WILLEMSTAD – The Centrale Bank van Curaçao en Sint Maarten (CBCS) has raised its pledging rate to 4.50%, citing an expected decline in foreign exchange reserves, uncertainty surrounding global trade policies and continuing geopolitical tensions.
The decision was taken on September 17 and follows the U.S. Federal Reserve's move to raise its policy rate by 25 basis points. The CBCS kept the reserve requirement unchanged at 18.50%.
The pledging rate is the interest rate commercial banks pay when borrowing from the central bank. Following the latest adjustment, the CBCS is maintaining a 50-basis-point spread above the U.S. federal funds target range, which now stands at 3.75% to 4.00%.
The central bank's decision comes despite a substantial increase in gross official reserves during the first eight months of the year. Through August 31, reserves increased by Cg 468.1 million. However, the CBCS expects the picture to reverse by the end of 2026, forecasting a decline of approximately Cg 332 million for the year as a whole.
According to the central bank, the projected decline is mainly related to withdrawals by the Dutch State from its account at the CBCS and lower net capital transfers.
The Dutch withdrawals concern the repatriation of funds accumulated in its CBCS account, primarily from interest and principal payments made by the governments of Curaçao and Sint Maarten.
Combined with an expected increase in imports of goods and services, the decline in reserves is projected to reduce the monetary union's import coverage from 4.7 months at the end of 2025 to approximately 4.3 months by December 2026.
The CBCS stressed, however, that this remains comfortably above the three-month benchmark and said the foreign exchange position of the Curaçao-Sint Maarten monetary union remains strong.
The central bank nevertheless sees several risks ahead.
Geopolitical tensions and renewed disruptions in international energy markets could affect the economies of Curaçao and Sint Maarten. Global trade tensions and uncertainty over tariff policies could also weaken external demand, increase the cost of imports and add to inflationary pressures.
Another concern is U.S. monetary policy. If inflationary pressures persist and the Federal Reserve adopts a more restrictive position, global financial conditions could tighten further. According to the CBCS, this could increase external financing costs and make financing more difficult to access for Curaçao and Sint Maarten.
The CBCS said it will continue monitoring domestic and international economic developments and adjust its monetary policy instruments when necessary.