Philipsburg – E Colegio di supervision financiero (Cft) ta warda e presupuesto revisa di aña 2019, e plannan pa reforma e presupuesto 2019 y e maneho pa pone e parti financiero na ordo cu masha interes. CFT a discuti e revision di e presupuesto cu e Ministro di Finansas y a pidi e ministro pa finalisa e plannan aki a corto plaso.
Desde comienso di e aña aki Sint Maarten ta revisando e presupuesto di aña 2019. Esaki ta den cuadro di e consehonan anterior di Cft pa baha e gastonan presupuesta y asina tambe reduci e deficit. Pa evita un deficit structural Sint Maarten ta pensa di reforma e departamento di impuesto y asina elabora un plan conceptual pa esaki. Cft ta respalda e necesidad pa fortalece e autoridad di impuesto di manera cu e cumplimento fiscal ta aumenta y asina sigui aumenta e ingresonan. Cft ta conseha Sint Maarten pa tuma e medidanan necesario pa implementa esaki a corto plaso. E conseho aki tambe ta aplicabel na e plan pa mehora e maneho financiero. Pa luna di october Sint Maarten a compromete su mes pa entrega un plan pa mehoransa cu ta keda dirigi den un declaracion di auditoria aprobatorio den e cuenta anual di aña 2021.
Cft a convoca un medida pa reduccion di costo a corto plaso pa e gastonan di salud- y pensioen. Cft ta expresa su decepcion cu e ahuste priminti door di e ley de pensioen cu no a keda implementa prome di januari 2019. A entrega e ley di pensioen di aña 2018 na tempo na Parlamento pero esaki no a conduci na un decision manera priminti. Pa loke ta trata e atraso di pagonan di Sint Maarten, Gobierno di Sint Maarten mester yega acuerdo di pago cu e creditornan mas importante (SZV y APS) y cumpli tambe.
Un bes mas, Cft ta yama e atencion tocante e finalisacion di e proceso di hustificacion pa completa e proceso di pago di e añanan anterior. E cuentanan anual di 2013 y 2014 a keda entrega na Parlamento na aña 2018, pero esaki no ta aproba ainda. E cuentanan anual di 2015 y 2016 ainda no ta entrega na Parlamento. Y esunnan di 2017 en 2018 mester traha riba nan ainda.
E cifranan di aña 2018 ta mustra un deficit inferior cu locual a presupuesta. Esaki ta debi principalmente na e ingresonan mas halto y mas tanto e ingresonan fiscal cu tabata presupuesta. Apesar cu e deficit ta disminuyendo toch Sint Maarten tin mester di e apoyo di likides pa e añanan 2018 y 2019. Sint Maarten a haci peticion na Hulanda pa aumenta e apoyo di likides cu ta aumenta en relacion cu e debe. Ademas un prestamo previsto pa e gastonan di captial y posibel otro documentonan di finansas por tin influencia riba e desaroyo di e debe. Cft ta keda supervisa e desaroyo di e debe pa mantene un posicion sostenibel.
E supervision di Cft Curaçao y Sint Maarten a bishita Sint Maarten di 11 te cu 13 di februari ultimo y a dirigi combersacionnan cu e Gobernado, Ministro di Finansas, Conseho di Ministro. Conseho Consultativo, Director di Oficina Nacional di Programa di Reconstruccion y Departamento di Seguro Social y di Salud.
Speakers’ Notes Cft Chairman
Thank you for being here today, on our first visit to the Windward Islands in 2019. Besides Sint Maarten, the board also visited Sint Eustatius. Given that the temporary law of task neglect is in place, the Cft has no formal role regarding Sint Eustatius. Nevertheless, we were asked to stay informed about the budget cycle and the financial management. Our visit to Sint Eustatius was informative. We were also informed on reconstructions efforts and were impressed.
I come to Sint Maarten. In the past days our board had constructive meetings with minister Geerlings and with the council of ministers. We have also spoken with SZV, the council of advice and national recovery bureau.
In our meetings with government we discussed the 2019 draft budget, the plans for the restructuring of the tax authority and financial management, liquidity support, the 2018 budget performance, the financial statements from 2013 until 2017 and the 2015 targeted instruction from the Kingdom Council of Ministers.
Looking at the revision of the 2019 budget and the plans for restructuring the tax office and financial management, we can conclude that we support the course set by the government of Sint Maarten. Given the difficult financial circumstances and the need to get a balanced budget, we encourage Sint Maarten to speed up with the afore mentioned topics.
I will now give a more detailed insight to some topics mentioned. I first want to focus on the budget of this year and the projects that the government of Sint Maarten wishes to implement.
The draft budget 2019
Sint Maarten is in the process of presenting a revised draft budget 2019. The 2019 budget is planned for discussion in the meeting of the Kingdom Council of Ministers on the 22nd of March. The Cft was asked to advise the Kingdom Council before the 5th of March.
Based on the information yet provided, the projected regular income and expenditures for 2019 seem reasonable. I must add that although the quality of the budget has improved significantly, it does not fully meet all requirements.
Due to uncertainties regarding the financing of projects to be executed in the coming years, the capital expenditures budget raises some concerns. It is not yet clear which major projects will be funded through the capital budget and which projects will go through the Trust Fund. We have discussed this matter with the minister of finance and recommend the government to finalize the financing aspects of these projects. According to the Kingdom Act on financial supervision government’s loans must be submitted to the Cft for advice. Furthermore, all proposed loans and investments must be included in the budget. Therefore, we have advised the government of Sint Maarten to have a clear outline of the capital expenditures and the financing thereof.
