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Willemstad
• zaterdag 22 juni 2024

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CC | Cft: “Despite increasing income, Curaçao is facing major challenges”

HomeLandenCuraçaoCC | Cft: “Despite increasing income, Curaçao is facing major challenges”

WILLEMSTAD – In the coming years Curaçao will face higher expenses as a result of the ENNIA solution and the refinancing of the liquidity support. The risks and uncertainties in health care and social security remain invariably high as well and Curaçao encounters a major investment challenge.

In its recent discussions with the government of Curaçao, the Board of financial supervision Curaçao and Sint Maarten (Cft) requested special attention to these developments. The country’s economy is growing, partly on account of tourism. Further strengthening of the economy can be achieved through targeted investments. Tax compliance has improved significantly in recent years, but this will have to be anchored in a structural manner.

Further postponement of the introduction of the licensing system for the gaming sector has to be prevented. In addition, structural reforms are necessary to maintain health care and social security accessible for future generations.

Recently the Curaçao government opted for a solution for the ENNIA file based on which the country will make the necessary resources available for a controlled settlement. The Cft considers this a less risky solution than a restart of ENNIA. A significant loan, that would have been required for a restart, would have locked up Curaçao’s budget for several years. As a result, possibly no further investments could have been made in the future.

Curaçao will now, in collaboration with the Central Bank of Curaçao and Sint Maarten, further develop the selected solution. Curaçao has reached an agreement with the Netherlands on a loan to refinance the liquidity support. The level of interest for the loan is related to the final solution for ENNIA. In any event it is certain that in the coming years the interest costs of Curaçao will be at a structurally higher level.

The economic growth and an increase in tax compliance give Curaçao a basis to bear the growing burden. In 2022 the tax revenues were more than 18 percent higher than in 2021 and the expectations for tax revenues in 2023 are positive as well. This higher level of tax revenue needs to be maintained and increased. It is important that the budgeted income from the licensing system for the gaming sector be actually realized in 2024.

The Cft has declared a number of times that Curaçao needs to invest more in the country’s economic development. In addition to the ensuing improvements for the people of Curaçao, the strengthening of the economy contributes to the resilience of public finances. Despite the increased expenditure, Curaçao will have to create more room for investments in the budget. This can be done by implementing structural reforms. Curaçao can make better use of the opportunities that the National Package offers to this effect.

Health care and social security

Curaçao pays out of the national budget an annual contribution of ANG 305 million to the social funds. To prevent social fund deficits in 2022 and 2023, the country implemented some successful management measures. However, the Social Insurance Bank (SVB) still expects structural deficits in the social funds (swinging fund). Curaçao has the obligation to cover these deficits with resources from the national budget. This will be at the expense of other government expenditures on, for example, investments and education. Structural reforms must be implemented to keep healthcare and social security accessible for future generations. The financial situation of the Curaçao Medical Center remains as troublesome as before. The Cft requested Curaçao to be more urgent in tackling this situation.

Bron: Curacao Chronicle

1 reactie

  1. “In the coming years Curaçao will face higher expenses as a result of the ENNIA solution and”…….—>This is undoubtedly true, but these expenses WILL BE partly offset by the mandatory payment by Ansary c.s. when the sentences are (and will have been) enforced and executed in the U.S.A. Then inevitably the financial burden on the national budget will be partly offset by coercive collection of the sums due pursuant to the sentences.

    “Further strengthening of the economy can be achieved through targeted investments”……….—>This is indeed the only real and sound policy to be achieved by the government, but the political parties in charge of governing the country lack the foresight and the capability of creative thinking to achieve this. They have let a unique and feasible opportunity slip through their fingers when they did not accomplish the large-scale development plan for the industrial area in Bullenbaai. If they had followed through and accomplished the large-scale development as it had been envisioned, then RdK might have been in the leanback mode today by collecting hundreds of milions, payable by way of throughput charges from a mutinational oil trader and from the construction of an LNG terminal at Bullenbaai. This would not even have required any financial investments on the part of the government of Curaçao, neither from RdK. But the shortsightedness of decision-makers in key positions prevented this plan to become fruitful in 2016.

    “Further postponement of the introduction of the licensing system for the gaming sector has to be prevented”……—>Agreed, but not even the necessary legislation has as yet entered into the process of being enacted.

    “In addition, structural reforms are necessary to maintain health care and social security accessible for future generations…….”—> And exactly because structural reforms will be necessary to maintain health care, this being a substantial part of the expenditure out of the national budget, it is most unwise and surely will turn out to be counter-productive to choose the option of a “sterfhuisconstructie” in Dutch, meaning that the viable branches of Ennia will remain operational and the only non-viable branch, being the provision of old age pension schemes, will be gradually phased out completely. In this way Curaçao will certainly lose its major structural pillar to alleviate the already overburdened SVB from providing for the basic social security benefits, because the insured pensioners of Ennia will have to turn to the SVB after the facility of an Ennia Life Insurance policy has disappeared because Ennia Life has then become defunct. So, out of necessity the former insured pensioners of ECL will have to turn to the SVB for the basic social support when Ennia no longer exists. Choosing the option of the “sterfhuisconstructie” will have a severely disruptive impact on the society of Curaçao in the future.

    “Curaçao has reached an agreement with the Netherlands on a loan to refinance the liquidity support……”—>But this agreement is still tentative because the Dutch Parliament has not yet finally decided by a majority vote if it is in agreement with the choice of the “sterfhuisconstructie” and it will most likely postpone that majority vote untill after the election in November and after the new government in The Netherlands will be formalized and installed. That’s why the members of Parliament almost unanimously agreed to the one year extension proposed by Mrs. Van Huffelen and accepted by the government of Curaçao, in order to fully accomplish the balancing of the implications of the two options for a definitive solution of the Ennia problem.

    “However, the Social Insurance Bank (SVB) still expects structural deficits in the social funds (swinging fund). Curaçao has the obligation to cover these deficits with resources from the national budget”……—>yes indeed and therefore it will turn out to be counter-productive to phase out ECL entirely, because such will surely and unavoidably entail a much higher expenditure from the SVB to provide a much larger group of senior citizens (approximately 30.000 households) with the basic social security benefits to provide for their living, when ECL is no longer in existence..

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