government costs a lot, because of the fixed costs in the area of security, infrastructure, education and health care. Electricity and water are expensive. In the private sector, scale disadvantages in most cases lead to a strongly concentrated market, in which competition is limited. Access to the international financial market is limited as well. In Curaçao and Sint Maarten, all these challenges are visible, but the countries have a better chance to cope with them, compared to other countries in the region, because of the low government debt and the relatively high standard of living.
Curaçao
The package of measures, which the government implemented in 2013, has led to a delay in the recovery, but the shrinkage in 2013 remained limited and recovery is expected to kick in quickly in 2014. That does not mean that nothing has to happen anymore at this point in time. Not all the measures from the recovery package have been implemented as yet, and some measures still have to actually result in savings. So, at this moment it is too early to already conclude that costs can be reduced or that there is space for higher expenditures. However, an investment program maybe started, even though the Board warns that large scale (public) investments are expected to make only a modest contribution to the growth. Nevertheless a big part will leak out of the country, resulting in more pressure on the balance of payments. Curaçao will have to work on improving its competitive edge and improving the business climate in order for private investments in the import substitution and exporting sectors to set off.
Sint Maarten
Three years after obtaining the status of a country, Sint Maarten still does not have its institutions in order. Mainly the tax office and the financial management are lacking. The Board entitles Sint Martin the most Anglo-Saxon country of the Kingdom, with a small government and a high level of trust in private initiative. Nevertheless there are limits to this reality, and strengthening of the institutions is necessary to obtain a more sound economy and a secure and social community. The liquidity position and the tax incomes are worrisome.
The public entities
Mainly on the area of care and the education, a lot has been invested in the public entities. Because the inflation was high during the years 2010 – 2012, the purchasing power decreased. Meanwhile, the inflation is now better controlled. Combating poverty amongst parts of the population forms an important task for the coming period.
Click here to view the CFT 2013 Annual Report.
Cft Press Release