~As global uncertainties intensify~
Willemstad/Philipsburg – On June 19, 2025, the Centrale Bank van Curaçao en Sint Maarten (CBCS) decided to keep its monetary policy stance unchanged. As a result, the pledging rate will remain at 4.75% and the reserve requirement percentage at 18.50%. The most recent adjustment to these monetary policy instruments occurred in November 2024, when both figures were reduced by 0.50 percentage points, a move supported at the time by the monetary union’s solid foreign exchange position and adequate import coverage. While domestic economic and monetary indicators remain solid and broadly aligned with expectations, the global outlook has become increasingly fragile due to mounting downside risks. Heightened uncertainty in global trade and financial markets, rising geopolitical tensions, along with the U.S. Federal Reserve (Fed)’s continued pause in its policy rate cuts, were key factors in CBCS’s decision. Given the prevailing uncertainties, the CBCS is maintaining a cautious policy stance and will continue to closely monitor both domestic and international economic developments, adjusting its policy as necessary. The current account deficit of the balance of payments as a percentage of GDP is expected to narrow from 16.8% in 2024 to 15.0% in 2025 due mainly to an increase in net exports of goods and services driven by higher exports, complemented by a decline in imports. Exports growth is expected to be led mainly by increased foreign exchange receipts from tourism activities across the monetary union. Meanwhile, the projected decline in imports is mainly due to the anticipated impact of lower international oil prices on the oil import bill. In contrast, non-oil merchandise imports across the monetary union are projected to increase, driven by increased tourism spending and higher domestic demand. So far this year, gross official reserves have increased by Cg 203.5 million as of June 2, 2025. By the end of the year, reserves are expected to have risen by Cg 51.8 million, as external financing and capital transfers are expected to exceed the deficit on the current account of the balance of payments. In line with this development, the import coverage has also shown an upward trend. The average import coverage is projected to increase from 4.4 months in 2024 to 4.7 months in 2025, remaining well above the norm of 3 months. However, the external environment has deteriorated significantly in recent months and could affect key monetary indicators. In particular, the escalation of (retaliatory) trade measures and prolonged trade policy uncertainty have intensified global trade tensions and disrupted supply chain stability. In addition, the intensification of geopolitical tensions in Eastern Europe and the Middle East could further disrupt global supply chains and raise energy and other commodity prices. These developments pose significant risks to import-dependent economies, like Curaçao and Sint Maarten as rising import costs may put pressure on the balance of payments and, consequently, gross official reserves. Considering these developments, the CBCS has decided to maintain the pledging rate at 4.75%, remaining aligned with the Fed, which decided on June 18, 2025, to keep its policy rate unchanged at 4.50%. The decision by the Fed to pause monetary easing reflects the growing uncertainties arising from the deteriorating global environment, including rising trade and geopolitical tensions. In addition, the CBCS will keep the reserve requirement percentage unchanged at 18.50%. Moreover, it will continue to offer attractive rates on its weekly auctions of certificates of deposit (CDs) with the aim of holding more bank liquidity domestically to support the preservation of a solid foreign exchange position. Willemstad, June 20, 2025 CENTRALE BANK VAN CURAÇAO EN SINT MAARTEN
