THE HAGUE – The Netherlands wants to explore with Curaçao whether parts of the Kingdom’s financial supervision framework can be applied more flexibly, including through a possible hardship clause for compensating budget deficits and greater room to respond to major economic shocks.
The proposals are outlined in a progress letter from Dutch Minister of the Interior and Kingdom Relations Pieter Heerma to the Dutch Parliament following a policy review of Dutch financial support and supervision involving Curaçao, Sint Maarten and Aruba.
The review presents a mixed assessment of the existing system. According to the researchers, the Kingdom Act on Financial Supervision (Rft), debt relief and lending arrangements have contributed to greater transparency, financial stability and confidence in government finances.
However, the policies have been only moderately effective in achieving budgetary standards, sustainable public finances and structural economic development. Research firm SEO also concluded that efforts to improve financial management in the countries have not been effective.
One area the Netherlands now wants to examine concerns the obligation to compensate for previous budget deficits. According to Heerma, the government intends to offer Curaçao and Sint Maarten the opportunity to investigate whether a policy rule or hardship clause could be developed within the existing legal framework.
Such a mechanism could provide more flexibility in exceptional circumstances without eliminating the underlying budgetary rules.
The experience of the COVID-19 pandemic is also influencing the discussion. The crisis demonstrated how severely unexpected external shocks can affect small Caribbean economies that depend heavily on sectors such as tourism.
The Dutch government acknowledges that every crisis requires a tailored response but believes elements of the new financial supervision framework being developed for Aruba could potentially be relevant to Curaçao and Sint Maarten.
This does not mean financial supervision is about to end. The Kingdom Council of Ministers decided in October 2024 to continue the Rft, with another evaluation due no later than 2027.
At the same time, the Netherlands has previously acknowledged that Curaçao and Sint Maarten want a clearer perspective on eventually bringing financial supervision to an end.
The latest proposals therefore focus on creating greater flexibility within the existing Kingdom Act rather than abandoning financial standards.
The Dutch government is also placing responsibility on Curaçao and Sint Maarten to develop their own long-term vision for sustainable public finances, making clear that additional flexibility would have to be accompanied by credible fiscal management.