During its visit this week, the Board of financial supervision (Cft) met with the new minister of finance for Sint Maarten. During this constructive meeting the specific terms of the instruction and the way in which they can be met, were discussed. Until the terms of the instruction are met, Sint Maarten will not be able to borrow for new capital expenditures.
The incoming Sint Maarten government indicated it will take action to meet the terms of the instruction. This includes settlement of payment arrears and compensation for accumulated deficits in the period 2016-2018.
Age Bakker (Cft): “We look forward to work with the new Council of Ministers and welcome the realistic approach of the minister of finance in meeting the terms of the targeted instruction. Decisive actions need to be taken shortly to meet the financial and budgetary challenges.”
On December 7 and 8 2015, the Cft met with the Acting Governor, the Minister of Finance, the Council of Ministers and the Financial Committee of Parliament. The main topics of discussion were the expected budgetary outcome for 2015, the budget for 2016, the targeted instruction and the status of financial management.
Budget 2015
According to the latest insights the expected outcome for 2015 will show a deficit in the order of ANG 10 to 20 million, largely on account of overtime payments and health care costs which were not budgeted. Apparently the situation has worsened late in the year since in the third quarterly report an expected surplus of ANG 2 million was reported. This will be the fifth year in a row in which the budget of Sint Maarten has a negative outcome. Once the final outcome for 2015 will become clear in the Annual Account the deficit will have to be compensated in coming budgetary years. This underlines the need to tackle the budgetary challenges in a sustainable manner. The targeted instruction was precisely given for the purpose of structurally strengthening the fiscal situation. Such strengthening is also needed to underpin confidence in the economy which recently seems to have been negatively impacted by financial and political instability.
Targeted instruction and Budget 2016
In September 2015 the Kingdom Council of Ministers (Rijksministerraad) issued a targeted instruction to Sint Maarten. The instruction requires the Sint Maarten government to: 1) settle its payment arrears, 2) compensate for the deficits accumulated in 2010-2014, 3) amend the budget to include all costs related to the public pension scheme and the healthcare system, 4) implement the measures related to the retirement age and healthcare system that have already been agreed upon in the Council of Ministers, and 5) reform both the pension scheme and the healthcare system by the end of 2016. As long as criteria 1 to 4 have not been met, Sint Maarten will not be able to issue any new debt to finance capital expenditures.
Until now Sint Maarten has not fully met any of the terms of the targeted instruction, although progress has been made by the previous government. Urgent action is needed here since the deadline of November 1 2015 for meeting the terms of the instruction has passed and the government wishes to undertake capital expenditures in the coming year. It has been agreed with the government that the terms included in the targeted instruction will be addressed in the Budget 2016 in a credible and sustainable manner. The task of incorporating the terms in the targeted instruction is a formidable one, but it can be done, according to the Cft. Priorities need to be set. Since the deadline of December 15 for approving the budget by Parliament realistically cannot be met, the Minister of Finance of Sint Maarten has asked Cft for approval of delay of the Budget until January 31, 2016.
Financial management
During the meeting with the Minister of Finance financial management of the Government of Sint Maarten has also been discussed. Recently the Cft has released its fifth Findings Report regarding Public Expenditure and Financial Accountability (PEFA). The main finding is that Sint Maarten still faces challenges in financial management. The Annual Financial Reports of Sint Maarten for 2012, 2013 and 2014 have not yet been adopted by the Parliament. The Cft urges Sint Maarten to complete this process as soon as possible. This will enhance the budgetary process in the coming years.