Today’s Opinion: Financial supervision

POSTED: 05/19/11 12:24 PM

It is interesting to note that eight members of our Parliament actually attended a meeting with the Financial Supervisor Cft this week. While the budget and the matter of financial supervision are probably the hottest political potatoes around until at least 2017, seven members of parliament apparently had other pressing matters to deal with. One MP, National Alliance leader William Marlin, had informed the Parliament that he was unable to attend.

But the others? They missed a unique opportunity to ask direct questions, and to hear information from the horse’s mouth. Apparently, this was not worth their time.

There is no doubt that the relationship between St. Maarten and the Cft is cumbersome. That appears from the endless troubles that preceded the balanced 2011 budget, and it also appears from the strained relationship between finance Minister Hiro Shigemoto and his dismissed head of the finance department Bas Roorda.

In public, most politicians will say that St. Maarten signed for financial supervision and that we simply have to live with it. But that does not mean that the Friendly Country is a willing participant.

That appears again from a question that popped up during the meeting between Parliament and Cft. The parliamentarians wanted to know, for instance, whether the Parliament should have the final say over the budget instead of the Cft.

We assume that this question is based on a gross misunderstanding. Of course the parliament has the final say over the budget – that is, over the political decisions. The Cft is not going to tell St. Maarten what it ought to spend its money on, or how it ought to generate revenue.

The financial supervisor is simply checking whether the budget meets previously agreed upon standards. Everybody knows what those standards are, and we don’t want to get technical here by explaining them all.

The point is, the budget has to be realistic and it should not be based on a pipe dream. One of the yard sticks for a reality check is the figure the government uses for the projection of economic growth. The higher that number, the easier it becomes to balance the budget – on paper.

For 2011, the government took 1.3 percent economic growth as the basis for its calculations. We know now from a report written by the research department of the Central Bank that this figure falls in the pipe-dream category. Economic growth this year will remain flat, the analysts at the Central Bank say, or it could even be negative.

Local politicians do not like Central Bank reports that contain bad news. We remember that Vice Prime Minister Theo Heyliger more or less shrugged it off, saying that it was now up to St. Maarten to prove that the Central Bank is wrong.

Heyliger pointed out that the Central Bank has been wrong before with its predictions about St. Maarten’s economy. That could very well be true, but to use that as an argument against a serious report, assuming that those number crunchers in Curacao got it wrong again, seems a bit lighthearted, and even careless.

What if the Central Bank is right? What if the economy does show negative growth by year’s end? Would it not be better to anticipate such a situation instead of sticking our heads in the sand? Yep, that would be better, but as far as we are able to see that is not happening.

The only comforting thought is that the island’s budgets have been balanced on paper for years, that they have shown a deficit in almost all annual accounts since the early nineties, and that somehow we still are not bankrupt.

 

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