Aruba refinances national debt with help from the NetherlandsPOSTED: 06/10/13 1:39 PM
Aruba – Prime Minister Mike Eman says that the process to refinance the country’s national debt with help from the Netherlands has already started. At the same time VVD-MP André Bosman in The Hague has asked Kingdom Relations Minister Ronald Plasterk whether Aruba meets the international standards for sustainable government finances.
Bosman also asked the minister why the Netherlands has subscribed to bond issues for the Aruban national debt, “while it appears now that this only causes them to create more debts?”
Bosman furthermore asked whether the minister shares the opinion that the Netherlands should not participate in the bond issues, and whether article 43 of the Kingdom Charter (the guarantee function) means that the Netherlands is in the end responsible for Aruba’s debts.
A prognosis by the Central Bank of Aruba foresees that the national debt will increase this year to 3.3 billion florins ($1.84 billion).
Eman told the Amigoe that he is talking with the Netherlands about refinancing. He acknowledged that the country will have to meet the budget standard of a maximum deficit of 3 percent of the gross domestic product (GDP).
“This year we are just above it, next year we will meet that standard. This does not only mean that we will be able to borrow internationally against lower interest rates, but also that based on the protocol with the Netherlands the whole national debt can be refinanced against a much lower interest rate,” Eman said. Aruba signed this protocol with the Netherlands in March.
On Tuesday the Dutch senate debated the situation in Aruba. The senators appreciated the sustainable growth in Aruba and the country’s cooperation within the Kingdom, but they also expressed concerns about the financial situation.
Eman said last Thursday that the Dutch government is prepared to help Aruba with the refinancing because it has confidence in its cabinet-policy. “This appeared from statements in the senate whereby they expressed their admiration for Aruba’s course. They all said, wow, this is a government looking for harmony and cooperation within the Kingdom.”
The Dutch assistance guarantees economic recovery and financial stability for the coming years, Eman said. “Because we take care of reform the confidence in us is big. There is a visible distrust in the previous government and the characters of that time, because of their negativism and their criticism of the Netherlands. That is why they have never succeeded, but we did.”
Whether Eman’s optimistic view on Aruba’s finances will hold up remains to be seen. Based on a 2012-deficit of 5.5 percent of GDP and a 4,.6 percent deficit this year, the government expects to meet the 3-percent standard next year. But the International Monetary Fund has a different view: it sees an 8.5 percent deficit for 2012 and 6 percent for this year. The Central Bank estimates the 2013 deficit at 5.6 percent. In 2016, when the government expects to present a balanced budget, the deficit will still be 4.7 percent according to the Central Bank.
Finance Minister Mike de Meza has pointed out that the Central Bank figures are based on unchanged policies. Which additional measures the government has in mind to deal with the deficit is still unclear: Members of Parliament and journalists have so far not received clear answers on questions about this issue.