The Hague intervenes in Curaçao again

THE HAGUE, WILLEMSTAD - The Kingdom Council of Ministers intervenes again in Curaçao. The island's government will receive a budgetary instruction on Friday to bring financial management in order and the government budget back into balance.

The government is struggling with huge budget deficits. Previous advice from the Financial Supervision Board to the government has not been followed or has been insufficiently followed. Although the government has taken some meaningful steps, it has not prevented 2019 from ending up again with a deficit.

Legal standard

For the third consecutive year, Curaçao does not meet the legal norm agreed upon at the time of the debt restructuring in 2010. Previously, the government of Gerrit Schotte also received instructions in 2012 for the same reasons.

In total, the deficit is about 120 million euros over the last three years. In addition, the debt ratio of Curaçao rose to 46% of the Gross National Product in 2018, well above the level of 40% considered sustainable. The liquidity position has also fallen to a worrying level.

Start position

The Financial Supervision Council foresees various risks and eight additional measures are necessary to comply with the standards of the Financial Supervision Act.

The aim is to maintain the healthy starting position of the countries of Curaçao and Sint Maarten in 2010 and to prevent financial problems, such as the former country of the Netherlands Antilles.

Taxes

Already in 2016, the Board indicated in its advice to take into account the disappointing tax revenues, noting that the non-tax revenues lagged behind the forecast.

In particular, the tax revenues and revenues on the budget post sales of goods and services were disappointing and still disappointing, compared to the established budget, while the expenses were higher than budgeted.

Instruction

Curaçao now must compensate 61 million euros for the regular service of 2019. Furthermore, a deficit of 85 million euros on the regular service of 2017 and 2018 with surpluses in 2020, 2021 and 2022. And finally, the short-term debts to the APC Pension Fund and health insurance company SVB must be repaid by 31 December 2022.

The way in which Curaçao implements the operation belongs to Curaçao's autonomy. But the Council of Ministers of the Kingdom makes the suggestion to consider eight points and to implement them.

 

This includes at least the obligation stop. By January 1, 2020, Curaçao must implement a tax reform in a budget-neutral manner. This includes in any case a strengthening of the collection authorities and the introduction of a general spending tax.

Measures must be taken to further strengthen the public administration and its associated public limited companies and to increase productivity and efficiency. This means in any case that the personnel costs within the collective sector must be reduced in the coming years. The salaries of civil servants and trend followers must also be frozen. With regard to the public limited liability companies, the subsidy policy must be revised.

Should money be left over after the deficit compensation, this should be spent on creating framework conditions for economic growth, spending on education and reducing tax-increasing measures.

Previous measures

The measures envisaged in the policy areas of medical specialty, international medical services and medicines must be fully implemented to cover the operating deficit of the new hospital.

The AOV retirement age must also be raised to 66 years and the basic reduction and the elderly person's allowance must be limited accordingly. Additional measures are also needed, whereby forms of personal payments in healthcare, among other things, must be considered.

The covenant

The Kingdom Council of Ministers has taken note of the negotiations between the government of Curaçao and the government of the Netherlands in order to reach a mutual settlement within the so-called covenant. This oversees the provision of substantial, concrete and direct assistance to Curaçao in areas where reforms are necessary. The Council of Ministers of the Kingdom encourages the governments of the aforementioned countries to follow up on those negotiations.




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