Kingdom of the Netherlands—Curaçao and Sint Maarten: Staff Report for the 2018 Article IV Consultation Discussions
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International Monetary Fund. Western Hemisphere Dept.
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Publication Date:
25 Jan 2019
eISBN:
9781484395929
Language:
English
Keywords:
ISCR; CR; discussion; real GDP; government; authorities in Curaçao; labor market; central bank; monetary policy; Global
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2018 Article IV Consultation-Press Release and Staff Report

Abstract

2018 Article IV Consultation-Press Release and Staff Report

Context: A Union at a Difficult Juncture

1. Economic conditions in Curaçao and Sint Maarten, two autonomous constituent countries within the Kingdom of the Netherlands which comprise a monetary union, continued to deteriorate over the past years. Negative external shocks further magnified the already-lackluster growth performance of both economies, exposing the underlying vulnerabilities and structural weaknesses. In Curaçao, the ongoing crisis in Venezuela—one of its main trading partners and just about 100km away—is taking a toll on the economy and creating major uncertainty for the outlook. In Sint Maarten, Hurricanes Irma and Maria had a devastating impact in September 2017, causing an estimated US$2.7 billion (over 250 percent of the island’s GDP) in damages and losses.

A01ufig1

Real GDP Growth

(Percent)

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Sources: Authorities’ data, IMF staff estimates, and IMF WEO database.

2. The political and institutional setting has been volatile. In Curaçao, political instability dominated most of the early part of 2017, culminating in early general elections in April 2017. Facing challenges on both the growth and fiscal fronts, the authorities are looking into ways to boost investment. To support Sint Maarten’s recovery, the Netherlands set up a reconstruction fund to be disbursed though a World Bank-administered Trust Fund, which became operational by July 2018. After a change of government following the hurricanes and early elections in February 2018, a new cabinet was sworn in in June, pursuing a program aimed at sustainable rebuilding and government restructuring.

Recent Economic Developments

A. Curaçao

3. Curaçao’s economy contracted in 2016–17, marking five years of recession in the seven years since gaining autonomy in 2010 (Table 1 and Figure 1). Spillovers from Venezuela have been the main drag on growth, as trade shrunk, stay-over tourism from Venezuela dropped, and the Isla refinery operated by the Venezuelan state-owned oil and natural gas company, PDVSA, was underutilized and undermaintained. The construction sector, with a few major projects, was one of few bright spots amid an otherwise broad-based slowdown. Weak performance continued in the first half of 2018, as low refinery utilization more than offset the uptick in tourism. Inflation was zero in 2016 but rose to 1.6 percent (12-month moving average, y/y) by end-2017 driven by international prices, reaching 2.2 percent in September 2018. The unemployment rate increased from 11¾ percent in 2015 to about 14 percent in 2017.

Figure 1.
Figure 1.

Curaçao and Sint Maarten: Real Sector Developments

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Sources: Authorities’ data, IMF WEO database, and IMF staff estimates.1/ The average for Antigua and Barbuda, Aruba, The Bahamas, Barbados, Dominica, Grenada, Jamaica, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines.2/ Latest data available over 2015–17.
Table 1.

Curaçao: Selected Economic and Financial Indicators, 2013–23

article image
Sources: Data provided by the authorities, and IMF staff estimates.

Excludes consumption of fixed capital.

The 2016 figure refers to July–December 2016.

4. Curaçao’s fiscal position worsened significantly, triggering corrective actions as stipulated by the rules of the union’s fiscal supervision framework (Table 2 and Figure 2). The current balance turned to a deficit of 0.6 percent in 2017 (from a surplus of close to 1 percent of GDP in 2015), as nontax revenues declined and spending on goods and services increased.1 The overall balance also worsened due to construction outlays on a new hospital (1½ percent of GDP). Gross public debt rose to 50 percent of GDP in 2017 (from 44 percent of GDP at end-2015), mainly driven by the arrears to the public pension fund (APC) and the Social Insurance Bank (SVB). Given the breach of the rule, which prohibits current budget deficits, Curaçao is required to compensate NAf 117 million (2 percent of GDP) for past deficits by achieving current budget surpluses starting in 2018.

Figure 2.
Figure 2.

Curaçao and Sint Maarten: Fiscal Developments

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Sources: Authorities’ data, IMF WEO database, and IMF staff estimates.1/ From 2016, the Social Insurance Bank (SVB) is included in both revenue and expenditure.
Table 2.

