WILLEMSTAD, Curaçao – During its visit to Curaçao, the Board of financial supervision for Curaçao and St. Maarten (CFT) indicated that the new government is facing the challenge of having to combine budgetary balance with the need to promote economic growth.
For several years now, Curaçao has complied with the standard of a balanced budget, but up till now the 2017 budget execution is lagging behind compared to the forecast. The new government will need to take the necessary steps to prevent a budget deficit over 2017.
The challenges are the insufficient tax revenues, keeping the social funds balanced and the strengthening of the financial management. In addition, extra attention is requested for the risks associated with specific projects such as the financial situation of InselAir. Hopes are that potential investments in the refinery and the construction of the second mega-pier can give an important boost to the economy and thus to government revenues. In addition, the economy can be enhanced with the improvement of the investment conditions and the quality of education.
Probably balanced 2016 budget
The expenditures over the full year of 2016 were higher, whilst on the other hand the revenues remained below the expectations as reflected in the fourth progress report of same year. This was revealed in the first progress report of 2017. These final figures of 2016 show a provisional deficit of ANG 30.8 million (0.5% GDP).
Curaçao, however, expects dividend income from government companies, which will balance out the budgetary year 2016. CFT emphasizes the importance of a structural dividend policy for public companies, which takes into account the financial position of the companies while leaving sufficient room for necessary investments. CFT furthermore warns for a policy that relies on incidental revenue in order to offset the budget.
Execution 2017 budget under pressure
The balance of expenses and revenues over the first quarter is ANG 41.3 million lower than was previously expected. The revenue of, in particular, the wage tax is unsatisfactory. Also the premium income of the SVB is lower than foreseen. The swing fund, which is utilized to counterbalance setbacks in the social funds, threatens to drop below the legal minimum. In contrast, government expenditure is higher than was forecast.
The CFT chairman said: “The new government should take the necessary steps to diverge an imminent deficit by the end of 2017.” Furthermore, CFT advises the new government to actively keep an eye on the transition to the HNO and to deploy a renewed business case based on the evaluation report. In addition, the budget should take into account a situation in which InselAir cannot repay the loan granted to it.
Finally, the CFT addressed the liquidity position and the resilience capital, which should both be strengthened.
Improvement financial management
An important challenge remains the strengthening of the financial management. The objective of obtaining a qualified auditors’ report shortly is ambitious and will require a great deal of governmental attention.
CFT applauds the government’s intent to strengthen the financial functions of the ministries with financial controllers and internal auditors. The CFT requests the government to ensure that the initiated strengthening process of the tax office will not stagnate. In addition, CFT urges for the annual accounts of 2014 and 2015 to be adopted soon and to optimize the accountability process in its entirety.
Last visit current chairman
Besides discussing the results for the first quarter, this visit is also about bidding farewell to current chairman Age Bakker as of July 1, 2017, and making acquaintance with the coming president Raymond Gradus. The departing chairman looks back on a successful cooperation with Curaçao.
Age Bakker about his period with the CFT said: “In recent years Curaçao has taken solid steps towards achieving sustainable public finances, thereby largely complying with statutory standards. I am pleased that the new government has indicated that it will continue giving priority to sustainable public finances. CFT shall see to it.”
As usual during the visits of the Board to Curaçao, meetings were held with the Governor, the Minister of Finance, the Council of Ministers and the financial committee of Parliament.
