THE HAGUE - The minister confirms in her letter that the salary cut imposed in the context of the Dutch corona support to Aruba, Curaçao and Sint Maarten cannot be phased out as long as the countries need liquidity support.
In her letter, the State Secretary explains that as of April 2020, the autonomous countries of Aruba, Curaçao and Sint Maarten have received more than €1 billion in liquidity support to absorb the financial and economic effects of the Covid-19 pandemic. This was done after a decision to that effect was made in the Kingdom Council of Ministers, partly based on the advice of the Board of the Committee for Financial Supervision (C(A)ft) and reports from the Temporary Work Organization of the Ministry of the Interior and Kingdom Relations (TWO).
The provision of liquidity support was preceded by permission from the Kingdom Council of Ministers (RMR) to the countries to be allowed to deviate from the central budget standards for the fiscal years 2020 and 2021. For Curaçao and Sint Maarten, this concerned the budget standards from Article 15 of the Curaçao Financial Supervision Act. and Sint Maarten (Rft). In these years Aruba was allowed to deviate from the standards as included in Article 14 of the National Ordinance Aruba Financial Supervision (LAft) and the Protocol Aruba and the Netherlands 2019-2021.
In the RMR of 4 February, a decision was made about the requests from the countries to be allowed to deviate from the budgetary norms for the 2022 budget year as well. In addition, a decision was made about Aruba's request to be allowed to phase out the salary cut for employees in the (semi-) public sector and for ministers and members of parliament from 2022. This salary cut was part of the decision in the RMR of 15 May 2020 about the second tranche of liquidity support. The State Secretary informed the Dutch Parliament about the decision-making of February 4, as well as about the extension of the protocol Aruba and the Netherlands 2019-2021.
Aruba-Netherlands protocol extension 2019-2021
On January 20, 2022, the governments of Aruba and the Netherlands agreed that the duration of Protocol Aruba Netherlands 2019-2021; Framing the path towards solid, transparent and sustainable public finances in Aruba will be extended by two years until December 31, 2023. It has also been agreed that the protocol will expire if the Kingdom Act Aruba Financial Supervision (RAft), the proposal of which will be shared with the Dutch Parliament, enters into force earlier than December 31, 2023. With this extension, the budget standards have been established against which the Kingdom Council of Ministers can assess the budget of Aruba for 2022 and 2023.
Application of Article 25 of the Rft and Article 23 of the LAft and degree of deviation
Due to the continuing effects of the corona crisis on the budgets of the countries, the Kingdom Council of Ministers has, in accordance with the advice of the C(A)ft, agreed to a deviation from the budget standard as contained in Article 15 of the Rft for Curaçao and Sint Maarten and from the standard for the applicable financing balance as contained in article 14 of the LAft and the protocol for Aruba. The permitted degree of deviation from the norm is, as in previous years, for the fiscal year 2022 equated to the total of loans that the country takes out for expenditure during 2022, corrected for the change in the country's liquidity balance at the end of the year. The loans mentioned above require prior approval from the RMR.
Phasing out salary cut
When deciding on the second tranche of liquidity support on 15 May 2020, the RMR decided on a reduction on the employment conditions within the (semi-)collective sector of the countries until further notice. The implementation of this Decree is conditional on the granting of liquidity support. Aruba has requested the RMR to agree to the partial phasing out of the country's implemented salary cut of 12.5% for all employees in the (semi) public sector and 25% for Members of Parliament and Ministers, starting with a cut of respectively 6.25% and 12.5% in 2022.
In light of the still fragile government finances with a very high government debt-to-GDP ratio of approximately 114% of the Gross Domestic Product, the pressure that a reduction of the salary cut in the budget and the repayment capacity would have and the fact that Aruba has requested to be allowed to deviate from the budget norms on the basis of Article 23 LAft, a phasing out of the salary cut is not obvious at the moment. The RMR has therefore not yet agreed to this request.
The State Secretary stresses that as long as liquidity support is provided from the Netherlands, phasing out is in any case not an option. With a view to offering perspective, Van Huffelen says that she is prepared to discuss with the countries under which conditions the salary cut can be phased out over time. In the meantime, Aruba can make proposals for an alternative interpretation of the salary cuts, as long as that interpretation is in line with the decision of the RMR of 15 May 2020.
Finally, the RMR was informed about the administrative agreement on the Kingdom Act containing rules regarding the establishment of the Caribbean body for reform and development (COHO State Act).