Minister Geerlings gives in depth overview to MPs about CFT and Economic Development
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Minister Geerlings gives in depth overview to MPs about CFT and Economic Development

Minister Hon. Perry Geerlings Minister Hon. Perry Geerlings

SINT MAARTEN (PHILIPSBURG) - Care-taker Minister of Finance Hon. Perry Geerlings presented an in depth overview to the members of the House of Parliament with respect to the relationship with the Committee for Financial Supervision of Curacao and Sint Maarten (CFT) and national economic development.  See below the Ministers presentation:

Honorable chairman, honorable members of Parliament, dear listeners and viewers,

I was invited to a plenary meeting in Parliament on October 8th, 2019 with the following agenda points:

  1. The recent IMF criticism of the CFT and its intent to recommend and instruction for Curacao
  2. Review of the Kingdom Law Financial Supervision against the backdrop of St. Maarten’s economic development

During the meeting Parliament concluded the first round of questioning. Before giving the answers to the questions I would like to first outline a frame of reference (“referentiekader”) on the subject. Against this backdrop I will then give my answers to the questions.

So please allow me to elucidate first on the history, objective and functioning RFT and the CFT, before answering.

 

Kingdom Law on financial supervision (Rijkswet financieel toezicht – RFT)

 

During the negotiations on the restructuring of the former Netherlands Antilles, a debt relief was promised to allow the new autonomous countries to start with a clean financial slate. The Kingdom Law on financial supervision was drafted as part of a whole debt relief package. This proposal was accepted by all countries, including Sint Maarten.

This so called ‘Rijkswet financieel toezicht’ (RFT) in its articles 15 and 16 basically sets the financial standards to which each country must comply to. These standards are mostly of the same nature as in our own LVO on accountability (Comptabiliteitslandsverordening) and include for instance the golden rule of providing at least a balanced budget for each fiscal year. In that respect, both our own LVO and the RFT want to assure proper Public Financial Management.

Of a different nature however are the rules on borrowing as stipulated in article 16. In principal the countries are only allowed to attract loans for Capital Expense. And only after approval of the Cft. The main reason for this article (16) to prevent the now autonomous countries to acquire the same exorbitant debt quota’s the former Netherlands Antilles accumulated before the restructuring.

These rules in the RFT are designed to protect and maintain the ‘starting equity’ of the autonomous countries (after debt relief) as realized budget shortages might diminish that  equity, and to protect the countries from lending too much on the capital market and build up unsustainable debts like the former Netherlands Antilles did.  

“These rules are not bad for developing countries”.

IMF and other international financial institutes promote these kinds of measures. As a matter of fact, both IMF and Cft are of the opinion that the so-called debt quote (total of debts as a percentage of Gross Domestic Product (GDP)) should not be higher than 40% for a small country like Sint Maarten. Currently Sint Maarten grows slightly above that ceiling with some 45% of GDP, because of the situation after the hurricanes. However, we are trying to stay as close to the 40% as possible because higher debts will become a burden on future generations and on future budgets as interest someday will raise again.

 

College financieel toezicht (Cft)/Board of financial supervision

 

Supervision based on the RFT is executed by the Board of financial supervision (Cft) that for Curaçao and Sint Maarten consists of 4 members, a chairperson appointed on behalf of the Dutch prime-minister, a member appointed on behalf of the Dutch Government and one member per Country for Curaçao and Sint Maarten, appointed by the respective countries. In the case of a difference of opinion between the members of Cft, the vote of the chairman is pivotal. The Board is supported by a secretariat, all costs are carried by the Netherlands.

To give honor to the truth, Sint marten has never been able to comply to the LVO on accountability (Comptabiliteitslandsverordening) nor with the ‘Rijkswet’.

As an example, we never provided a multi-annual budget as is required by both laws. We also never produced annual reports in time according per the laws, except for the year 2013. May I also remind you that Parliament takes its time to approve those accounts when finished. Furthermore, over the past 9 years our budgets were merely policy based. We hardly discussed and elucidated on the investment budget (capital expense) as is required. And for the normal expense budgets our elucidation is seen as to limited. 

These kinds of things are always mentioned by Cft in their formal advices to Government as findings and conclusions. These findings and shortcomings have however never been handled or properly remedied by the different governments of Sint Maarten. 

