Central Bank criticizes SER advice about monetary union

POSTED: 12/30/13 12:38 AM

St. Maarten – The Central Bank of Curacao and Sint Maarten contests the position of the Social Economic Council (SER) that Curacao is the sole cause of the monetary union’s deficit on the balance of payments.

The SER advised the government of St. Maarten already on February 28 to step out of the monetary union. “The gist of this advice was for Sint Maarten to leave the monetary union with curacao and to adopt the US dollar as the sole legal tender in our country,” the council wrote in a letter to Prime Minister Sarah Wescot-Williams, dated September 18.

The basis for the advice was “the risk caused by the divergence of the Sint Maarten and the curacao economies, and the real possibility of a subsequent devaluation of the Netherlands Antilles guilder.”

So far, the Wescot-Williams cabinet has not acted on the advice, and now the Central Bank has taken a shot at the SER-advice at the request of reporters at the Antilliaans Dagblad in Willemstad.

The newspaper asked the Central Bank to elaborate on the SER-advice, and this was the reaction: “The SER’s conclusion that the high deficit on the current account is caused solely by curacao is based on the date of just one year (to be exact, 2012). It is however advisable to use a longer period for such analyses. Comparing the nominal balance of the current account can also produce an incomplete picture, because the two countries differ in size. The total imports for Sint Maarten will always be lower than those of Curacao because Sint Maarten’s economy (in particular the size of its population) is smaller.”

In its September 18 letter to Wescot-Williams, the SER spoke of “alarming balance of payments developments.” The SER advised the government to leave the monetary union as soon as possible.

The Central Bank notes that the SER has only compared the date for 2012, when the balance of payments for Sint Maarten showed an 11 percent deficit, and that for curacao a deficit of 27.9 percent. “From this comparison the SER concludes that the deficit on the balance of payments of the monetary union is caused by curacao, while the positive contribution of Sint Maarten somewhat diminished the deficit.”

However, the Central Bank analysis at least adds some nuance to this point of view, the Antilliaans Dagblad reports. “According to its charter the Central Bank must not only publish the data of the balance of payments of the monetary union, but also the data of each country separately. The data on country-level must be interpreted carefully, because they do not include the transactions between Sint Maarten and curacao. This is especially true for the financial account of the balance of payments.”

The Central Bank states furthermore that it uses surveys to produce these data. “The response from companies in Sint Maarten is unfortunately very low. In other words: the balance of payments data of each individual country, and especially of Sint Maarten, do not return a complete picture.”

From the balance on the current account over the past five years up to 2012 (as a percentage of each country’s gross domestic product), the Central Bank concludes, “that these accounts show unbalances in both countries, be it that they are larger in Curacao.”

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