CFT approves St. Maarten’s NAf. 30 million loan request
31 May 2017
THE HAGUE/PHILIPSBURG--The Committee for Financial Supervision CFT has approved the St. Maarten Government’s NAf. 30 million loan request for several projects, including the Pointe Blanche prison and the Tax Department.
CFT Chairman Age Bakker confirmed this in a letter dated May 4, 2017, that was sent to St. Maarten Finance Minister Richard Gibson Sr. and released on the CFT website more than three weeks later on Tuesday.
St. Maarten had made the loan request on April 12 and the CFT received a further elaboration on this request on April 25. The CFT concluded that the planned projects complied with the definition of the System of National Accounts (SNA).
According to the CFT, the conditions for the approval of the loan request were complied with, as the 2017 budget has met most of the criteria of the 2015 instruction issued by the Kingdom Council of Ministers, as well as the fact that the interest expenditures of the planned investments fit within the interest expenditure norm.
The CFT did establish that a part of the planned investments for the prison and the Tax Office, about NAf. 8.3 million, was not included in the approved 2017 budget. “For this reason, the CFT advises you to implement a budget amendment regarding the capital account as soon as possible so all projects mentioned in the loan request and the associated amounts can be included and actually executed. It is necessary to include these planned loans in the budget in a clear and controllable manner through a budget amendment.”
Minister Gibson was also asked to inform the CFT of the spending of the reserved funds for unforeseen capital expenditures, which amount to about 10 per cent, or NAf. 3.1 million, of the total loan.
The CFT made clear that the Finance Minister has to seek the CFT’s approval if he plans to spend those reserved funds for something else if there are no unforeseen expenses or there is no under-spending in the projects.
After the loan has been supplied, the CFT monitors the progress of these investments to check whether the borrowed capital will indeed be used for the capital investments as stated in the loan request and has been secured in a budget amendment. The CFT advised to provide information on these investments in the executing reports.
In a separate letter, sent by the CFT on May 24, 2017, the St. Maarten Government was reminded of its responsibility by law to submit its executing report over the first quarter of this year no later than May 12. The CFT has not received this report as yet.
Apparently the problems with Government’s internal IT systems have not been solved, the CFT was informed. As a result, the Finance Ministry did not have access to all figures of the first quarter and consequently the executing report could not be supplied in time. The CFT stated that it wished to be informed beforehand if the executing report could not be submitted soon.
In an earlier letter dated April 13, 2017, the CFT addressed the preparations for the 2018 budget. The St. Maarten Government was urged to submit the 2018 draft budget on time and not late as has been the case in previous years.
“Even though the process to arrive at an approved 2017 budget was less delayed than in previous years, St. Maarten has not managed to have an approved budget in time since October 2010,” CFT Chairman Bakker stated.
The CFT advised the Government to calculate the revenue side of the draft 2018 budget in a “realistic manner” and to “preserve a structural basis.” The CFT pointed out that the budget has increasingly become dependent on incidental revenues that have proven in the past to be difficult to realise.
According to the CFT, the structural revenues have to be increased; for example, by expanding the tax base and improving tax collection. Also, the 2018 draft budget should be based on a minimum policy basis, meaning that only existing policies are budgeted and not new policy. If the financial space becomes available, new policy can be added to the budget through a budget amendment.
The CFT further advised drafting a policy with regard to the dividends of the Government-owned entities, taking into account long-term investments, stability and these entities’ financial capacity. In this manner, a more structural contribution can be secured to the St. Maarten budget.
The capital account needs to be further reduced to a “more realistic size, taking into account the executing capacity,” the CFT advised.
Government was urged to take measures before the end of 2017 to ensure a sustainable, structurally affordable health care system and pension scheme.
Source: The Daily Herald, St. Maarten