Another important area of supervision within the RFT is that of the quality of the public financial management (PFM) for each country. The poor quality of our PFM has been a real concern with the General Audit Chamber of Sint Maarten, internal auditor SOAB, as well as a growing concern with the Cft for some years now. In fact, the concerns of these knowledgeable institutions made Government decide to develop a priority project to solve these issues, for which a plan of approach was approved in the Council of Ministers in April 2019. 

Due to the late approval of budget and not receiving the investment loan yet, the project hasn’t started yet and the delay will impact the agreement with Cft on reaching a balanced budget, maintaining a sound debt quota and an unqualified audit opinion as per 2021.

In my opinion, apart from the formal Kingdom instruction in 2015, the cooperation between Sint Maarten and Cft in general is not bad at all. The civil servants from the ministry of finance in most cases have a good and fruitful working relationship with the employees of the secretariat of Cft. 

Cft is less harsh on Sint Maarten than they probably could be if you look at the auditors reports for the past years. In my belief that might also have to do with the fact that the financial situation of Sint Maarten could improve relatively easy if:

  1. the economy improves after the hurricanes, 
  2. the tax transformation plan is executed, stimulating the grow of the economy and increasing income revenue
  3. if pension and healthcare systems are changed etc. 

That is perhaps the key difference with Curacao: Curacao has already taken certain measures. They changed pension and healthcare systems some years ago, they modernized their tax organization etc. They have less room to improve with yet big deficit and lending problems ….. this might be the main reason for the instruction towards Curacao.

 

The restructuring of the Netherlands Antilles

 

In the process of the restructuring of the Netherlands Antilles took a long time, from the referenda up to and even after 10-10-2010. Parts of the discussions were about the debt relief. Before 10/10/10 Sint Maarten was not allowed to enter into loan agreements as an Island territory. The remaining debts of the Netherlands Antilles, after debt relief, was therefore distributed amongst the new countries as part of the distribution of property and debts of the former Netherlands Antilles.

Sint Maarten didn’t profit from the debt relief as much as we could have. We can partly blame the Netherlands and partly ourselves for that because we were simply too late with the filing of proper documentation as proof of the debts, while the Netherlands unexpectedly closed the opportunity of negotiations on this point. Estimates are that we missed approximately NAf 50 million in relief money. Ans our subsequent complaints had fallen on deaf ears.

Sint Maarten did not only get some of the remaining debts of the Netherlands Antilles. We also have debts from 10-10-2010 in our books for an amount of NAf 300 million of which NAf 50 million is due in 2020. This loan will have to be renewed.

The process of distribution of property and debt of the Netherlands Antilles also took quite some time and was only finalized in 2017. 

A following summary illustrates Sint Maarten’s portion from the distribution of properties, receivables, cash and debts:

 

 

Fixed assets have been completely transferred to government, as are also the government owned companies. The valuation of the receivables is probably almost NAf 21.5 million less than the valuation used in the Distribution of Assets. This is still under review and efforts are made by the Ministry of Finance to make sure these receivables are being collected. On the other hand, the debt attributed to Sint Maarten based on the Distribution Assets Report is probably NAf 37 million overstated because of no further substantiation of debts for this amount.

NAf 88 million of the cash amounts were used for to pay of old debts from the Island Territory Sint Maarten to the Netherlands Antilles. The remaining amount of cash has been received.

 

Formal Kingdom instruction of 2015

 

The formal Kingdom instruction of 2015 consisted of 4 instructions on certain issues. And were aimed at ending budget deficits, compensation with surpluses, holding back the growing amount of payment in arrears (a form of informal loans to finance the deficits).

The Kingdom instruction of 2015 addresses some NAf 60 million in shortages to be compensated. This amount is not the sum of the deficits as stated in our annual accounts as Cft found income items in these accounts that were related to the years before 2010, which was correct. As we talk about deficits in the years 2010 until 2014, that by Kingdom Law must be compensated in the year after the deficit arises, Cft waited for years to come up with the proposal on a Kingdom instruction in this respect. What I mean to say is that according to the Law, they could have acted much earlier but left Sint Maarten space to solve the issue without an instruction. We didn’t comply however.

The restructuring of the healthcare and pension systems is another part of the 2015 instruction.  This issue has been discussed at length but not much has been realized except for the raising the AOV age to from 60 to 62 years. 

Pension system: on this subject I heard some incorrect statements in Parliament this year. A member of Parliament suggested to use the proceeds of the sale of UTS (some NAf 20 million) to cover the pension problems, so that the pension age would not have to go up in the coming years. 

