WILLEMSTAD – One of the most striking facts highlighted in the Central Bank’s presentation is that Curaçao’s currency has not been devalued once since it was pegged to the US dollar in 1971.
That record is unusual among small island economies and reflects a consistent policy focus on reserve adequacy and liquidity control. The Bank monitors the credibility of the peg primarily through its import coverage ratio, ensuring that foreign reserves can finance at least three months of imports. Currently, coverage stands at over five months, signaling a strong external position.
To maintain this buffer, the Bank actively manages liquidity in the banking system using reserve requirements, certificates of deposit, and lending rates. The objective is indirect but clear: control domestic credit growth to prevent excessive imports that would drain reserves.
The Bank stressed that once a peg fails, restoring trust is extremely difficult. Devaluation in small economies typically triggers immediate inflation, wage erosion, and capital flight. Avoiding that outcome, even at the cost of policy flexibility, remains a deliberate strategic choice.
