Finance Minister Ardwell Irion and his support staffer Christian Grannum in Parliament on Monday.
PHILIPSBURG--Finance Minister Ardwell Irion on Monday presented the draft 2022 budget to Parliament and received a laundry list of questions, comments and suggestions from Members of Parliament (MPs).
The draft budget contains a projected income of NAf. 409.3 million; expense of NAf. 533.4 million and a deficit of NAf. 124.1 million.
Income
Government expects to rake in a total of NAf. 341.1 million in taxes in 2022 (compared to NAf. 307.5 million budgeted in 2021); NAf. 14.8 million in permits (compared to NAf. 11.8 million budgeted in 2021); NAf. 36.4 million in fees and concessions the same as had been budgeted in 2021; NAf. 17 million in “other income” (compared to 16.2 million budgeted for 2021).
Irion told MPs that revenues had been calculated based on projections from the International Monetary Fund (IMF). For 2022, the IMF projects a 16 per cent growth of nominal Gross Domestic Product (GDP) compared to 2021. This growth is based on an increase in economic activities, especially in the tourism sector. Execution of reconstruction projects – the new St. Maarten General Hospital and Princess Juliana International Airport (PJIA) – are projected to increase economic activity in the country and expected to have a positive impact on the economy, Irion told MPs.
“We expect this increase in economic activity to mainly have an impact on turnover-tax and therefore you can see an increase in our tax revenue in comparison to 2021. All the other revenue categories are more or less in line with previous year. Although we expect, and would like to see, economic growth next year, we must mention that there are risks that might hamper us from achieving the expected growth in revenue.”
These risks are continuation of the COVID-19 pandemic and the uncertainties surrounding the global developments of the pandemic continuing to have consequences for the economy; delay in implementation of reconstruction projects as any further delays in the implementation and execution of the new hospital and airport reconstruction of the airport will have an impact on the expected increase in economic activity and a possible hurricane. “Should St. Maarten be hit by a hurricane in 2022, this will obviously also have an impact on our economy and will lead to a decline in revenues and increasing expenses for the country. The ongoing pandemic certainly brings along many uncertainties and therefore makes it very difficult to make predictions about our economic growth. One thing we know is that the coming years will not be easy and therefore we will constantly have to continue monitoring what is happening on the island and around us to be able to adjust our financial management to reflect our reality,” Irion said.
Expenditures
In terms of expenses, government projects to fork out 210.2 million in personnel costs (NAf.196.2 million as budgeted in 2021 and NAf. 205.3 million budgeted in 2019); NAf. 3 million in “contingencies” (compared to NAf. 5.7 million in 2021 and $0 in 2019); NAf. 8.2 million in depreciation (compared to NAf.9.2 million in 2021 and $0 in 2019); NAf. 153.8 million in “goods and services” (compared to NAf. 150.1 in 2021 and 106 million in 2019); NAf. 7.2 million in legal and other expert advice (compared to NAf. 6.5 million in 2021 and NAf. 1.9 million in 2019); NAf. 106.5 million in transfers and subsidies compared to NAf. 202.9 million in 2021 and NAf.129.3 million in 2019); NAf. 12.2 million in interest (compared to NAf. 11.6 million in 2021 and NAf. 12.7 million in 2019); NAf. 28 million in social security (compared to NAf. 26.4 million in 2021 and NAf. 25.3 million in 2019); NAf. 4.3 million in scholarship allowances, the same amount as 2021 and compared to NAf. 3.1 million in 2019.
Broken down by Ministries, Parliament and High Councils, in the draft budget, Parliament and High Councils are allocated NAf. 25.5 million (compared to 23.3 in 2021 and NAf. 16 million in 2019); Ministry of General Affairs allocated NAf. 79.2 million (compared to NAf. 75.8 million in 2021 and 71.3 million in 2019); Ministry of Finance NAf. 56.9 million (compared to NAf. 161.4 million in 2021 and NAf. 71.6 million in 2019); Ministry of Justice NAf. 85.3 million (82.1 million in 2021 and NAf. 84.6 million in 2019); Ministry of Education, Culture, Youth and Sport ECYS NAf. 122.3 million (NAf. 118.4 million in 2021 and NAf. 114.3 million in 2019); Ministry of Health, Labour and Social Affairs VSA NAf. 94.4 million (compared to 86.5 million in 2021 and NAf. 77.7 million in 2019); Ministry of Tourism, Economic Affairs, Transportation and Telecommunications (TEATT) NAf. 28.8 million (NAf. 25.8 million in 2021, and 16.3 in 2019) and Ministry of VROMI NAf.40.5 million (NAf. 39.6 million in 2021 and NAf. 31.8 million in 2019).
