WILLEMSTAD - The Curaçao government considers it irresponsible to balance the 2019 budget no matter what. The budgetary instruction that The Hague wants to impose this week must therefore be adjusted. A visit to the Council of State therefore seems to be the only way for Curaçao to turn the tide.
The government in Willemstad is particularly afraid of the negative effect of the measures in the designation on the future growth and earning capacity of the country. The government therefore finds the IMF on its side.
In their report following their visit last month, the IMF states that adjustments to compensate for the cumulative current budget deficit over three years in an environment of continuing economic weakness may be counterproductive. It will lead to a further economic contraction. A contraction that cumulatively already stands at 5.5% over the past three years.
The Rhuggenaath government's proposal is to find scope within the framework of the Financial Supervision Act to ensure the very fragile economic situation and the government's commitment to structural reforms to guarantee the sustainability of public finances.
This would mean that several years would have to be set aside to compensate for the deficits. "A realistic period to compensate the deficits for 2017 up to and including 2019 and possibly 2020 is five years from 2021," said Rhuggenaath, who incidentally feels supported by the Financial Supervision Act itself.
After all, it has no provision for the period of deficit compensation and the Financial Supervision Board (Cft) has already suggested in its advice that an application of Article 25 (Calamities) for Curaçao can be considered for a longer period for deficit compensation.
The above does mean that the prime minister says that measures will be taken in 2019 and 2020 to limit the deficits as much as possible. But not in the short-term orientation of the upcoming instruction.
This will inevitably lead to a loss of confidence and perspective: betting on confidence-inspiring financial management with a multi-year budget balance and sound public finances in the light of sustainable economic growth and ensuring good governance.
Impact of budgetary instruction
Passing on the macro-economic impact of the final delivery of the regular service in 2019 shows that the real Gross National Product (GNP) is expected to shrink by almost 3.7% in 2019 and 8.6% in 2020, on top of the basic path already negative economic growth, says Rhuggenaath.
The effect on the economy in general is significantly negative and for people with the lowest incomes. An instruction to the government of Curaçao currently provides no added value to the achievement of broader intended objectives and, on the contrary, stands in the way.
With the emphasis on the short-term solution, the instruction does not contribute to the necessary administrative peace and social support that are necessary for the implementation of the essential structural reforms and measures for sustainable recovery.
If Curaçao appeals to the Council of State, it will in any case buy time. Time that the Cft will need to set up a constructive file with detailed figures. Connoisseurs doubt whether Cft can.
On the other hand, if the 2019 budget is not signed and the governor rejects it, Curaçao won’t be able to do anything just as it would be the case if they get a budgetary instruction.