Minister of Finance Honourable Hiro Shigemoto will be travelling to Curacao along with Prime Minister Hon. Sarah Wescot-Williams on Sunday to meet with International Monetary Fund (IMF) officials, the Central Bank of Curacao and Sint Maarten (CBCS) and the Private Sector.
One of the key issues the IMF addressed according to the Minister of Finance and which has not been refuted by anyone whom they have spoken to is that there is no projected economic growth for 2012.
Another point is that diversification of the economy is of importance but for short-term results the country should invest in marketing activities that would stimulate more visitors vacationing on the island. This would mean additional foreign exchange for the country.
The IMF also touched on the fact that the country apparently has relatively high wages and that wages needed to be lowered.
The Minister disclosed other issues discussed were high crime and high unemployment rates especially among the youth.
The re-vamping of the Tax system and for example by lowering the tax rates for Income and Profit tax and introducing possibly a Value Added Tax (VAT) were also part of the recommendations of the IMF.
“I immediately commented that while I agree revamping the tax system is of paramount importance I am already working on increasing compliance as I cannot accept that we have had an estimated Gross Domestic Product (GDP) of Naf. 1.6 billion and we cannot even get Naf. 500 million, or less than a third out of this.
“That means there is some leakage taking place and we need to work on getting those monies into the public treasury which can then go to finance the necessary investments that need to be made in education, health care, tourism, social community development, youth, senior citizens, sports development, public infrastructure and law enforcement,” the Minister of Finance pointed out.
The IMF also spoke about the two countries, Curacao and Sint Maarten, having to synchronize policies as it concerns the joint currency. While the Government definitely takes heed to the recommendation of the IMF, they need to be placed in the political reality that we live in, Minister Shigemoto emphasized.
“We need to decide what we are going with dollarization versus a common currency. The IMF did advise that we first take care of the majority of the issues they presented before going over to dollarization. So in essence they think we can dollarize but not just yet,” Minister of Finance Hon. Hiro Shigemoto explained.
Another major concern of the IMF is the increasing current account deficit which is seemingly being caused by Curacao and hence why the IMF is advocating joint policies between the two governments.
Both countries are basically importing more than they are producing and exporting. Revitalization of the economy is therefore essential in order to avoid the devaluation of the guilder which the IMF is not an advocate of for the short-term, and prefers that the two countries work on resolving current issues first.
“What the IMF found encouraging and comforting is that the issues as presented were not a surprise to anyone they spoke with and each Minister and Ministry could elucidate on plans to address most of the issues. This demonstrates that the government is on the right track,” the Minister added.
The Council of Ministers through the Prime Minister informed the IMF that Government has a governing program and that this was going to be presented to the nation via the opening of the new parliamentary year. This was done and copies are to be provided to the IMF during the working visit to Curacao.
The IMF is mandated to oversee the international monetary system and monitor the economic and financial policies of its 187 members.
This activity is known as surveillance. As part of this process, which takes place both at the global level and in individual countries, the IMF highlights possible risks to domestic and external stability and advises on needed policy adjustments.
IMF Article IV Consultation is an important part of the IMF’s regular surveillance activity with all member countries and is usually conducted every year. At the conclusion of the visit, the mission issues a statement.