With total expenses at NAf 533.4 million, the total budgeted expenses compared to 2021 decreased by NAf. 79.4 million, which is mainly due to a decrease in material cost. For 2022, the amount of personnel expenses increased by NAf 14.0 million compared to 2021. This difference is mainly due to an increase in the health care expenses for civil servants (OZR) under the Ministry of VSA for an amount of NAf 7.9 million. This increase was done taking the current actual expenditures into consideration.
In addition to this, government expects to fill 67 vacancies in 2022, for which an amount of NAf. 6.1 million has been budgeted. Material expenses decreased by NAf. 93.4 million. “The biggest drop is under Transfers and Subsidies. This is due to government no longer having the stimulus programme budgeted. This is also reflected in the drop under the Ministry of Finance as the payroll support was budgeted in this ministry in the previous year.”
SSRP
Irion said the St. Maarten Stimulus Support and Relief Plan (SSRP) is not included in the 2022 draft budget.
In the approved 2021 budget, SSRP was only budgeted up until September. “It has been decided to discontinue the stimulus programme in 2022 however, there are some provisions taken up in the budget should things change,” the minister indicated. Personnel expenses of MPs, ministers, civil servants and employees of subsidized institutions (such as foundations, schools, and Non-Governmental Organisations NGOs) are still based on the conditions tied to liquidity support from the Netherlands.
Capital expenses
A total of NAf. 400,594,066 is tagged for capital investments for 2022. These include non-residential buildings at NAf. 44,480,000; “other structures,” at NAf. 600,000; land improvements at NAf. 8,000,000; transport equipment NAf. 726,700; Information Communication Technology (ICT) equipment at NAf. 2,110,000; other equipment at NAf. 3,458,850; research and development NAf. 10,000,000; computer software NAf. 24,748,000; NAf. 0 for other work in progress and NAf. 306,470,516 for loans.
Some of the largest Capital Investments are the completion of Prins Willem Alexander School (PWAS) for Special Education; the new Parliament Building; Phase 2 of the reconstruction of the Pointe Blanche Prison; Hardware and Software (including ICT equipment); the Weather Radar; Project Improving Financial Management; health information system; Project Reform Tax Office; replacement of sirens to warn public in case of disaster and infrastructure investments.
As it relates to capital investments for 2022, Irion said of the approximately NAf 400.6 million total, NAf 306.5 million is related to loans and student scholarships. The balance of NAf. 94.1 million is to acquire capital goods.
Irion said besides capital expenditures, the country is also expecting to receive about NAf. 32 million (15 million Euros via the Temporary Work Organisation (TWO) as income for capital investments to cover capital expenses for the financial management and the restructuring of the Tax Office projects.
Loan needed
According to the minister the country will need a loan of NAf. 67.6 million to be able to cover the other capital goods or projects. For 2022, government will also require loans to the tune of NAf. 484 million. This will include the refinancing of the six tranches of liquidity support, for a total amount of NAf. 292.4 million. These six tranches mature in 2022 and negotiations with the Netherlands about refinancing alternatives have started. “As mentioned before, we will need an amount of NAf. 67.6 million to be able to cover our capital expenditures. And we also expect to have to take on new loans or request liquidity support to cover our projected deficit of an amount of NAf.124.1 million.”
Irion said the effects of COVID-19 brings along many uncertainties that makes it difficult to predict the future, but it can also create opportunities if St. Maarten is able to contain the spread of the COVID-19 virus and manage under the new/changed circumstances. “This government is committed to the vision that is mentioned in the coalition agreement namely: “realisation of a country with a strong multi-pillar economy – where opportunities exist, which empowers each citizen to realise their strength to progress at all levels – a place where every dream can be realised,” Irion said.
