The economy of Aruba is recovering well. In the months of April and May, tourism has surpassed the pre-corona level of 2019. Aruba has to utilize this period of recovery to put the budget in order. It is necessary that Aruba follows the recommendations the CAft made with regard to the adopted 2022 budget, limit the deficit in 2022 and achieve a surplus of 1 percent of GDP on its budget as of 2023.
Reducing the government debt of AWG 5.9 billion (about 104% of GDP) to an acceptable level remains an important issue. In addition, reforms need to be implemented to safeguard the social security system for future generations.
The multi-year picture, as presented in the adopted 2022 budget, shows that there will be deficits up to and including 2026. As a result, the nominal national debt will increase further in the coming years. Interest rates are now rising, and significant refinancing is underway. It is essential that Aruba reduces its deficits because otherwise the interest charges could become unmanageable.
The CAft has made recommendations that should lead to a reduction of the financing deficit this year and a surplus of 1% of GDP as of next year. The sustainability of the Aruban debt also makes this necessary.
2022 and 2023 budget As of April 2022, tourism has surpassed the pre-corona level. With this rapid recovery of tourism, the economy is also expanding. According to the latest insights, the economy grew by 17.2
percent last year. Notwithstanding, the 2022 budget is showing a deficit of AWG 236 million for
the public sector (4.2 percent of GDP). The CAft has made recommendations for the 2022 budget,
which mainly concern expenditure control. For example, the costs for goods and services in the
budget will increase by 22 percent compared to the pre-corona years, while the need for this
excessive increase in costs is insufficiently justified. Personnel costs and the country’s
contributions to government-owned companies also increase unnecessarily. The recommendations
of the CAft have not yet been followed, which means that for now the deficit this year is
unnecessarily high.
Tax reform
A tax reform will be implemented as of 2023, of which the introduction of a VAT (BTW) is an
important part. The tax benefits arising from this reform have not yet been sufficiently clarified in
the budget. This makes it impossible to establish the reality level of the tax benefits. It should be
noted that the legislative process for the introduction has not yet started. Failure to meet the
intended implementation date, January 1 st , 2023, will therefore affect the financing balance in
2023.
Social security and health care
Reforms in the social security and health care are necessary to ensure the sustainability of the
system for future generations. The resulting savings of AWG 60 million are a first step towards
sustainable care and should ensure that the country does not have to make a contribution in the
short term to compensate the deficits in the AZV. Because the introduction of a personal
contribution and the austerity of the positive list of medicines and bandages have not yet been
formalized, Aruba does not expect to achieve the pursued saving of AWG 60 million in 2022. It is
very important that these measures be implemented in the short term. A delay in the
implementation of these measures leads to savings losses. In the absence of compensation for
these savings losses, the result of the AZV will be negatively affected, as well as the financing
COLLEGE ARUBA FINANCIEEL TOEZICHT L.G. Smith Boulevard 68
La Piccola Marina
Oranjestad, Aruba
T (+5999) 461-9081
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balance of the country, should a national contribution be required to compensate the deficit in the
AZV.
Financial management
The financial management and accountability cycle of Aruba are not in order. The preparation of
the 2019 and 2020 annual accounts has been further delayed, causing a considerable backlog.
These delays are due to deficiencies in the financial management.
The CAft visited Aruba on June 23 and 24 and held talks with the Governor, the Minister of Finance
and Culture, the Council of Ministers and the Committee on Finance, Government Organization,
Culture and Sport of Parliament. The CAft also spoke with the management of the Social Insurance
Bank (SVb), the General Audit Chamber (ARA) and the Dr. Horacio E. Oduber Hospital (HOH).