Cft: Financial management still a major issuePOSTED: 06/14/12 1:03 PM
St. Maarten – The Board of financial supervision (Cft) for Curacao and St. Maarten wants the Government of St. Maarten to put more focus on its financial management and expressed support for a five year action plan that the government has crafted to deal with the different issues. That is the main conclusion of the board’s latest visit and round of consultations with Governor drs Eugene Holiday, the Council of Ministers, Finance Minister Roland Tuitt and parliament.
The Cft’s chairman Age Bakker believes that the action plan, which Finance Minister Roland Tuitt says will be sent to the Council of Ministers and Parliament by the end of July, should include clear benchmarks and will give government, the Cft, the parliament, the media and the public a tool to measure whether the government is truly improving the way it manages its finances. Next the plan the Cft believes that the government needs to strengthen the functioning of the tax administration, broaden the tax base and increase tax compliance. Government is already on the brink of finalizing a plan for improving the tax administration.
“Financial management is also about having good real time indications, so it is important to have real time information on your liquidity position in real time,” Bakker said.
Later he’d add, “Financial management has understandably been an issue in the past, but we now that it must be put in order. At a certain stage you must grow up and stop saying we are a young country.”
Though the board is somewhat patient with the new administration they are also clear that they will follow the rules as outlined in the Kingdom Law Financial Supervision.
“Sound public financial management is a prerequisite for sound financial policy and for economic growth. Improvement of financial management will help to include all expenditures and revenues in the budget and to correct, if needed, during the execution of the budget. The Cft will not hesitate to use all instruments within the framework of the Kingdom Law on Financial Supervision to achieve sound financial management and a balanced budget in a sustainable way,” the board states in a release.
The Cft chairman said it was too early to label a deficit of 30 million guilders in the budgets of 2009 and 2010 a structural deficit, but the body does believe it proves that the country is still challenged when it comes to “improving the sustainability of its public finances.” The government of St. Maarten was the one to inform the Cft of the deficits and the body has requested the government take measures to compensate for the deficits. Government informed the Cft it intends to send annual accounts to parliament soon.
Budgets 2012 and 2013
Yesterday marked the end of the three weeks the finance minister requested to provide the Cft with his plans for covering deficits in the budget, but up to the time of yesterday’s press conference there had been no letter from the government on how they would proceed. The deficit is brought on by the fact that the 21 million guilders from taxing the income of especially foreign condominium owners cannot be collected and the fact that government will be paying out the 17 million guilders in cost of living adjustment. The finance minister gave the Cft preliminary indications of his planned actions during their meeting. One measure is using the higher than projected revenue from several taxes in the first five months of the year to cover the deficit. The Cft has requested the government provide an analysis of why the increases happened and whether it is likely to continue for the rest of the year.
The Cft also believes that finalizing the 2013 budget by December 15 is doable, but they are clear that it will be challenging for the government to submit a balanced budget, when one looks at the country’s aspirations.
“We have understood some delays are there but the minister seems fully committed to getting the process going,” Bakker said.
Pensions and social security
The Cft remains concerned about how the government is moving forward with social security, healthcare costs and pension forms. The body is yet to be convinced that the projections the government is using are based on actual facts and figures and they have reminded the government of an agreement for the latter to “identify the financial impact of projected developments in social security funds and health care costs” an include these in the multiannual budget. The agreement was one of the Cft’s conditions for approving the 2012 budget. The body also believes that government must initiate reforms on the pension system now to prevent major deficits in the near future.