St. Maarten Prime Minister signals potential budget issues for 2012

POSTED: 07/28/11 12:21 PM

“…we’re basically going to be doing an exercise like we did in 2011…”

St. Maarten – Prime Minister Sarah Wescot-Williams believes her government should request that the Central Bank pay the one percent foreign reserve levy it collects in St. Maarten back to the government. Banks are required to collect the money from every transaction that is not done in Antillean guilder and then pay it to the Central Bank of Curacao and St. Maarten. The government has the legal right to then request that the money comes back to them, but no request has been made so far.

The prime minister’s thoughts on collecting the money from the Central Bank was part of wider response to a series of questions at Wednesday’s Council of Ministers press briefing. She told journalists that she sees the request as part of a wider discussion on government’s finances and financial sources. That discussion includes finding out what will happen to St. Maarten’s shares in companies that were owned by the Netherlands Antilles. As time passes the prime minister and her government are faced with increasing pressure and are now anticipating if a solution is not found that there will be a repeat of the discussion on the 2011 budget where government had a “huge gap in revenue” and what they want to spend on.

“I believe that if we don’t get a grasp on the larger financial issues for St. Maarten that will assist us in the budgetary process we’re basically going to be doing an exercise like we did in 2011 of trying to get blood out of stone as far as the finances of government is concerned,” Wescot-Williams said.

Government is prioritizing the revenue from the levy and the sale of shares in the Antillean companies as a source because they consider the current economic climate an unfavorable space to raise taxes.

The prime minister admits though that coming to a solution will not be easy because of issues that have surrounded and continue to surround the Central Bank. Those issues include the lack of a fully functioning board – which also still does not have a chairman – and difficulty in communicating with the Central Bank. An example of the communication breakdown is the fact that government has yet to get approval for its loan facility that will allow to do capital investments like the finalization of the new Government Administration Building on Pond Island and the lack of movement on setting up of a fully functioning branch of the Central Bank in Philipsburg. The government wants this done by January 1, 2012.

Setting up that fully functioning branch is key for St. Maarten as the government believes the government of Curacao took a clear stance on dissolving cooperation in a Central Bank when the Parliament of Curacao approved a motion to investigate the possibility for Curacao to have its own Central Bank. Prime Minister Wescot-Williams stressed again Wednesday that parties must press forward on discussing a split, instead of lingering over the issue.

“We can’t continue to act as if everything is just as it was when the agreement was made back in 2006 to have a joint central bank and I believe in cutting it off where we can and moving forward, rather than having something linger there festering and wondering what are we going to do to move forward together. It’s too important an issue to have it shrouded in that kind of uncertainty,” Wescot-Williams said.

“If today for whatever reason that split was to come and curacao and St. Maarten were to go their own way we have nothing here in terms of infrastructure to be able to do that. So our first request to the Central Bank was to comply with that part of the agreement as far as it pertains to the Central Bank. Has that happened? No, not yet. Are we on it? Yes, basically daily,” the prime minister also said.

For now the prime minister intends to meet St. Maarten’s members of the supervisory board of the Central Bank to discuss the way forward. She was less willing to commit to requesting a summit between the governments or prime ministers of Curacao and St. Maarten to discuss the issue. Wescot-Williams is convinced that the discussion is becoming more important with each day.

“I know on a minister to minister level there is communication. I have not spoken with the prime minister of Curacao since our last discussion about board members but it is becoming quite critical right now,” the prime minister said.

Dollarization

Also tied into the discussion on a joint Central Bank is the matter of a joint currency. The implementation of the Dutch Caribbean has already been delayed and St. Maarten still has not taken a formal decision on whether it will use the United States Dollar as its currency.

“We believe that it is an option that we cannot and should not discard without having received compelling arguments that it is not the way for St. Maarten to go. So in other words it is an option the government would like to pursue but we’re doing that very cautiously in coming to a decision,” the prime minister said.

The Windward Islands Bankers Association is carrying out an independent study and will submit that to government for consideration. No date has been set for a presentation.

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