WILLEMSTAD – The Central Bank of Curaçao and Sint Maarten (CBCS) has lowered the interest rate at which commercial banks can borrow money from the central bank. The rate has been reduced by a quarter of a percentage point to 4.25 percent, marking the second interest rate cut this year.
The adjustment concerns the so-called lending rate, which applies when commercial banks temporarily need additional liquidity and borrow funds from the central bank. A lower lending rate makes it cheaper for banks to access extra funds. In practice, this can help keep loans for businesses and consumers more affordable, although the CBCS notes that this effect is not automatic.
According to the central bank, there is room for the rate cut because the financial position of Curaçao and Sint Maarten has improved. Both countries have built up higher foreign exchange reserves, which are financial buffers held in foreign currencies such as U.S. dollars and euros. These reserves are essential for maintaining international payments. The CBCS reports that current reserves are sufficient to cover approximately five months of imports, a level considered comfortably adequate.
The deficit on the current account has also narrowed. This deficit reflects how much more money flows out of the countries than comes in. The improvement is largely attributed to higher revenues from tourism and transport, as well as lower import costs, partly due to cheaper oil prices this year.
The interest rate reduction aligns with recent developments in the United States, where the Federal Reserve has also lowered interest rates amid signs of an economic slowdown. Because the Caribbean guilder is pegged to the U.S. dollar, the CBCS generally follows U.S. monetary policy, while maintaining slightly higher rates to safeguard financial stability.
At the same time, the central bank cautions that economic prospects remain uncertain. International tensions, particularly in the region surrounding Venezuela, could lead to higher import costs, disruptions in trade, and a decline in tourism. Such developments could fuel inflation and dampen investment. The CBCS therefore says it will continue to closely monitor economic conditions and stands ready to adjust its policy if necessary.