Pension coverage is not a unique problem for Sint Maarten. Many countries have tackled and solved the same problems before us. The reasons the pension structure becomes more expensive (or the coverage shortfall increases) can be summarized as follows: 1) people tend to live longer (= more pension years);  (2) investment income diminished and is currently often (bonds etc.) even close to 0 or even negative.: (3) A final-pay pension system in which you pay premiums over your current salary but receive pension benefits over the average of your salary in the last 2 years of your career are extremely expensive. These reasons require a much higher premium than the current 25% of salaries.  

APS and other pension funds calculate for the coverage ratio of future pension obligations with a certain income on investments. They estimate a coverage shortfall of 4% or a shortfall of pension premium equivalent to 7%-9%. This means that APS stands to have a shortfall of NAf 32 million EACH YEAR on an investment fund of Naf 800 million. Obligations keep growing while the coverage from investment income and premiums is grossly insufficient. 

Pension funds made calculations from which was concluded that the premium should be at least 31- 34% to make final pay arrangements feasible. This would cost another NAf 10 million per year extra in premiums.

The agreement reached with the unions in 2016 on major issues follows the most common internationally chosen solution to keep the pension structure sustainable for the future. 

In our healthcare system there are many separate funds like FZOG, ZV/OV, AVBZ etc. Most of these funds currently have a negative equity, accumulated deficits from earlier years, that are financed by funds that are healthy like AOV/AWW. The current healthcare system is financially unsustainable so changes are necessary also because higher ages will bring higher costs. A new healthcare system should provide for a financially sustainable situation and possibly solve the current deficits in the various funds over time as they must be considered a dormant risk for Government finances also.

The payment arrears towards SZV, APS, TELEM, GEBE and others were partly redeemed by the sale of the new Government building in 2016. Negative surprises, both in healthcare costs as well as in pension premiums that became clear in 2016 and later, brought the total back to some NAf 165 million by the end of 2018, of which the largest amount is towards SZV (NAf 90 million).

In 2019 Government will redeem at least some NAf 50 million of these debts via payments and other solutions like debt reduction agreements made between parties. With TELEM a contract was signed to redeem the debt in full within a period of some years. With SZV a letter of intent was signed, pending some audits, and with APS discussions are on the way to redeem the remaining debts.

We have not been able yet to compensate of deficits with surpluses as prescribed by the instruction of 2015. To the contrary, we have had significant deficits over the years since the instruction. Discussions about compensating the large deficits going forward still must start. The total deficit post Irma is estimated to be between NAf 230 – NAf 250 million.

These issues must be resolved to make and keep our finances sustainable for the future. The instruction of 2015 on these issues has not been complied with yet. The RMR is currently looking at a new timeframe for Sint Maarten to comply with. The Government of Sint Maarten commented on the proposal of the Kingdom council. We have not received feedback on our comments yet. 

Some questions of the honorable members of Parliament can be answered in general terms:

 

  1. RFT evaluations. The RFT was evaluated twice by an evaluation committee. First in 2015 for the years 2010-2014. And second in 2018 for the years 2015-2017. The committee did not evaluate the RFT and the functioning Cft, but rather if Curacao and Sint Maarten complied with the RFT. The committee was also tasked to advice on the need of the RFT going forward; if financial supervision is deemed necessary for the future and/or if certain aspects of the RFT should be changed. In both evaluations the advices were to continue with the RFT. The next evaluation will happen in 2021. 

In several occasions Sint Maarten government has been critical on the RFT and on the functioning of the Cft. We have expressed out concern with the independence of the Cft. We sometimes also differ from opinion with the Cft. But in most cases we have been able to resolve our differences through good discussions and an open mind towards each other.

  1. Budget deficits. To budget a deficit is prohibited in the RFT unless certain extreme circumstances like the hurricanes of 2017 make that inevitable. For the years 2017-2019 the Kingdom Council of Ministers (RMR) gave Sint Maarten permission to deviate from this ‘golden rule’ and approved the budgets after an advice from Cft. We recently applied for article 25 of the RFT for 2020 as well. This will allow Sint Maarten to budget a deficit in 2020. In the end however, it is not the budget that is important but the realization of those budgets as provided in the annual reports.

According to the RFT, realized deficits must be compensated with surpluses in the subsequent year. The reason for this is to protect the (starting) equity of our country. Sint Maarten didn’t comply with the no-deficit rule in all the years after 10-10-2010, except for 2013. The budgets may have been balanced but the realization showed otherwise. For 2016 and 2017 the Minister of Finance followed the instruction and budgeted surpluses of at least NAf 20 million to compensate earlier losses, however, also these years are now showing considerable realized losses.

