WILLEMSTAD - In the coming years, Curaçao will be concerned with both putting and keeping the budget in order and a structural improvement in productivity. In that regard, the corona crisis has emphasized the structural imbalances. "Now it's up to you!"
This is what Raymond Gradus, chairman of the Board of Financial Supervision (Cft), concluded during his lecture recently. "It is also an important task to maintain care and social security for future generations," was another conclusion.
Gradus started with the report of the Van Lennep Commission from 1996, because this is also referred to in the vision of the new coalition parties MFK and PNP. “It is indeed exciting to look up this report.
Before 1996, as it is now, the Netherlands Antilles were confronted with mounting debt, a budget that was out of balance and lagging productivity. Indeed, the committee indicated that, in addition to fiscal policy, broader economic policy should be central.”
However, the Cft chairman indicates that Van Lennep was 'stricter than the Kingdom Act' now, referring to the Financial Supervision Act (Rft) introduced in 2010, because, according to Van Lennep's advice, 'surpluses on the regular service are necessary to finance capital expenditures'.
In his presentation, he took stock for the period 2010-2019, not counting the corona disaster year 2020. On balance, Gradus told his audience, the economy of Curaçao shrank by almost 10 percent during that period and a structural adjustment of the government budget has not yet taken place sufficiently.
“The impending budget deficits have been temporarily cushioned with mainly incidental income from, for example, dividends from government shares.”
Furthermore, in those nine years, the debt ratio increased from 40.5 percent in 2010 to 55.9 percent of GDP (gross domestic product) in 2019. The debt increased due to capital loans for the new hospital, but also due to increasing payment arrears.
“Income inequality is great and that is all the more pressing because social security is based on the Dutch model,” continues the Cft chairman. At the end of 2019, unemployment has risen to more than 17 percent of the working population. The excessively high youth unemployment in particular is a cause for concern.”
“The IMF estimates a peak in the government debt of Curaçao of approximately 100 percent GDP early next year. This debt ratio will decrease due to economic recovery in the coming years. The IMF expects the debt ratio to be back at 80 percent in 2025. This is of course still far too high.”
It is therefore of great importance, according to the chairman, that a further effort is made by Curaçao to improve debt sustainability. Two cases are of interest: first that the budget is in order; Secondly, the economy will also grow structurally.”
Tourism clearly shows signs of recovery. The situation of the budget (however) is 'worrying'. In the established budget for this year there is a shortage of 822 million guilders and also for 2022 and later years there are major challenges. “The loans are liquidity support in April 2022 and agreements on the conditions at which the restructuring takes place are necessary.”