Published On: Thu, Jun 21st, 2018

Cft chairman Raymond Gradus: “Budget control and related risks is insufficient; without additional measures a new deficit for 2018 is unavoidable”

Cft - 1WILLEMSTAD - During its visit to Curaçao, the Board of financial supervision of Curaçao and Sint Maarten (Cft) indicated that more insight and better management are needed in the execution of the budget. The financial situation and the related risks for Curaçao are of great concern to the Cft. For 2018, at least 1/3rd of the preliminary deficit of 113 million guilders of 2017 must be compensated, whilst the structural effect of this deficit must be reversed as well. To this effect the government has already taken a number of measures and has incorporated these into the 2018 budget amendment, which has yet to be adopted by Parliament. The first execution report of 2018 does not sufficiently clarify which effect the measures taken have assorted. The execution report also shows that for a number of risks additional measures are already required, in order to avoid a new deficit for 2018. The Cft has requested the Minister amongst other to make clear before July 11th what effect the cost-saving measures and the compliance-increasing measures with regard to the taxes will have. To that effect it was explicitly requested to present measures to deal with possible setbacks and the effects of risks.

During its visit the Board spoke with the Governor, the Council of Ministers, the Minister of Finance, the financial committee of Parliament and the Ministerial Director and Supervisor (Ministeriële Regisseur en Toezichthouder) of HNO. Tomorrow a meeting will be held with the General Audit Chamber.

Result of compensating measures needed for steering

According to the most recent information, the provisional deficit 2017 amounts to 113 million guilders. In accordance with the 2018 budget, 48 million guilders will be compensated this year with various measures. The first execution report of 2018 contains insufficient information about the result of these measures, but it does show that taxes for the first quarter of 2018 are disappointing. During its previous visit, the Cft called for monthly reports so that the progress of the budget in general, and the deficit compensation in particular, can be clearly detectable. In a year in which the budget is under, with little room to allow for dealing with setbacks, this is vital in order to be able to make timely adjustments. The Cft has indicated to the Minister that up to now there has been insufficient insight into how Curaçao steers towards maintaining the realization within the budget. Without additional measures, it does not seem a new deficit at the end of 2018 does not seem avoidable. The Cft therefore requested the Minister to prepare measures to deal with these possible setbacks. Furthermore, the Board stated the importance of achieving a balanced budget in the context of economic growth. Investors value stable public finances because this contributes to a reliable investment climate. In addition, borrowing under favorable conditions via the Netherlands is only possible with a balanced budget.

Outcome risk analysis to be included into the 2018 budget

Various risks have a major impact on the execution of the 2018 budget, some of which are currently already materializing. The risks with regard to Sehos, HNO and various outstanding dividends from government entities can have a significant impact on the budget and must be actively controlled. There are also risks in the execution of the cost-saving measures, compliance-increasing measures for taxes, tax collection and the situation regarding the refinery. The Cft therefore asked the Minister to draw up a risk analysis early this year. After receipt thereof, the Cft requested further elaboration and substantiation on several points. The results of this analysis have to be translated into the 2018 budget.

Succession

It is now the government’s turn to take action in the short term on the points discussed. The Minister has been asked to inform the Cft before July 11th about the content and progress of the outstanding recommendations and questions. The Cft has declared this as necessary in order to make the budget complete, sufficiently transparent, orderly and verifiable in accordance with the Kingdom Act on financial supervision.

Last visit of Board members Sybilla Dekker and Maria Plantz

This visit was also marked by the farewell of the fellow members Sybilla Dekker and Maria Plantz. Dekker stops as per July 1st of this year; she was member of the Cft from the summer of 2012 on. Sybilla Dekker about her period at the Cft: "I have experienced the cooperation with Curaçao as constructive, and i expect that the economic development – based on sustainable public finance – will bring opportunities for Curaçao". For Maria Plantz it is also the last visit, since she was nominated as State Council for Sint Maarten as per October 1st. As per July 1st, 2018 the Cft will consist of Raymond Gradus (chairman), Gregory Damoen (Curaçao) and Henk Kamp (the Netherlands). The successor from Sint Maarten will be known soon.

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