Published On: Wed, Jun 17th, 2015

Cft advises in its annual report to be reserved with regard to taking out new loans

CftWILLEMSTAD, PHILLIPSBURG - It is important to be reserved when it comes to taking out new loans. The Board of financial supervision issues this word of caution in its annual report for 2014. ‘The public finance of Aruba have worsened quickly in the recent period, whilst Curaçao and Sint Maarten had a relatively sound position which allowed them room to invest’, according to Chairman Age Bakker in the preface. ‘Even though the debt of Curaçao and Sint Maarten is at a level that is both historically and internationally low, it remains necessary to cherish this position, as it regards a condition for economic growth’.

Economic development

In the annual report the Board gives an image of the reluctant recovery of the world economy after the financial crisis and the crisis in the Euro zone. Aruba and Sint Maarten have experienced growth again in 2014, even though the economical development was still cautious with respectively 1 and 1½%. The economy of Curaçao has contracted for the third consecutive year, but there is a change becoming visible towards a light positive growth as per the third quarter of 2014. Meanwhile the pressure caused by an ageing population is increasing in all three countries. Structural reforms are necessary to get the economy going again. Less regulation, a better functioning free-market system and a more flexible labor market are key. With regard to the public entities, the Board recognizes that a lot is being invested in education and health care. The economic development however remains weak on these islands. Positive is however, that after the prices have been rising strongly for years, as of 2014 inflation is under control.

Deficit and debt

All countries closed off 2014 with a deficit on the total budget, including social funds and capital investments. In Curaçao this was primarily caused by ongoing deficits at the SVB, which were paid out of the fluctuating fund (‘schommelfonds’) and because of extensive investments in primarily the new hospital. In Aruba this is a result of government consumption that still remains high, but also because of a onetime deposit into the pension fund. In Sint Maarten the reason lays in tax incomes that continuously stay on a low level, and because of various investment projects and the purchase of a new government building.

As a result, all deficits in all countries lead to increasing debt quotes. The debt of Curaçao has reached the internationally considered acceptable limit of 40% of the GDP, particularly as a consequence of a onetime big investment in the construction of the new hospital; Sint Maarten’s debt is just slightly lower. In both countries the room for new loans is thus limited and needs to be seen in proportion to the economic growth, in order to keep the debt proportion manageable. In 2014, Aruba exceeded the 80% limit and even if the agreed goals are reached, the debt will keep on increasing in the short run, before at the end of the decennium a cautious decrease sets in; the public finances van therefore no longer be considered sustainable.


In the annual report the Board gives a broad analysis on the different ways how supervision can be fashioned. It is remarkable that in many countries some kind of independent financial supervision is applied. For a supervisory organ to function well, broad support is essential and therefore it has to be established based on consensus. The organ needs to be truly independent and professional, but does not need to overlap other organs such as accountants. In conclusion, transparency is of great importance for the success of supervision. The Board differentiates itself from other forms of supervision in the fact that it is not only focused on giving advice regarding the budget, but also on monitoring the execution thereof. Therein lays an important added value, since experience testifies that deficits and debts primarily arise because of less deficient budget execution.

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