Oranjestad – The first progress report of this year shows that the deficit in the collective sector on Aruba in the first quarter amounts to 1.1% of GDP, which is higher than the 0.5% GDP deficit standard for the full year. Both the tax revenues over the first quarter and the revenues resulting from the reorganization measures are insufficient, while the expected effects of the re-opening of the refinery are also lagging behind due to delay. Aruba faces the challenge to comply with the legal deficit standard this year as well. The Board of financial supervision Aruba (CAft) proposes to consider announcing in this stage already an overall commitment stop and vacancy stop.
Unsatisfactory results over the first quarter
The CAft indicates that, in particular, the wage tax and corporate turnover tax (BBO) revenues are below budget. The measures implemented by the government at the tax authorities in order to increase tax compliance have not resulted in the intended effect. In addition, because of the delay in the work activities with regard to the oil refinery, a great deal of the investments will have their effect only later in this year, slowing down the income from tax revenues. At the expense side the government’s reorganization measures that are necessary for sustainable public finances seem to be withering. The Board emphasizes how important it is that the budgeted income of AWG 67 million, comprising the settlement sum of Valero (AWG 27 million) and the sale of Fuels Marketing & Supply Aruba (AWG 40 million), be realized this year.
Work to be done
The financial results over the first quarter are at such level that the Board advises to implement a vacancy stop and a commitment stop. The CAft chairman: “Personnel costs amount to about one third of the total government spending this year and this amount should be reduced. There is work to be done.” At the beginning of this year more people have entered public service, which is not in line with government’s intention to save 5% on government staff annually. In order to further reduce public spending, the frequency and level of fees for predictable overtime should be better anticipated in the budgetary process. In addition, the establishment of a function house for government officials can help to counter the autonomous growth in staff expenditure. As far as taxes are concerned, further tax reform is needed and the country’s liquidity position has to be structurally strengthened. The Minister of Finance, together with other government departments, takes the necessary steps to obtain an auditor’s report. The next step in this process is to formulate a concrete and realistic time path to that end.
Last visit current chairman
In addition to discussing the results for the first quarter, this visit was also related to the forthcoming farewell by the current chairman, Age Bakker, as of July 1, 2017, and making acquaintance with the upcoming chairman Raymond Gradus. The departing chairman looks back with a satisfied feeling on a fruitful cooperation with Aruba. Age Bakker on his period at the CAft: “It was not always easy, but together, each working from his own role, we contributed to the fact that Aruba has met the legal deficit standard over the past two years. With this achievement important steps have been taken to reduce the untenable debt position”. As usual during the visits of the Board to Aruba, meetings were held with the Governor, the Minister of Finance, the Council of Ministers, and the Parliamentary Committee on Finance, Economic Affairs and Government Organization. The CAft also visited the Central Bank of Aruba. The conversation included amongst others the delayed work activities of the refinery.