WILLEMSTAD - Curaçao is doing better financially than in the year before the corona crisis. The income this year is higher than in 2019 and the expenditure is lower.
Although the (not yet adopted) budget amendment assumes a loss of 74 million guilders, a large surplus seems within reach. Based on the result up to and including the third quarter (plus 127 million guilders), the Board of Financial Supervision (CFT) concludes that it is feasible to remain below the maximum deficit of 4 million guilders set by the Kingdom Council of Ministers (RMR).
In its letter, CFT indicates that Curaçao realizes ANG 1,278 million in income up to and including the third quarter of 2022. This is substantially higher than in the same periods in 2021 and 2020, and also higher than in 2019. The higher realization is explained by higher tax income (ANG 1,181 million) and higher income from license fees (ANG 41 million). With regard to taxes, the higher revenues from profit tax, sales tax and import duties are particularly striking. These higher incomes are on the one hand the result of the economic upturn and inflation, on the other hand Curaçao is taking significant steps to structurally increase tax compliance. This increases the tax base. Tax collection arrears are also being cleared, so that the income from property tax is higher than in previous years. However, wages and income tax revenues show only a limited increase compared to the corona years 2020 and 2021, and are therefore not yet at the level of 2019.
CFT says that Curaçao will realize ANG 1,151 million in expenses up to and including the third quarter of 2022, an underspend of ANG 44 million compared to the forecast. The expense realization is substantially lower compared to the same periods in 2021 and 2020, which can be explained by the disappearance of the corona support measures. Expenses are also lower than in the same period in 2019, mainly due to lower personnel costs as a result of the retirement of approximately 600 civil servants as part of the Early Voluntary Outflow (VVU) scheme. The expenses for the VVU amount to ANG 17 million up to and including the third quarter, a clear exceeding of the annual budget of ANG 10 million. There is also a threat of overtime being exceeded, while Curaçao previously indicated that it would address the increasing costs for overtime. The CFT draws attention to these overruns, and requests Curaçao to explain in the fourth performance reporting (PR) of 2022 what measures have been taken to reduce overtime.
The expenses for goods and services are below the realizations in the same periods in 2019-2021. Curaçao states that the obligations entered into for goods and services amount to ANG 61 million at the end of the third quarter of 2022. In its response to the second PR, the Cft already noted that it cannot be determined whether the underspending on goods and services is the result of actually lower costs, or of a delay in realization. The CFT requested Curaçao to explain how control of these burdens is managed, and requested a specification of the bookings for goods and services. Curaçao was also asked to comment on the development of short-term debts and obligations. These requests have not been followed up, the CFT requests Curaçao to do so no later than December 6, 2022.
Curaçao realizes a significant surplus on the regular service up to and including the third quarter of 2022. The CFT expects that the 2022 service year can be closed within the maximum deficit of ANG 4 million set by the RMR. Nevertheless, it remains necessary that the burdens are managed in the short term and also over several years. It is also important that Curaçao improves the quality of liability management in order to prevent substantial subsequent bookings in 2023 with regard to the 2022 service year, in contrast to previous years.
Up to and including the third quarter, Curaçao realized only ANG 12 million in investments, despite the budget of ANG 109 million for the whole of 2022. In its response to the second PR 2022, the CFT recommended Curaçao to check to what extent the budgeted for 2022 expenditure will actually be incurred this year, and to draw up a multi-year investment agenda. The number of investments has been maintained in the draft budget amendment that has been presented to Parliament. Partly in view of the number of commitments entered into for investments at the end of the third quarter of 2022 of ANG 46 million, the CFT considers it foreseeable that not the entire investment budget will be realized in 2022.
In its responses to the first and second PR 2022, the CFT already pointed to the strongly improved liquidity position of Curaçao. The balance of liquid assets amounts to ANG 317 million at the end of September 2022, an increase of ANG 65 million compared to the position at the end of 2021. The CFT requested Curaçao at the third PR to provide more insight into its liquidity planning in the medium to long term. This includes the fact that a loan from 2010 of ANG 140 million expires in 2025. Agreements must also be made about the expiring liquidity loans in October 2023 and the country has obligations towards the Central Bank of Curaçao and Sint Maarten in the context of the settlement of the Girobank. Curaçao has not provided the requested insight into the liquidity planning and is requested to do so.
In recent discussions with Curaçao, the CFT expressed its concerns about the progress of the improvement of financial management, more specifically the extension of the roadmap to a qualified auditor's report on the country's annual accounts. There is political commitment to the roadmap, but bottlenecks remain. The CFT requests to be informed how the country processes the solutions proposed in the report for the mentioned bottlenecks. The CFT also requests to receive the roadmap report of November 2022 as soon as possible.