Curaçao: Government Operations, 2013–23

(Percent of GDP unless otherwise indicated)

article image
Sources: Data provided by the authorities and IMF staff estimates.

From 2016, the central government operations include the social security bank (SVB).

Includes transfers to cover the deficit of funds not integrated into the central government budget, such as those for social security/insurance.

The denominator is the average of total revenue in the previous three years.

B. Sint Maarten

5. Sint Maarten’s growth has been decelerating since 2014, and the real GDP is estimated to have contracted by about 4¾ percent in 2017 following Hurricane Irma (Table 3 and Figure 1).2 With major tourism infrastructure (including the airport and big hotels) destroyed, cruise and stay-over tourist arrivals declined by about 25 percent (y/y) in 2017. Preliminary data suggest that the recovery, particularly in stay-over tourism, remains slower than in other hurricane-affected regional peers. Inflation increased in 2017 to 2.2 percent. With about half of the labor force engaged in the tourism sector, the labor market was severely affected although various arrangements to keep employees, such as via training and other programs helped cushion the impact. Total insurance claims amounted to about NAf 1 billion, of which about two thirds were paid by end-September 2018.

Table 3.

Sint Maarten: Selected Economic and Financial Indicators, 2013–23

article image
Sources: Data provided by the authorities; and IMF staff estimates.

Excludes consumption of fixed capital.

The 2016 figure refers to July–December 2016.

A01ufig2

Stay-over Tourist Arrivals

(Percent change relative to the same period of the previous year)

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Sources: Authorities’ data, Caribbean Tourism Organization, and IMF staff calculations.

6. While Sint Maarten’s fiscal position was improving prior to Hurricane Irma, the large drop in tourism-related revenues and increase in expenditures significantly worsened the 2017 fiscal accounts (Table 4 and Figure 2). The 2017 overall deficit reached 3½ percent of GDP, including about 2 percent of GDP in Irma-related expenditures. The liquidity shortfall was initially met by a drawdown in government deposits and eventually supported by a loan from the Netherlands of NAf 50 million. Gross public debt remained at about 34 percent of GDP by end-2017. In March 2018, the Kingdom Council of Ministers (the executive body of the Kingdom of the Netherlands) allowed for a temporary deviation from the balanced budget rule in 2017–18. To support the island’s recovery, the Netherlands set up a €550 million reconstruction fund (about 65 percent of GDP), committing up to €470 million to be disbursed through a World Bank-administered Trust Fund until 2025. The operations of the Trust Fund are gradually stepping up, with three projects amounting to about US$103 million over 2018–23 approved as of mid-December 2018 and other projects under preparation.3

Table 4.

Sint Maarten: Government Operations, 2013–23

(Percent of GDP unless otherwise indicated)

article image
Sources: Data provided by the authorities and IMF staff estimates.

Includes transfers to cover the deficit of funds not integrated into the central budget, such as those for social security/insurance.

The denominator is the average of total revenue in the previous three years.

C. The Monetary Union

7. The external position of the union has deteriorated since 2015 (Table 5). The current account deficit continued to widen to 15 percent of the union GDP in 2017, as tourism receipts declined in both countries while imports increased in Curaçao due to higher oil prices and construction activities. In Sint Maarten, lower imports and insurance payouts kept the current account positive in 2017. Official reserves stood at US$1.3 billion (about 4½ months of imports) as of November 2018. External debt is estimated at about 74 percent of GDP in 2017, half of which is the government debt (in local currency) to the Netherlands. Curaçao’s and Sint Maarten’s real effective exchange rates (REERs) steadily appreciated in recent years. Staff’s assessment, while complicated by data availability, suggests that the external positions of Curaçao and Sint Maarten are moderately weaker than justified by medium-term fundamentals and desirable policies (Annex II).

Table 5.

Curaçao and Sint Maarten: Balance of Payments, 2013–23

(Millions of U.S. dollars unless otherwise indicated)

article image
Sources: Centrale Bank van Curaçao en Sint Maarten, and IMF staff estimates.
Table 5a.

Curaçao: Balance of Payments—Current Account, 2013–23

(Millions of U.S. dollars unless otherwise indicated)

article image
Sources: Centrale Bank van Curaçao en Sint Maarten, and IMF staff estimates.
Table 5b.

