National Bank next step for finance ministryPOSTED: 03/2/16 12:50 PM
Ministers Gibson, Marlin, Kirindongo and Lee at the beginning of the afternoon session in parliament. Photo Today / Milton Pieters
St. Maarten News – After the approval of the 2016 budget, Finance Minister Richard Gibson will set the first steps towards the establishment of the National Bank of St. Maarten. The minister made the announcement at the end of his presentation about the draft 2016 budget to parliament yesterday morning.
“To have Gebe with 70 million guilders in the bank and do nothing with it is stupid,” the minister said. “If we put that money in the National Bank it could be used for the development of St. Maarten. Such a bank will contribute to a better development of the country.”
The minister also shared with parliament his experience from a conference call with the International Monetary Fund of last week. “St Maarten does not have a good name with the IMF in terms of producing the macro-information they need for their advice and giving direction.”
One of the causes of this inability is that the new software the immigration department is using does not match the software the airport uses. “That is silly,” the minister said. “When I asked the harbor, all the information was there. I found that the tourist bureau does not agree with the system at the airport. We have to fix these things. We need to be proud of our image and show the world that we are a country.”
Minister Gibson told parliament as well that he intends to submit the draft 2017 budget on time.
For the budget at hand, the minister made a passionate plea for unanimous approval.
“Approving this budget will set the stage for the 2017 budget. If we manage to have balanced budgets for 2017 and 2018 we can ask the Cft to vacate and set up our own Cft. Approve this budget unanimously and do not let this historic moment pass you by,” he urged parliamentarians. “The approach is objective and realistic and this will become the rule of the future. You can become one of the MPs who brought this about – a system where we spend within our means. You do not want to deny St. Maarten access to loans for capital investments. This budget is not for me, for the Council of Ministers or for the parliament, it is a budget for the people of St. Maarten.”
The finance ministry sent the draft budget for a preliminary advice to financial supervisor Cft. All recommendations from the Cft have been added to the budget through a memorandum of modification. The projected income now stands at 468 million guilders and the ceiling for expenditures at 442 million.
“The income is based on reasonable certainty, not on promises or measures that still have to be taken,” Gibson told the parliament.
The country has accumulated 60 million guilders in budget deficits over the 2010-2014 period, while there were payment arrears to social insurance agency SZV of 83 million and to general pension fund APS of 60 million by the end of 2015.
“The total debt is over 200 million guilders. The previous government wanted to sell the government administration building on Pond Island for 40 million guilders and refinance 103 million guilders in debt. “That refinancing plan was nothing else than asking for a new loan to pay off an old debt,” the minister said, adding that for this reason the Cft did not approve it last year.
The current proposal, included in the budget, is to sell the building for 45 million to SZV and to apply 22.5 million of this amount to the government’s debt to SZV. Of the rest, 19.5 million goes towards the debt to APS that in turn will buy a plot of land west of the building and construct a multi-level parking garage on it.
The government has committed to paying the windfall from the division of assets from the former Netherlands Antilles (60 million) towards the debt to APS and to pay 20 million a year for the next three years to SZV. The government leases the building from SZV for 6 percent of the total investment, with an option to buy the building back when this is convenient.
Minister Gibson addressed concerns about how the reserves at APS would be affected by the deal. “In 2014 the coverage at the pension fund was 97.6 percent and in 2015 it went down to 96.8 percent; with this arrangement the coverage will go up to 101 percent. This year we will pursue pension reform and that will increase coverage further and make sure that the fund is viable and sustainable.”
The lease agreement gives SZV a 6 percent return on its investment. “That is a healthy rate of return,” the minister said, “better than an investment in the rollercoaster stock market.”
Gibson labeled the deal as a win-win-win situation. “We pay off our debts, we get rid of the kingdom instruction and we remove the concerns of the Cft. The benefits are numerous. St. Maarten will get access to 38 million guilders in new loans for capital investments.”
However, Minister Gibson warned that the country is in for a hard time. He quoted GDP growth data from the United States – projected at one time at 3 to 4 percent for 2015 – that fell to just 0.7 percent in the third quarter of last year. The year may end at around 1.5 percent. “If the United States sneezes, St. Maarten catches a cold.”
Minister Gibson furthermore noted that, according to the IMF a debt to GDP ratio of 50 percent is still safe. St. Maarten’s ration currently stands at around 35 percent.
“We could borrow 1.2 billion guilders based on the interest norm anchored in the kingdom law on financial supervision,” Gibson said. “We would of course be crazy to do that, but to the notion that our debt to GDP ratio should not go higher than between 33 and 36 percent I say: baloney. Currently our ratio is almost the best in the world. If we moved it up 5 of 6 percent it would give us the capital for the investments that should have been made since 10-10-10.”
Talking about investments, the minister said that he is not thinking in terms of roads and buildings. “I am talking about investing in people,” he said. “When people achieve their potential, this will have a multiplier effect. That is the best investment we can make.”
Minister Gibson also addressed criticism of the cuts in subsidies to the Heineken Regatta and Carnival. “In 2015 the government did not pay the regatta any subsidy, because the regatta did not comply with our agreement. They should have used the money for the direct promotion of St. Maarten, but instead they wanted to apply it to operational costs.”
The minister said he appreciated the reaction from the Carnival foundation to its subsidy cut. “They said: we understand, so we are going to the private sector. That is a message of self-reliance. Everybody has to share in the pain and we can only do what we can do. Most subsidies had to be cut, not only those of the regatta and carnival.”
“Everywhere I go I hear: the government is doing a good job,” Minister Gibson continued. “That does not only apply to the Council of Ministers, but also to the parliament. “People have a feeling that something is happening, that something is changing. People walk around with a different mindset. They see progress, and that makes people feel good.”
Lastly, Minister Gibson reiterated that a system will be put in place to monitor the budget. Monthly reports from the controllers of the ministries will go to the Council of Ministers, where individual ministers will be held responsible for their department.