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CFT continues to see significant shortcomings in St. Maarten's public finances

TUESDAY, 04 SEPTEMBER 2012

PHILIPSBURG–The Committee for Financial Supervision CFT says St. Maarten’s financial management has “significant shortcomings” in its seventh semi-annual report issued on Monday. Out of a joint investigation by CFT and government, it seems that St. Maarten scores low on the credibility and completeness of its budget.

The CFT board found this was not surprising for a new country still in the construction phase, but at the same time indicated that big steps had to be taken rapidly.

CFT concluded that government companies “do not constitute a menace in general for the budget, but rather offer opportunities to develop a dividend policy.” However, it noted that “no progress” had been made in the area of corporate governance in the recent period.

St. Maarten’s 2012 budget was approved by Parliament in April. The CFT indicated that this budget might be executed if setbacks in the tax atmosphere were compensated. That led to the first adaptation in the budget since 10-10-10. CFT tied a set of conditions to the budget approval and its adoption.

In time, St. Maarten also will be confronted with the consequences of an aging population and the increasing cost of health care. The CFT board is of the opinion that St. Maarten has to be well prepared for this and has to take appropriate measures as of now. To this end, the country will have to make a plan for all year-long financial developments, including the impact of the financial statements of 2009 and 2010.

Strictly maintaining the stipulations in the Kingdom Act on Financial Supervision for Curaçao and St. Maarten (Rijkswet financieel toezicht Curaçao en St. Maarten) “leads to more usage of financial instruments and cash flow outside of the budget, via governmental companies, foundations and funds that have been created especially for this purpose,” according to CFT.

By doing so, though, the countries still can comply with the Kingdom Act, but this may represent a threat to the financial stability of Curaçao and St. Maarten. Moreover, the budget right of the parliaments will be jeopardised.

In the report, CFT extensively elaborates on the developments that led to the instruction the Kingdom Council of Ministers (Rijksministerraad) gave to Curaçao on July 13. CFT concludes that Curaçao has a worrisome financial situation and that the financial management was insufficient. The financial situation becomes even more acute in the long run.
The cost for the medical healthcare in Curaçao still increases rapidly and the aging population is creating rapidly increasing cost for the provisions of the pension funds. Implementation of necessary measures to change the situation is continuously delayed.

The institutions outside the Curaçao Government show great deficits. In connection with this the Board mentions care funds and the AOV fund, Aqualectra and the Curaçaose Dok Maatschappij.

At the same time reserves are being used to cover old deficits and new financial constructions are introduced, which may indeed not put more weight on the budget in the short term, but are undesired from the point of view of correct financial management. Examples are the NAf. 0.05 tax on every litre of gasoline bought and the financing of free education. The CFT Board said the budget right of the Curaçao Parliament was jeopardised by these measures.

From a joint investigation by the CFT board concerning the status of the financial management in Curaçao, it seems that the supervision and control by Parliament as well as the follow-up on advice from the General Audit Bureau (Algemene Rekenkamer) also were brought forward as points of concern.

The year 2011 was closed with a substantial deficit for Curaçao, which was communicated long after year-end. Due to this it was not possible to take the necessary measures during the year. This deficit has to be compensated in the coming years. That the information was made available so late is a clear indication that the financial management and especially the provision of information are not well organised.

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