High level provisionary details are as follows:

 

  1. Does CFT intervene with the content of our capital (investment) budgets?

In principle NOT, other than comments on the process and standards to het to the capital expense account. Their biggest comment is that our capital expenses are not explained enough and appear therefor not to be policy based. They would like the capital investments to be elucidated on in much more detail than we do in our draft budgets. The current short descriptions make it impossible to judge if those investments comply with the standards and best practices of public finance management, particularly the System of National Accounts of the United Nations. The Cft sometimes questions the elucidations, but never try to influence the content of our investment plans.

On the other hand the Cft does monitor our debt quota and loan ceiling.

 

On the more specific questions of honorable members of Parliament:

MP Jules James

  1. How many years has Sint Maarten produced a balanced budget?

    Until 2018 a balanced budget was approved. However, as you can see in the table above, in most years a deficit was realized in the annual accounts. For 2017 however this was related to the hurricanes, for the other years before 2017 because of mainly negative surprises and poor budgeting in some respects.
  2. How many times did Sint Maarten receive a Kingdom instruction based on Cft feedback?

    Until now, Sint Maarten only received one (1) formal Kingdom instruction from the RMR, the 2015 one described before. 

In 2019 our total expenses and capital investment loan amount were restricted, because of the high debt quota. We were however allowed to (1) have budget deficit and (2) surpass our expense ceiling with Naf 8.8 million, with the support of the Cft.

    1. Can you summarize the content of the instructions received?
      I refer to the part on the Kingdom Instruction 2015 before and the last part of letter b before.
    2. What are Sint Maarten deficits since 10-10-2010 cumulatively?

As you can see in above table, we expect some NAf 250 million cumulatively until and including 2019. As Cft corrected some issues from the first years towards pre-2010, this amount might in the end be some NAf 30 million higher. Of this total amount some NAf 210 million is related to the hurricanes of 2017.

 

MP Sidhart Bijlani

  1. What was the outcome of the round table of then Minister Ferrier with relevant parties on sustainable financial Government and have we reached progress in this?

The most important outcome of the conference was the collaboration that we agreed with IMF to help us compile an economic outlook for the Sint Maarten sectors. Ultimately this resulted further in a membership to Cartac that gives us a more sustainable advise platform.

In October 2018 I presented my Financial Recovery Plan for Sint Maarten, that aims to create budget surpluses by levying fair taxation based on compliance of (almost) the whole economy in order to be able to compensate for earlier deficits, pay back loans, get rid of payment arrears and the improvement of our Public Financial Management. Two priority projects (both of some 3 years) should bring the mileage needed for success and were approved by the COM in april 2019, but both were stalled because we didn’t receive the funding needed to start them yet.

In my opinion a historic and current income level of Government Sint Maarten of some 21% of GDP is unsustainable where all around us in the Caribbean that percentage is 26% on average and almost 30% in Curacao. Improving with 3% only would mean an extra income of some NAf 55- NAf 60 million yearly!!! 

  • What is a medium-term fiscal framework and how does it work for Sint Maarten?

    A fiscal framework starts with the objectives of fiscal policy. And that is not alone how and how much income the Government needs out of that, but also other objectives like stimulating the economy, maintaining financial stability, all using a methodology repeated over time accepted by all involved. IMF defines the fiscal framework also as the set of institutions that design and conduct fiscal policy;

    The short term (1 year) framework is ready to be implemented. As part of the tax transformation we are reviewing our tax policy for the medium and longer term. That should be included in June of 2020. The Fiscal Affairs Department of the IMF will help us with the overall strategy. while the OECD will be developing the detailed projection models for Sint Maarten based on available data, benchmarks and best practices.

    “Our strategy is to have a tax policy that grows the economy, not raise taxes. We would like to reduce corporate and personal income taxes, move to indirect consumption taxes, reducing the shadow economy and increase compliance. While at the same time assuring a lower tax burden for compliant taxpayers”. 
  • What is the current unemployment rate? 


I don’t know the exact figure now. My cabinet however believes it is higher than the 9,2% mentioned because of the less than expected wage tax income. That is also the current estimate of some external parties;


  • What is the current position of Sint Maarten with Cft?