Economic growth and debt
The IMF recently published their so-called article 4 consultation and made the following forecast. “In a scenario without any adjustment on the revenue and spending side after 2018, the debt path will be unsustainable, with the debt rising to 49 percent of GDP in 2019 and reaching 72 percent by 2023”. The IMF recommends income increasing measures for the coming years and to implement short as well as long term measures to ensure a balanced budget.
For 2019, the IMF and also CBCS projects an economic growth of more than two percent. This is based on the recovery of tourism industry and the strong investment for reconstruction. Thus far, we have taken notice of the reconstruction efforts and commend the Sint Maarteners for the progress made thus far. Tourism is picking up and the cruise and cargo results for 2018 were better than expected.
Liquidity support
Sint Maarten needs remaining liquidity support for the year 2018 and new support for the year 2019, due to budget deficits. This support as well as other possible financing matters will lead to an increase of the debt-to-GDP ratio. The Cft will monitor the development of the ratio, given the importance of maintaining a sustainable level.
Reform of the tax office
The financial recovery plan, which was presented last year, highlighted two major projects: the reform of the tax office and the financial management improvement plan. During the past years, the Cft has stressed the importance of improvement in both areas.
As also illustrated in the financial recovery plan, there is the need to increase the tax income to achieve a surplus on future budgets. This will make Sint Maarten no longer dependent on the current liquidity support and even lowering the debt to GDP ratio. Given the size of both projects mentioned it is advisable to properly evaluate the business case and we advised minister Geerlings to do so.
Financial Management
During the previous visit in October 2018, the Cft and the minister of finance made the agreement that Sint Maarten will work towards a unqualified audit opinion on the 2021 financials. The board has understood that the new improvement plan is to be approved by the council of ministers. However, financial management is more than just an unqualified audit opinion.
It is important for the government to invest in its staff and their resources and to make sure every minister and ministries understands the importance of having sound public finances. Therefore, as we understand, the financial management project will include specific training to improve the financial reporting in all the ministries.
Payment arrears
Part of the 2015 instruction was to reduce the payment arrears of the government. As disclosed in the draft budget 2019, Sint Maarten ended the year 2018 with around 150 million guilders in payment arrears, of which around USD 90 million to SZV and USD 40 million to APS. This is almost 15% of GDP! The Cft advised the government to make realistic formal settlement agreements with the relevant institutions and we agreed to be informed on this in due course.
Financial statements
The budget and reporting cycle for the years 2013-2017 has not been completed. Although the reports of the accountants, the Cft and audit chamber are published, the financial statements for 2013 and 2014 must still be approved by the Parliament and the financial statement for 2015 is not yet presented to parliament by government. The process towards getting the mentioned financial statements to parliament has taken a considerable amount of time and is in violation of local ordinance.
In addition, the Cft has not yet formally received the 2016 financial statements accompanied by the findings of the SOAB and the General Audit Chamber. We did take notice of the report by the audit chamber. Although the number of errors is becoming lower, there are still major shortcomings in financial management. For almost all items in the annual accounts this has led to uncertainty on the correctness and the completeness of the amounts. According to the latest planning received, the 2017 financial statements will be presented to parliament in the second quarter of this year. In our meeting with the cabinet, we have advised cooperation by all ministries to ensure that this target is met as the deadline in the ordinance was the 31st of August 2018.
Budget performance 2018
The budget deficit for the first three quarters of 2018 amounted to 71.5 million guilders. Based on the report on the month of November the budget deficit until then was 87.6 million guilders. These are preliminary amounts, but it shows a much lower deficit, mainly because income is on a higher level than expected. That is positive news and Illustrates the increasing economic activity in Sint Maarten.
The 2015 targeted instruction from the Kingdom Council
In November 2018 Sint Maarten reported on the follow-up of the instruction. The Cft issued an advice accompanying this letter at the request of the State Secretary of the Interior and Kingdom Relations. Let me mention two points.
Healthcare system
With respect to the reform of the healthcare system, the Cft advises to strengthen the cost-cutting measures already in short term in order to reduce the current deficits and make the healthcare sector more financially sustainable. This morning we discussed this issue with SZV and they stressed the importance as well.
Pension reform and old age provision
The cost savings as a result of the pension reform for civil servants are included in the new draft budget 2019. This reform is set to be enforced on the first of May 2019. The proposed date is feasible only if the new pension scheme passes through parliament on a short term. The Cft express its disappointment that until present day, no decision has been made by parliament. The missed cost savings of not implementing this pension scheme as per January first amounts to several millions and this negative effect on the budget performance will increase if implementation is further delayed.
Furthermore, we discussed an increase of the AOV age from 62 to 65 years. Currently, Sint Maarten is the only country in the Kingdom were this age for the public pension scheme is not 65 or higher. The Cft advised this change in order to increase the sustainability of the public finance. In ageing society such reforms are necessary to keep the AOV and other public institutions affordable and available for the next generation.
In conclusion, the main message of our board is to go forward with the course that is set by the government and to speed up the process where possible also in the interest of the budget and the people of Sint Maarten.
Thank you for your attention.