The announcement that less liquidity support than anticipated might be required this year is most welcome. A whopping “hole” of NAf. 197 million in the 2018 budget had led to growing concern over the sustainability of the country’s public finances.
Not-so-good news is that – at least so far – the Dutch government hasn’t offered more of such assistance, as it provided for the 2017 budget. Chairwoman of St. Maarten’s Kingdom Relations Committee Silveria Jacobs also alluded to this in her presentation at the Inter-Parliamentary Kingdom Consultation lPKO in The Hague (see Wednesday paper).
Nevertheless, Finance Minister Mike Ferrier’s relief that the deficit and related cash shortage could end up being smaller than feared due to a slight increase in revenues and further spending cuts is shared. Income projections following the onslaught of Hurricane Irma on the local economy had understandably been kept conservative.
The idea of asking for bridging loans on a quarterly rather than annual basis makes sense because it prevents borrowing a higher amount than needed and allows adjusting to the still-fluid situation on the ground along the way. On the other hand, the added administrative burden of preparing these requests on top of having to submit monthly reports should not be underestimated.
The reality is that taking significant austerity measures right now would be difficult at best. A crisis levy like the one being introduced in Aruba by raising their turnover tax from 2.5 to 6 per cent is certainly unthinkable for St. Maarten with its hospitality industry still way down.
Reducing cost is always an option, but that too can have a negative impact on the community’s already-lower-than-normal purchasing power, with all possible consequences for businesses attempting to bounce back and ultimately the employees as well as their families. In fact, any drastic action to that effect could easily prove counterproductive and do more harm than good.
So yes, temporary extra funding from the Netherlands may be indispensable to tide the country over. However, once the dominant stayover tourism recovers there is every reason to believe things will eventually improve to the point that the Dutch side can again “climb out of the red.”