Our relationship with Cft is functional and satisfactory however we sometimes differ of opinion. Cft is the instrument in place to check if the new countries comply with the consensus Kingdom Law on financial supervision and they are mild upon Sint Maarten in my opinion as we are not compliant to more than one aspect of this law. Cft gives Sint Maarten time to grow as an autonomous country and only pulls the breaks if we go over the lines to much or too often. I’m in favor of supervision, either within the country or, like in this case, via the Kingdom and to put it right, if we take finance more seriously, I’m in favor of the current solution as small communities mostly face big challenges to staff these kinds of high institutions properly as they simply need to be independent to function well.

MP Sarah Wescot-Williams

  1. Give an update on the infamous instruction and what if any progress has been made?

I already elucidated on this 2015 instruction in my general introduction and the issues that form part of it. Currently not one of the four (4) elements within the instruction is complied with (compensation of deficits, payment arrears, completeness of pension- and healthcare costs in budgets and sustainability of pension- and healthcare arrangements for the long term). 

The 2015 instruction was advised by Cft to the Kingdom Council of ministers as Sint Maarten government did not comply with remarks made by Cft in the years before on certain issues, and Sint Maarten did also not comply within the timeframe given by Cft in 2015 either. 

The Kingdom instruction that followed was contested in the beginning in conformity with the rules about that in the Kingdom law (Rft) but after Government fell by the end of the year, the new Minister of Finance withdrew from this procedure.

As said, the timeframe allowed to comply with the four (4) issues was interfered with by the hurricanes of 2017. Currently the RMR is busy with a new timeframe for compliance, on the draft of which Sint Maarten commented. 

We know however that there is a feeling that the pension reform takes too much time and the Netherlands already kept NAf 8,7 million in liquidity support for 2018 to put pressure. However Government opposed against this move because it is in the hands of Parliament and not of Government, they didn’t pay out said amount and will wait until Parliament approves said changes.

So until now, we didn’t compensate for the instructed NAf 60 million in deficits between 2010 and the end of 2014. 

The payment arrears of 2015 were partly mitigated in 2016 by selling the new Government Building but rose strongly again afterwards because of negative surprises on OZR for the years until 2016 and on pension premiums because of a mistake made by APS. By the end of 2018 the payment arrears totaled to some NAf. 175 million of which SZV was the biggest one with some NAf 100 million.

Cft strongly advised in 2018 and the beginning of 2019 to come to agreements with the parties involved about not only the total debt amounts but also the payment schedules involved to solve them, as officially the 2015 instruction is still valid until the RMR changes the timelines. 

I came to full agreements with GEBE and TELEM including payment schedules, signed a letter of intent with SZV on the indebted amount but not an agreement as certain elements within the debt still must be audited. We have developed some ideas about repayment to SZV, but negotiations didn’t start yet.

Pension fund APS must come up with a proposal on the amount of debt and the payment of the remaining debt. 

In the year 2019 we eliminated some 50 million of the existing debts by payments made or negotiated reductions with parties involved. In my believe we will end 2019 with a remaining debt of some 125 million.

  1. Are there any agreements with Cft regarding the finances of our country?

The only agreement with Cft I know of, is our verbal agreement to improve our public financial management in such a way that for the year 2021 a positive audit opinion will be obtained. Because the start of this project is already delayed with some 7 months, this will no longer be possible in my opinion, and that is what I told Cft during their last visit las week.

MP Rolando Brison

  1. Has IMF ever issued similar recommendation to Sint Maarten as they did on Curacao and have we had any similar indications from other organizations like Moody’s, OECD, FATF en U.S. State Department and what is their position on Cft?


As far as I know, IMF never tabled any similar recommendation to Sint Maarten as was done with respect to the Cft view on Curacao. Moody’s, IMF, CBCS and World Bank however suggest Sint Maarten strongly to get their fiscal framework and public financial management in order as they find the financial position of the country not only vulnerable but also policy wise not up to standards and see risks, also because of the geographical risks on yet another disaster somewhere in the future. Institutions also warn for the risks of a ‘one pillar’ economy in this respect.

OECD, FATF and the U.S. State Department to the best of my knowledge never issued these kinds of recommendations or instructions. 

In a recent lecture of Mr. Gradus, the Cft chairman, in Curacao he discussed the IMF reaction in broad terms and concluded (amongst other things) that:

  1. According to most economists economic growth is better stimulated by cost savings and cost cuttings than by raising taxes and other income items;
  2. The period of current realized deficits and the amounts thereof in Curacao would hamper the economy even more as the investment climate deteriorates even further, leading to more unemployment etc than do both (eliminate deficits and revitalize economic prospects).
  3. In case Curacao Government implements the measures agreed upon, they will get more time to compensate the earlier deficits in order to have more room for economic development.
  • Is there a set formula, an objective methodology used by Cft to determine what the capital expenditure of Sint Maarten should be?

