Honourable Minister of Finance Hiro Shigemoto says that the Committee for Financial Supervision CFT has issued a negative advice regarding the 2011 national budget and this will be sent to the Kingdom Council of Ministers.
The CFT is of the opinion that the draft budget as presented by the government falls short of Naf.45 million which is mainly due to the difference in economic growth index applied by the CFT (0.3 per cent) and that applied by the government (1.3 per cent) on the income as projected.
However, the Minister and CFT have agreed to a joint plan of approach of measures that would result in the country being able to fully comply with the stringent financial regulations that have been put in place for a balanced budget.
The Minister met with the CFT on Wednesday in Curacao. "This has been a cumbersome process, and we continue to have a difference of opinion which cannot be bridged which is the economic growth index, however dialogue continues and we have come up with a plan of approach that would allow for government to present a balanced budget within a reasonable period of time," Hon. Minister of Finance Hiro Shigemoto said on Thursday.
The CFT is basing its growth projection of 0.3 per cent as forecasted by the Central Bank of Curacao and Sint Maarten which would mean that the island will have an income of Naf.416 million, while the Government believes it will have a projected growth of 1.3 per cent translating into an income of Naf.444 million. The difference then would be Naf.28 million still to be covered.
"With the inclusion of the cost of living for teachers and civil servants of 3.3 per cent, an additional sum of Naf.16 million had to be added bringing the total budget to Naf.461 million having a deficit of Naf.45 million.
"Having said this, we have jointly agreed that we develop together a plan of approach that would lead to the 2012 budget being able to meet the stringent financial regulations," Hon. Minister of Finance Hiro Shigemoto explained on Thursday.
The seven points related to the joint plan of approach is as follows:
1. The budget ceiling has increased from Naf.360 million to Naf.416 million. This amount has to be approved by Parliament within the next four weeks.
2. The Minister of Finance exercises increased financial supervision: the minister will appoint a civil servant who would closely monitor and control to make sure that individual expenses which exceed Naf.5000 are according to and comply with the financial management rules as the "comptabiliteitsvoorschriften" of Country Sint Maarten as well as the Consensus Kingdom Law on Financial Supervision for Curacao and Sint Maarten.
3. The Minister of Finance and the Council of Ministers are obliged to inform the CFT when advices with financial consequences for the country are not in line with budgetary rules and regulations, however increased rigid controls are already in place and will continue with adjustment where necessary.
4. Bank Statements: The CFT must be provided with bank statements. These statements will substantiate how the budgetary process is working based on the rules and regulations in place. This is already established in the Kingdom Consensus Law on Financial Supervision for Curacao and Sint Maarten, article 22.
5. Government owned companies and foundations annual accounts: In order for the CFT to have a complete picture of the country’s financial possibilities, the annual reports of government owned companies and foundations are necessary. The insight into this information in the opinion of the Council of Ministers must go via the Minister of Finance and should not be regarding policy issues but merely insight into the financials of the government owned NV’s and foundations. As stipulated in the recently adapted Civil Code Book 2, government owned NV’s should already make certain financial records public. The insight should not supersede the Civil Code at any time.
6. Extra capacity and critical vacancies: Priorities need to be set in filling critical vacancies especially in the areas with plans of approach as politically agreed upon during the constitutional negotiations leading up to October 10, 2010.
7. Monitoring Commission: The CFT proposes that a special commission be established to monitor the agreements that have been made to resolve the 2011 budget challenges and this commission would inform the Minister of Finance, the Council of Ministers and the CFT of its findings. The Minister is of the opinion that the CFT should establish an office on the island which would enhance the working relationship because there would be easier access to the experts.
"It should also be noted that any changes to the income for the budget can still be made and if the measures presented are passed by the Council of Ministers and presented to and passed by the Parliament the additional income will be added to the Naf.416 million. I am busy also working on solutions to rapidly increase the agreed upon ceiling from Naf.416 million until the submitted budget of Naf.461 million can be arrived at.
"One such measure is working out the substantiation for the reserves to prove that these are hard reserves as well as other measures which are in preparation and cannot be disclosed at present. It is important also to point out that the supervision will all be local by my persons as Minister of Finance and under the responsibility of the Ministry of Finance. This process will help to secure the funding for the plans of approach which were politically agreed to but for which no financing was secured by the previous administration in power prior to October 10," Minister of Finance Shigemoto explained.
The minister said that an additional Naf.24 million which was not accounted for in the 2010 budget for back service pension as a result of the indexation of 4,6 per cent paid out in 2010 had to be taken up into the 2011 budget, again something left over by the previous government administration.
The minister added that it is imperative that the country receives its fair share of the political agreement which was made for the Netherlands to refinance the payment arrears and this is the basis for financial supervision.
"It is our opinion that no debt relief means any financial supervision. This too will be made clear to the Dutch Minister of Interior Affairs and Kingdom Relations, Minister Donner during a planned visit to the Netherlands as early as mid March," Minister Shigemoto said.
Sint Maarten has also requested permission to borrow monies on the capital market to re-finance some outstanding debts which were made in the past in order to carry out necessary infrastructural projects for a sum of Naf.27 million.
The pre-financed arrangements if paid off in full would save considerable interest in the budget as it pertains to interest. Another request for a loan to complete blocks A,B, and C of the new government building as well as purchase these blocks from the current owners was also submitted to the CFT for approval so that Government can save on interest as well as from paying double rent. Every quarter government pays nearly Naf.900,000 in rent for blocks A, B, and C which are not complete and at the same time government is paying rent to house the departments which should be housed in the these buildings. The savings are considerable and in the current situation every million counts, Minister Hiro Shigemoto pointed out.
"Both of these issues stem from the previous administration and have not been handled, however need to be finalized soonest. It is imperative for the people of Sint Maarten to remember and in some cases understand that our country received a raw deal by not having the assistance of the former Federal Government to help build up its departments or in some cases even establish decentralized departments in the last couple of years.
"Now that 10-10-10 was realized and especially without a transition period, all of the financial skeletons are coming out of the closets. These issues have to be dealt with as there are grave situations which require handling, such as expansion of the prison, facilities for the care of our youth delinquents, turning point expansion to be able to accommodate female clients as well as handle mandatory treatment, and there are numerous other institutions and facilities which need to be introduced in due time but are just as urgent.
"All of these issues were neglected by the previous administration or never completed. The fact that we need to hire some 72 police officers which is part of the plan of approach of Justice will cost quite some money which has to be funded from the budget. And this is just part of the plan of approach which was not worked out financially but previously agreed to politically without knowing the financial consequences, and more importantly how these costs were going to be covered.
"Having mentioned only some of the issues which led to our country being in this situation it is important to realize that this situation didn’t arise as of October 10, 2010 but has grown over the years and in some cases decades due to neglect from the former Central Government as well as from the agreements made by the previous administration which we are now finding out the financial consequences coupled with having to improve also in our financial management and other factors.
"Our country luckily is resilient and it is with this hope that with proper planning and fighting to receive what is rightfully ours based on these same negotiations that I see light at the end of the tunnel. It won’t be an easy road but with the help of all involved willing to constructively contribute and working together across party lines to help bring our country to its rightful position (financial and otherwise) forgetting about who did or didn’t do what but who together we can move forward, step by step, block by block building on our foundation," Hon. Minister of Finance Hiro Shigemoto concluded.