WILLEMSTAD - The developments in Curaçao’s public finances in 2019 show that the government improved its fiscal position compared to 2018. According to the latest published figures, the government of Curaçao turned its 2018 current budget deficit of NAf.39.3 million1 into a surplus of NAf.7.3 million in 2019.2 However, uncertainty about the transfer of dividends by state-owned enterprises and commitments still to be processed may ultimately result in a deficit of NAf.30.0 million in 2019. Furthermore, Curaçao recorded a debt-to-GDP ratio of 52.0% in 2019, down from the 53.4% registered in 2018.
The improved fiscal position of the government of Curaçao was caused by a decline in government expenditures of NAf.29.6 million combined with an increase of NAf.17.0 million in revenues. Revenues went up because of more tax income, especially from sales tax, waste disposal charges, and profit tax. The rise in revenues reflects, among other things, the ongoing efforts to improve tax compliance. Also, as part of its revenue-increasing measures, the government raised the excises on tobacco, liquor, beer, and wine, and increased the sales tax rate on imports from 6% to 9% on September 1, 2019. In addition, the higher earnings from waste disposal charges 1 Source: Financial Management Report of the government of Curaçao of May 2019. 2 Source: Financial Management Report of the government of Curaçao of December 2019. was the result of a 75% increase of the monthly fee on the same date. However, the rise in total revenues was mitigated by a drop in nontax income reflecting, among other things, a decline in earnings from the sale of goods & services. Also, a transfer of reserves by some government institutions in 2018 that did not occur in 2019 contributed to the drop in nontax income. Meanwhile, expenditures dropped mainly because of less spending on goods & services, transfers & subsidies, and wages & salaries.
Curaçao’s public debt contracted by NAf.102.1 million in 2019 compared to 2018, reaching NAf.2.87 billion. The lower debt was caused by a decline of NAf.156.6 million in the domestic debt component as the government managed to pay off a substantial amount of its arrears towards the public pension fund, APC, in the beginning of 2019.3 Also, the government reduced its outstanding arrears towards the social security bank, SVB. By contrast, the foreign debt component increased by NAf.54.4 million mainly as a result of the issuance of a NAf.69.1 million bond in January 2019, moderated by a NAf.8.2 million amortization of a bond issued in 2015 and a drop in arrears towards the 3 The government transferred the ownership of two buildings to the APC to settle part of its outstanding arrears. Also, to ensure sustainable payments of the remaining arrears, the government made an arrangement with APC to pay these off in 120 monthly installments of NAf.1.2 million. 6 Dutch government related to the coast guard (NAf.6.5 million). Consequently, the debt-to-GDP ratio dropped to 52.0% at the end of December 2019 compared to 53.4% recorded at the end of December 2018.
In the first quarter of 2020, Curaçao’s fiscal position deteriorated compared to the first quarter of 2019 as the surplus on the current budget dropped by NAf.45.0 million to NAf.20.1 million. This deterioration was caused by a drop in government revenues of NAf.43.6 million combined with a slight increase in expenditures of NAf.1.4 million. Revenues dropped due to a fall in tax revenues, especially profit tax, wage tax, and import duties. An increase in sales tax revenues, however, mitigated the fall in tax revenues. Meanwhile, expenditures increased because of more spending on transfers & subsidies, mitigated by less spending on goods & services and wages & salaries.
The public debt of the government of Curaçao dropped by NAf.38.3 million at the end of March 2020 compared to the end of December 2019 reaching NAf.2.848 billion. The domestic debt component declined by NAf.19.6 million, particularly because the government reduced its outstanding arrears towards several creditors. Additionally, the foreign debt component dropped by NAf.18.7 million, largely because of the amortization of a sinking bond issued in 2015. Moreover, the government reduced its outstanding arrears towards the Dutch State Treasury Agency (DSTA) related to accrued interest on issued bond loans.