Cft follows the IMF standpoint for debts, which for small developing countries is set for a maximum of 40% of GDP. Cft allows an extra 5% in certain circumstances. By both organizations this percentage is seen as sustainable even if interest rates will start rising again. The capital expenditures however are also partly financed by a countries own means, which is in our case at least the depreciation amount in our budget. In case Sint Maarten would be able to create budget surpluses from which part of the Capital Account could be funded, Cft will only look at the part a loan is requested for and if the Capital account investments do comply with the rules (SNA-criteria for investments). In case a country budgets a very high Capital investment account, Cft might warn for the possibility that those investments might exceed the execution capacity of that country. 

  • How and why do they come to that amount and how often did what Government Submitted to Cft differ from what Cft says we should invest?

The formula for the cumulative maximum in loans is the % over GDP as stated. Until the hurricanes we always stayed below this % in debts, so there was no limit set by Cft. These days, that is another story: because of our budget deficits for which we need approval from the RMR, for budget 2019 they (RMR) made known that our maximum loan was for 2019 was NAf 40 million. As Cft never told Sint Maarten what to invest, we decide ourselves as long as it complies with the system of national accounts from the United Nations.

  • How many times did Cft said ‘no’ to the capital budget?

Since 10-10-2010 our capital investment budgets were accepted in most years. Only after the formal kingdom instruction of 2015 Sint Maarten for some time was not allowed any loan for these purposes. For investments in 2014 for instance we received a loan of NAf 60 million. The capital account loan for 2017 of some NAf 22 million was redirected into a liquidity support loan. For 2019 the RMR decided on a maximum loan amount of NAf 40 million, that is in the meantime approved also by Cft but not in our coffers yet. Again, normally Cft does not have objections on our capital account if our debts stay below the 45% of GDP. 

  • Were the mentioned items included in our capital account budgets and not accepted by Cft?
      1. Philipsburg Police Station: Cft never denied items that fit within the SNA parameters. 
      2. The prison? Point Blanche is in the capital account 2019 for NAf 6 million
      3. Paying police officers does not belong in the Capital Account as this are no investments according to SNA rules but must be paid from ‘gewone dienst’
      4. Hospital: some elements are paid for by the World Bank, the Hospital is not a Government owned entity but a foundation. It doesn’t belong in our budget;
      5. Schools: as far as the hurricane related repairs and improvements concerned, this is financed through the Trust Fund and insurance proceeds. We are not allowed to budget capital investments that are covered by the Trust Fund in our capital account budget;
      6. The dump: also Trust Fund
      7. Improvement of Philipsburg: depending on the type of improvements this could be either Trust Fund, capital account or ‘gewone dienst’.
  • Our own budget chamber

The RFT is a consensus Kingdom Law on which the countries of the Kingdom agreed upon in 2010. That is excluding Aruba because they already had an autonomous status at that moment. Establishing our own Budgetting Chamber is still a possibility but as said before: in small countries an independent institution is hardly viable and to find the necessary professionals will be very hard in my opinion. We currently are not busy with this subject;

  • Advising entities on capital expenditures and management of debts

We are advised indirectly (!) by Cft, IMF, and the World Bank on these subjects as they yearly report on our financial status and advise in general terms on priorities as they envisage. In hardly any report capital expenditures are mentioned however. On Sint Maarten, our internal auditor SOAB advises us, like also the General Audit Chamber with respect to the financial household of Sint Maarten;

  • Agreement of repayment of debts

Debts consists of payment in arears and in loans. When loans mature the normally will be replaced by new loans. The arears have been negotiated concerning the volumes and the terms of the payments. The main creditors are APS, SZV, Telem and GeBe. With all of these companies understanding exists and we try to comply with the arrangements made however due to the postponement of the liquidity support this payments may be hampered.


  • Living up to debts? 

We do still comply with the arrangements but the pressure of liquidity shortage is increasing.


  • Money owed by Kingdom partners through APS? 
    We are not aware of monies owed to us by other kingdom partners that would be settled through APS. Aps performed a separate division of assets.
  • Outstanding debt arrangements or debt forgiveness?

There are no outstanding arrangements except in liquidity support where we administered some amounts as zero% loans but now understand from a letter of State secretary Knops to the 2nd Chamber that these amounts are granted. This amount in total is some NAf 80 million. I already said something about the debt relief around 10-10-2010 in my opening remarks;

  • Recommendations Cft on pension fund?