Sint Maarten: Balance of Payments—Current Account, 2013–23

(Millions of U.S. dollars unless otherwise indicated)

article image
Sources: Centrale Bank van Curaçao en Sint Maarten, and IMF staff estimates.
A01ufig3

Monetary Union: Current Account

(Percent of GDP)

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Sources: Centrale Bank van Curaçao en Sint Maarten, and IMF staff calculation.

8. Broad money expanded strongly, and private credit grew despite the economic downturn in 2017 as excess liquidity remained high (Table 6 and Figure 3). The surge in demand deposits, likely reflecting inflows of post-hurricane insurance payouts, drove the growth in broad money supply. The increase in business and consumer loans in Curaçao more than offset the decline in private credit in Sint Maarten in 2017. Overall, private credit growth slowed in the first months of 2018. After keeping its pledging rate (at which commercial banks borrow from the central bank) at the historical low level of 1 percent since end-2008, the Centrale Bank van Curaçao en Sint Maarten (CBCS) increased it twice since 2017 to 2 percent, following the U.S. Federal funds rate hikes (given the exchange rate peg to the U.S. dollar).

Figure 3.
Figure 3.

Curaçao and Sint Maarten: Monetary Developments

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Sources: Centrale Bank van Curaçao en Sint Maarten, IMF WEO database, and IMF staff calculations.1/ For countries with differentiated reserve requirements (RR), the RR for commercial banks and domestic currency is shown.
Table 6.

Curaçao and Sint Maarten: Monetary Survey, 2010–17

(Millions of the Netherlands Antillean guilders unless otherwise indicated)

article image
Sources: Centrale Bank van Curaçao en Sint Maarten, and IMF staff calculations.

9. Past weaknesses in the financial sector oversight have become evident. The CBCS has intervened by placing three financial institutions under emergency administration (including the largest private insurer and private pension administrator in Curaçao since July 2018) and has been providing short-term liquidity to some commercial banks (though there is high excess liquidity in the banking system). Financial conditions of the banking sector deteriorated in 2017 (Table 7), including an increase in the NPL ratio. While the introduction by the CBCS of a New Chart of Accounts Reporting System for credit institutions in July 2016 created a break in the indicators and a data quality control is underway, preliminary data suggest that the net income of the banking sector was negative as of end-2017 (e.g., ROA was -0.5 percent) but improved somewhat in the first quarter of 2018, along with some improvements in the capital and NPL ratios.

Table 7.

Curaçao and Sint Maarten: Financial Soundness Indicators, 2010–17

(Percent unless otherwise indicated)

article image
Source: Centrale Bank van Curaçao en Sint Maarten.

As of 2017:Q3; the financial indicators have not been produced for 2018 given the data quality control planned for the beginning of 2019.

10. Financial innovations are gaining traction. Curaçao officially licensed the first casino operating on a cryptocurrency platform in 2017. The first cryptocurrency investment fund was approved for listing on the Dutch Caribbean Securities Exchange in February 2018, and bitcoins are being accepted at a local supermarket. In August 2018, the CBCS signed a Memorandum of Understanding with a Barbados-based Fintech company to explore the feasibility of the CBCS issuing a digital currency, to facilitate digital financial payments within the monetary union.

Outlook and Risks

11. Curaçao’s economy is expected to start recovering in 2019 but remain on a subdued growth path. The staff’s baseline—conditional on a continued negative outlook for Venezuela (as in the October 2018 World Economic Outlook)—assumes that (i) the Isla refinery would continue operations after the contract with PDVSA expires in 2019 but at a low capacity (given the lack of information on the new arrangement at this stage), and (ii) the gradual recovery in tourism will continue. Staff expects real GDP to contract further by 2 percent in 2018, before stabilizing at an average annual growth of 0.4 percent over the medium term, broadly in line with the CBCS projections. The negative output gap, estimated at about 2 percent in 2018, is expected to narrow gradually; however, absent major structural reforms, potential growth is estimated to remain negative and near zero (Annex III). Inflation will stabilize at 2½ percent.

A01ufig4

Curaçao: Real GDP Growth and Estimated Contributions

(Percent)

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Sources: Authorities’ data, and IMF staff estimates and projections.

