CURACAO AND ITS DEFICIT
Who do we have to thank for the conservatorship?
Recently, a lot has been written and said about the fact that Curacao is under some kind of conservatorship (or guardianship). In this case conservatorship means something like: not being allowed to take your own (financial) decisions without the approval of a supervisor. How could it have come this far?
In the run-up to the dissolution of the Netherlands Antilles a debt restructuring program was extensively discussed and negotiated. At the time, there was a debt of several billions. Eventually, the Netherlands was prepared to provide several billions, so Curacao and St Maarten would have a sound financial starting position.
In the context of the debt restructuring program, agreements were made by Curacao with the Netherlands about the public finances of Curacao and the supervision thereon. These agreements have been laid down in the Financial Supervision Act. The purpose of this Act is to maintain the sound starting position and prevent any financial problems from the past from occurring again. The purpose therefore was to prevent that Curacao would end up (again) with sky-high debts. Thus it is all about budgetary discipline: the government must ensure a sound income and expense ratio. This has failed and the Board of Financial Supervision (Cft) has made a detailed analysis of it. The conclusions are shocking. Some of these are:
- The first two years of the new country Curacao have been concluded with large deficits.
- As a result of continuing delays in the implementation measures relating to health care, the dividend policy and personnel policy, the deficits from 2010 and 2011 are likely to arise in 2012 as well. In view of the lack of progress it must seriously be taken into account that implementation of the various measures will not be possible in 2012.
- The deficit of Curacao over 2010 has only become known at the end of 2011. In February 2012, the deficit of 2011 was still estimated at ANG 9.5 million, while in May it was assumed to be ANG 140 million.
- During the year 2012, the government of Curacao consistently denied that a deficit was imminent and has, in other respects, never indicated that any measures would be necessary. The Minister of Finance of Curacao apparently does not have an adequate summary of the income and expense developments in order to be able to effect interim adjustments to keep the budget within the standards of the Financial Supervision Act.
- The government of Curacao indicates that although it does share the concerns of the Board of Financial Supervision in relation to (the implementation of) various measures (in particular with respect to the health care expense reform), it does not share the vision that the implementation of the agreed measures may be called into question.
In other words: the government of Curacao has let it get completely out of control. The debts have accumulated too high. The government of Curacao has not observed the agreements and moreover has consistently denied that any deficits were imminent. In addition, the Minister of Finance of Curacao does not have an adequate summary of the income and expenses. That is the reason the Government of the Kingdom had to give an ‘instruction’. In short, this instruction means: government of Curacao, observe the agreements that have been made.
On 25 July 2012, the Governor of Curacao sent a letter to the government of Curacao. In it he writes, in summary, that he will not approve or sign any (draft) national ordinances and decisions that are contrary to the Financial Supervision Act and the instruction given in that context. In that sense the government of Curacao is under conservatorship: for incurring certain expenses, entering into certain transactions (e.g. the hiring of personnel) it has to have the approval of the Governor. The Governor acts, as it were, as ‘guardian’. He will first assess the plans in the light of the provisions of the instruction. This way it is endeavored to get the government finances (somewhat) back in order.
It is painful that it had to come this far. The desire to be autonomous does after all, also entail that finances are handled responsibly. We also have to want to strive for sound public finances ourselves. The fact that the government of Curacao has shown not to be able to handle that has led to a serious dent in our reputation. The finger must not be pointed at others therefore (the Netherlands, Cft). It is our government that did not observe the agreements. And whoever does not observe their agreements must bear the consequences themselves.
Karel Frielink
(27 July 2012)
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