The pension restructuring forms part of the Kingdom instruction 2015 and as such is no recommendation. 

All over the world pension restructuring took place already 10 years ago because of the 3 reasons I elucidated already on in my opening remarks: our current pension arrangements are simply not sustainable on the long term. Sint Maarten is no exception in this respect to the rest of the world. I think it is up to parliament to acknowledge the facts and act.

 

MP Christophe Emmanuel

  1. Do you agree with the position of IMF regarding Cft in Curacao?

As I said before: I can understand both parties. The deficits of Curacao are of such magnitude that they are unsustainable. And I also believe cost cutting measures are more positive for economic growth than income raising measures as they take out money from the economy. I also understand IMF however on the tempo Cft wanted changes made. That indeed could hamper economic recovery, especially if the emphasis is on income raising measures. I believe however that parties can reach common ground and a balance that benefits all developments needed.

  1. Should Cft be evaluated? 

As said, currently every evaluation (each 3 years) in fact only looks at the question if, and if yes, to which extend, a country complies with the Kingdom law on financial supervision for 3 years in a row to decide they are, in whole or in part no longer subjected to financial supervision.

I think, both the Kingdom Law as well as Cft should be evaluated also. And changes should be made if deemed necessary. We are almost 10 years after 10-10-2010 and the functioning of the whole financial supervision should be evaluated;

  1. Should the structure of Cft change? 

I would like the structure to change to give more meaning to the fact that the autonomous parts within the Kingdom have the same rights as the Netherlands. Now, the Cft board consists of 4 members of which 2 are appointed by the Netherlands, of which the Chairman has more power than the rest. 

  1. Are the position and conditions laid down from Cft to Sint Maarten overreaching?

 No, as I stated before, from a financial point of view, I believe Cft is correct with most of their observations as we don’t comply with even our own laws, have deficits in most years since 2010 and finance them with payment arrears. We really need a change to give future generations a sustainable future financially in this country. With a debt burden growing in the direction of NAf 1 billion, debts we are not able to pay back because we never had surpluses, and however part of that stems from the post hurricane period, we need to show that we develop and grow also in financial respect;

  1. Dismantling of the Netherlands Antilles

In my opening paragraphs I already gave an overview on this subject. Some minor points are not finalized yet, but we are coming close. We received the full ownership on our Sint Maarten participations, an amount in cash and we inherited a part of the debts of the former Netherlands Antilles. 

Relationships between institutions like APNA en APS were finalized, also financially, like was the case in many other areas like SVB-SZV, Landsradio and BTP/TELEM etc;

  1. Assets received from the dismantling: see my opening elucidation and the answer to the question in this respect.
  2. Does Sint Maarten have a strong position because of the IMF remarks?

Sint Maarten and Curacao are not comparable. Curacao already has years of a diminishing economy, not by natural disasters like we had, and severe budget shortages. They did already change their healthcare- and pension schemes and updated their tax administration, have an income of almost 30% of GDP and still have those deficits. That is more worrisome than Sint Maarten is, because Sint Maarten can relatively easier take the necessary measures to solve these issues. Based on this, I do not believe Sint Maarten has a strong position because of IMF remarks because our financial problems are partly related to natural disasters and those are completely different backgrounds.

  1. Do you believe CFT has Sint Maarten in a stiff jacket?

No I don’t believe that. As I said before, CFT is rather cooperative and could have been much less easy on Sint Maarten than they are or have been. Financial supervision is alright in my view if we want to stay part of the Kingdom. If we look at our own accomplishments in respect to Public Financial Management, we honestly perform below standards compared to what is seen as good enough. I believe most of all because we are not really interested in that, as other (political) issues are believed to be much more important. I dare to say that we ourselves, both within government as well as in Parliament, let it happen year after year that we don’t even comply with our own laws in this respect.

 

MP Frans Richardson

You referred to Cft as the main factor that makes it impossible to borrow ourselves and rebuild in a much faster pace than currently is the case. Cft however only supervises if the countries follow the law, in this case the RFT, so the RFT is the real subject. Indeed, the RFT prohibits the countries to borrow money if not meant for the capital account in general. Borrowing however has some disadvantages also like paying interest and the obligation to redeem those debts one day. The RFT was accepted on a moment that a country (the former Netherlands Antilles) proved not being able to resist the adventure of borrowing and had a multi-billion debt.

