PHILIPSBURG--Government will be able to make some NAf. 38 million in new investments should the draft 2016 budget be passed by Parliament and receive the stamp of approval from the Committee for Financial Supervision CFT, Finance Minister Richard Gibson told Parliament in the plenary session dealing with the draft budget on Monday.
The funds will be derived from the country being granted by CFT the right to borrow for capital projects once the budget is deemed balanced.
Gibson said the access to these funds “should not be pooh-poohed in any way,” because the country is in for “a hard time.” That hard time will come from constraints in the United States economy, the country’s largest tourism market.
“So, it is crucial that we obtain access to the capital expenditure budget and could borrow to invest, because that would balance things out substantially for St. Maarten. In fact, it will contribute to a growth of GDP in St. Maarten. By investing that money, you will be able to create new jobs, more jobs, give out more contracts, create economic activity, which we are going to need, and in so doing possibility expand our economy,” said Gibson.
He said the funds that would become available should be partially invested in training for civil servants and not only in projects. Training has a long-term return on investment, he said.
The approval of the budget will theoretically give St. Maarten access to borrow up to NAf. 1.2 billion, based on the interest norm in the Kingdom Law for temporary financial supervision for Curaçao and St. Maarten, commonly called the CFT law. Gibson said it would be “crazy” to borrow that much, but the possibility would be created.
He told MPs that if they wanted to expand the country’s economy, they should “approve the budget.”
The approval of the 2016 budget will lay the groundwork for the 2017 and 2018 budgets. If all three of those budgets are deemed balanced by CFT, St. Maarten can be released from the financial supervision of that body and have the possibility to create its own financial monitoring body, said Gibson.
“We will have to right to tell CFT to remove yourself,” he said. “If you care for this process, approve the budget. … You do not want to deny St. Maarten access to these crucial investments that are necessary to expand our GDP.”
He called on MPs “to be messengers” for spending within the available means. This budget is “historical,” because the approach will be adopted by other Dutch Caribbean islands also faced with CFT regulations.
The draft 2016 “shotgun” budget, as Gibson described it, stands at NAf. 442 million in expenditures and NAf. 463 million in income. The difference between the two figures is the buffer Gibson wants to create to keep all ministries in line and to have a surplus to service the country’s existing debts. The draft budget does not include any income based on promises to take measures to generate more income. This approach is a departure from all previous budgets dating back to 2010.
Gibson told MPs those budgets had accumulated some NAf. 60 million in deficits, because additional income streams projected over the years had never been realised. Compounding the situation were debts owed by Government to Social and Health Insurance SZV and General Pension Fund APS due to unpaid premiums. Some NAf. 200 million in debt was accumulated this way.
Sale of building
The Government Administration Building on Pond Island was sold to SZV to cover the debt. From the sale amount of NAf. 45 million, NAf. 22.5 million will be applied to reduce Government’s debt to SZV and NAf. 19.5 million will be paid to reduce the APS debt.
Gibson said APS would buy the lot to the West of the building from Government for NAf. 4.5 million to create a multi-level parking garage.
For the reminder of the debt, Government has committed to pay the full amount to APS – some NAf. 60 million – from its share of the assets of the former Netherlands Antilles. An additional NAf. 20 million will be paid annually to SZV over the next three years.
Government will lease the building on Pond Island from SZV at six per cent of the investment SZV made for the purchase, Gibson said. “This is a healthy rate of return … compared to the stock market.”
Also part of the agreement is the possibility for Government to buy back the building in the future.
APS’ pension coverage reserves have increased significantly by the partial payment by Government. The coverage reserves will stand at 101 per cent once the sale of the building has been finalised. The coverage reserves currently stand around 96.7 per cent, according to Gibson.
This approach to the debt will “get rid of” the instruction from the Kingdom Council of Ministers to St. Maarten to balance its budget and take care of its mounting debt, said Gibson.
He also told MPs that St. Maarten “does not have a good name” with the International Monetary Fund (IMF), because the country does not provide macro-economic figures needed for analysis. He said the figures were easy to obtain from the airport and harbour. He said the fact that St. Maarten Tourism Bureau does not agree with the way the figures are collected does not mean the figures should not be made available to entities like IMF to make their analyses.
