Published On: Thu, Jun 6th, 2013

CFT: “Cautious fiscal policy still required”

CFT1WILLEMSTAD – The Committee for Financial Supervision (CFT) has visited Curaçao this week and has spoken with the Governor, the Prime Minister, the Ministers of Finance and of Health, Environment and Nature, the Council of Ministers and the Finance Committee of Parliament.

The previous visit was in January of this year. Since that visit, the 2013 budget was adopted by the CFT and provided with a positive council. In addition, Curaçao met four of the six conditions of the instructions. The ‘hiring freeze’ remains in effect and deficits from previous years must still be compensated.

Budget 2013

The government has shown decisiveness in the past six months by the measures included in the 2013 budget with regards to the basic insurance, the disability and the Sales Tax differentiation. The Board recognizes that this demands a lot of the Curaçao society, while stressing that taking structural measures is necessary to protect and to put public finances in order. With the start of a new cabinet, it is of the utmost importance that the government continues the path of prudent budgetary policy.

Now the measures are put in place, it is important to determine whether the intended saving effect has been achieved. The government is serious about setting up a monitor system to analyze the effects. During the Committee’s first visit- provisional figures were discussed. During this meeting, it shows that there is a risk that in particular the measures in health care do not yield sufficient savings at present. Analysis in the future should reveal whether this is a 'teething problem' which will be fixed as more experience is gained with the new regulations. If the causes are structural, the government should take further provisions to maintain a balanced budget. As long as the budget is balanced, Curaçao can borrow money for investment to give the economy a boost.

The CFT has indicated that the Government should do its utmost get clarity on the financial effects of the measures on very short term. At this time, halfway through the year, it can still be adjusted.

Accountability and Financial Management

In addition to the implementation of the budget, the accountability for the policy is considered during the visit. CFT is very concerned that the Government of Curaçao, since 10-10-2010, has not yet been held accountable for its budgetary policy through the treatment of final annual accounts 2010 and 2011 in Parliament. The CFT called on the Government of Curacao to give priority to the accountability process and eliminate the backlog. This is important  for the instructions which still in force, to compensate for deficits from previous years. The final amount of the offset deficit from previous years should follow after the final annual accounts.

A thriving financial, accountability and implementation process hinges on sound financial management. The CFT signals that Curacao is facing many challenges in the coming days, there has been little progress here in the last period. There is also an important role for Parliament here. The budget law is the most important right that Parliament has, since by using the budget law, they decide which policies will be executed, how high taxes are and what services it will make available to citizens.

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