Sint Maarten now grows towards a debt of NAf 1 billion. On 50.000 inhabitants that is
NAf 20.000 per person, and NAf 1 billion that must be paid back one day. Are we able of doing that? Most certainly not if we look at the past 10 years.  

  1. Have we done a proper evaluation on the working of CFT since 10-10-2010?

As said before, evaluations are not made of the working of Cft or RFT (the law) 

 

  1. How did the Minister saw the need and the working of Cft with Government during his tenure where Sint Maarten is concerned?

As I stated before, I believe an independent body for financial supervision is necessary as we are still a young country. I myself had no real problems with the functioning of Cft as they are critical but stay within the Law they execute. That is except for their advice to temporarily cut NAf. 8,7 million from our liquidity support because the pension reform was not adopted in time. In my opinion that was a political maneuver that didn’t belong to Cft and I made that known loud and clear.

  1. Is there an evaluation committee in place who evaluates Cft?

No, such an evaluation committee is not in place. Neither by law nor in Sint Maarten. 

 

MP Franklin Meyers

  1. Who negotiated on behalf of Sint Maarten on Rft/Cft and who was responsible for accepting this?

The island government negotiated the conditions of becoming a country in the years prior to 10-10-10. Key players in that era were:  Mr W. Marlin, Mr E. Holiday, Mr D. Richardson, Mrs J. Dovale Meit, Mrs G. Arrindell and Mrs S. Wescot. 

  1. Who is responsible for bringing the liabilities when we became autonomous?

To settle the possessions and debts to be transferred to the countries two separate commissions were established. First there was a committee that compiled the balance sheet, followed by a commission that designed the contours of the separation of assets. The design was approves by all three partners (CU, SXM BES) and executed. 

  1. What is the political agenda of CFT as IMF stated?

I’m not aware of such remarks of IMF to be honest. I understood that IMF and CFT differ from opinion on Curacao with respect to the best method their problems can be solved but know nothing about a statement that CFT has an agenda.

I already stated that I’m in favor of changing the structure of Cft but to do that, the Kingdom Law on financial supervision would have to be changed. See my answer on a question of MP Christophe Emmanuel (under letter c).

  1. Can you give me a list of tangible recommendations Cft has come up with that any government has executed and have benefited Sint Maarten?

I’m unable to give you such a list. Not that Cft didn’t give us any recommendations based on their task as prescribed by the Kingdom Law however, but because Sint Maarten in almost all cases didn’t execute them. Like we seemingly don’t listen to the SOAB reports and to the General Audit Chamber advises. Our financial household is not believed of great importance in my opinion, neither by the various Governments we had, nor by the various Parliaments during the past 10 years. The fact we until now didn’t even execute the formal Kingdom Instruction of 2015, a much stronger measure than recommendations, says it all.

  1. Forensic Lab bought for NAf 4,4 million in Cole bay, did Cft approve of that?

The lab fits within the SNA constrains and therefore was not denied by Cft.

  1. How far are we when it pertains the currency we are going to use, or do we stay in the monetary union with Curacao?
    Opinions about the monetary union with Curacao tend to differ depending on the timeframe and economic developments of the partners. None of the previous governments ever came to a decision to change the existing situation.   

 

MP Egbert Jurendy Doran

  1. Do you think that Cft giving Sint Maarten instructions is a good thing?

Cft is not able to give instructions to Sint Maarten. They can only advise Sint Maarten as prescribed within the RFT and if Sint Maarten does not comply, they can advise the Kingdom Council of Ministers to come up with a Kingdom Instruction like they did in 2015;

  1. What do we need to do as a country or what was agreed upon to get rid of the Cft?

If a country complies fully with the RFT during a period of 3 years, the evaluation committee that is evaluating compliance every 3 years, can advise the Kingdom Council of Ministers to end financial supervision for that country. All relevant Rft norms should be embedded in the laws of that country at that moment in time however. This is the only way if desired ‘to get rid’ of financial supervision and Cft according to the RFT.

Another way most probably would be to leave the Kingdom and become independent as a country, However, for this, a new referendum with that outcome would most probably be necessary.

  1. Should Sint Maarten have been given a break when Minister Gibson had 2 balanced budgets before the hurricanes hit?

Sint Maarten had balanced budgets in most of the years since 2010. As I stated before, what counts in the end is the execution of the budgets and the realized figures in the annual accounts. Like most of the Ministers before, also former Minister Gibson realized deficits in his period as a minister. One can’t expect getting a break for this.

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