12. Sint Maarten’s real GDP is projected to contract by 8½ percent in 2018 in the staff’s baseline scenario, assuming a decline of about 45½ percent (y/y) in tourist arrivals. A combination of the recovery of the tourism industry and the strong investment for reconstruction is projected to turn output growth positive in 2019, and then to stay slightly above its historical trend of 1.8 percent real GDP growth over the medium term, remaining somewhat below regional peers. After a projected acceleration to 2¾ percent in 2018,4 inflation is projected to remain at around 2 percent over the medium term. There is, however, significant uncertainty about the growth path given limited information about the amount, types, and timing of reconstruction activities. The large gap between reconstruction needs (estimated at US$2.3 billion) and identified public and private financial resources (around US$1.2 billion) persists, slowing the pace of recovery.5

13. The union’s current account deficit is projected to gradually narrow over the medium term but remain high compared to regional peers. Curaçao’s current account deficit is expected to improve slightly as tourism receipts increase and construction-related imports decline. In Sint Maarten, post-hurricane construction imports are expected to keep the current account deficit in double digits as a share of GDP in 2018–20. Official reserves would stabilize close to 4 months of imports, in line with regional peers (Annex II).

A01ufig5

Current Account Balance and Official Reserves

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Sources: Centrale Bank van Curaçao en Sint Maarten, IMF WEO database, and IMF staff estimates.

14. Risks to the outlook are mainly on the downside, reflecting external vulnerabilities and domestic structural weaknesses (Annex IV, Risk Assessment Matrix).

  • For the union, weaker-than-expected global growth could curb tourism demand, slowing the much-needed tourism sector recovery. A stronger U.S. dollar (due to tightening of global financial conditions) could negatively impact the islands’ competitiveness vis-à-vis non-U.S. tourist markets. The high current account deficit, especially if it widens further, and high excess liquidity in the banking system, if directed toward greater investments abroad, could pose a risk to external stability. A slow progress in strengthening financial sector oversight, AML/CFT frameworks, and central bank governance could lead to further losses of correspondent banking relationships (CBRs). The risk of cyber-attacks on public and other agencies is elevated due to weak IT systems and capacity.

  • For Curaçao, the continuing crisis in Venezuela is the main risk, causing also major uncertainty about the refinery’s future. On the upside, quickly identifying a strategic partner for the refinery could boost growth and investment, while regional and cruise tourism could benefit from the recent port expansion and expected resumption of operations by a local air carrier.

  • For Sint Maarten, where hurricanes remain a major risk, slower-than-expected progress on reconstruction, including the airport, implementation risks, and lower-than-projected reinvestment of private insurance payouts pose further downside risks to the outlook and sustainability of the recovery. On the upside, availability of additional resources and faster implementation within well-defined priorities could speed up the recovery and raise growth.

Authorities’ Views

15. The authorities broadly agreed with staff’s views on the outlook and risks. In Curaçao, the authorities stressed the importance of the refinery as a key pillar of the economy and their efforts to secure short- and long-term solutions for its continued operations. They saw the ongoing infrastructure modernization and construction of new hotels, together with further investments in the tourism sector, as an upside risk to the outlook. On the downside, the authorities noted a risk of a refugee crisis from further disruptions in Venezuela. In Sint Maarten, the authorities pointed out the demand for hotel rooms and reconstruction, expecting hotel capacity to return to pre-hurricane levels by end-2020. They noted the downside risk from a hike in insurance premiums. Given the gap between the reconstruction needs and identified financial resources, the authorities’ Governing Program 2018-2022 “Building a Sustainable Sint Maarten” stresses the need to find sufficient financing resources for rebuilding of Sint Maarten, including through prioritization, raising income, cutting costs, and seeking additional funding.

Policy Issues

A. Fiscal Policy: Strengthening Fiscal Frameworks, Ensuring Fiscal Sustainability, and Building Resilience

16. Curaçao and Sint Maarten need to urgently adopt a medium-term fiscal framework with a long-term debt anchor. Fiscal challenges facing both economies and mixed compliance have exposed the shortcomings of the current rules-based framework. This includes the lack of a fiscal anchor, drawbacks of the balanced current budget rule, rigidities in capital spending, the lack of a well-defined ‘escape clause’ which allows for deviations from the rules in the face of major shocks, and stipulations to build fiscal buffers (Annex V). A well-designed fiscal framework should have a fiscal anchor linked to the final objective of fiscal policy (debt sustainability) and an operational rule (or rules) on fiscal aggregates, such as spending rules, that are under the control of the government. As recommended previously, the level of 40 percent of GDP can be used as a desirable long-term debt anchor; a further specialized assessment would be needed to look into both the country-specific design and calibration of the fiscal framework and rules.6

17. In both countries, fiscal risks should be addressed through structural measures and greater fiscal transparency.

  • Budgetary arrears vis-à-vis the social security and pension funds have become endemic. While greater fiscal discipline and tight spending controls would prevent future arrears, further reforms to ensure financial viability of the social security funds and the healthcare systems are needed.

