Donner predicts higher prices from current account deficit

POSTED: 10/17/11 11:37 AM

WILLEMSTAD – Minister of Home Affairs and Kingdom Relations Piet Hein Donner has informed members of the Second Chamber that while Curacao’s current account deficit will have no impact on the debt of Curacao and St. Maarten and on the Dutch tax payer, the deficit will lead to higher prices. Donner’s letter is a written response to a letter questions by VVD MP André Bosman.

Donner informs parliament that the deficit arose because there is too much spending on imports and not enough revenue from exports. He opines that it can be solved by spending less or by adjusting monetary policy.
“A deficit on the current accounts could, in principle, place pressure on the fixed relationship between the guilder and the dollar. An adjustment to the fixed ratio may affect price levels in both countries and that mechanism could lead to upward pressure on spending,” Donner wrote n his letter.

Donner also informed MPs that the Central Bank had already raised the reserve requirement for banks in compliance with an advice from the International Monetary Fund. He’s also stressed that the International Monetary Fund and the Board of financial supervision (Cft) have suggested both Curacao and St. Maarten work to structurally strengthen their economies and to be cautious when spending.

Donner also provided assurances that the Consensus Kingdom Law on Financial Supervision states how much debt Curacao and St. Maarten can have. He also said that if the situation with the current account deficit worsens the Kingdom partners will decide on crisis measures based on the cause of the situation and the political choices that are available.

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