  • Reliance on one-off non-tax revenues from state-owned enterprises (SOEs) undermines fiscal discipline and potentially creates quasi-fiscal costs and contingent liabilities by shifting costs outside the budget. A clear framework for SOEs, including a predictable and balanced dividend policy, would need to be put in place.

  • Fiscal transparency, reporting and coverage would need to improve significantly, to facilitate policy analyses and assess financing and liquidity needs, including by adopting international standards on government finance statistics (Government Finance Statistics Manual). It is important that the budgets have a comprehensive coverage to transparently and consistently account for social security funds, and in the case of Sint Maarten, also include the Dutch fund for reconstruction purposes. Use of extra-budgetary funds, including for investment, should be avoided; at a minimum, their data should be consolidated with the budget, and a coherent public investment management framework developed. Budgetary decisions should be aligned with the governments’ policy priorities.

A01ufig6

Stock of Government Domestic Arrears

(Percent of GDP)

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Sources: Authorities’ data, and IMF staff calculations.

Curaçao: Significant Fiscal Deterioration and Risks Call for a Strong Structural Response

18. Curaçao’s fiscal position is expected to improve from 2018, though falling short of the needed adjustment to compensate for the 2017 deficit (Table 2). The authorities are implementing a package of measures focused on multi-year cuts in personnel expenditure, across-the-board reductions in spending on goods and services, and revenue administration. The measures aim to achieve a cumulative current budget surplus of NAf 117 million in 2018-20. Staff projects the current balance to improve by about 2½ percentage points of GDP in 2018, but still not reaching the current budget surplus expected in the amended 2018 budget.

Curaçao: Fiscal Projections and Comparison

(Millions of NAf)

article image

Includes depreciation.

19. Additional structural fiscal measures would be needed to put the public debt on a sustainable downward path. Even with the authorities’ target current balances expected to record surpluses over the medium term, the overall budget deficit will remain at about 1¼ of GDP in the staff’s baseline. Importantly, this masks a continuing deterioration of the SVB accounts (which the authorities stopped consolidating in their reports in 2018), assumed to be covered through the SVB reserves. In the staff’s baseline, the new hospital will have a negative fiscal impact as its higher operating costs are not fully offset by cost-saving measures (Annex VI). Gross public debt will decline slowly, remaining at about 47½ percent of GDP by 2023 (Annex VII). To bring debt down closer to 40 percent over the medium term, an improvement in the overall balance of about 1¾ percent of GDP relative to the baseline would be needed in 2019–23. A tighter fiscal policy stance would also help strengthen external stability.

Curaçao: Fiscal Scenarios

(Percent of GDP unless otherwise indicated)

article image

Authorities’ definition: includen depre dation.

20. Staff discussed a possible strategy to create space for fiscal buffers and public investment through further structural reductions in current spending and greater revenue mobilization. To support this effort and make it sustainable, the adjustments would need to be accompanied by structural improvements in revenue administration, adjustments in public services provision (such as through a comprehensive public expenditure review), organization of public administration, and stronger public financial management.

  • Public sector wage bill. With about one quarter of total employed working in the public sector, Curaçao’s public sector wage bill (at close to 12½ percent of GDP) is among the highest in the region. Reducing it closer to the regional average by 2023 would generate about 1½ percent of GDP in savings. Such reduction could be achieved through attrition, a hiring freeze, review of non-wage benefits, preferably within a broader civil service reform to modernize service delivery and make it more efficient and performance-oriented. The envisaged CARTAC technical assistance (TA) on personnel/payroll controls could contribute to this end.

  • Health and social insurance. The persistent deficits of the largest health and social insurance schemes call for further measures (Annex VI). Despite past reforms, the general old-age pension fund (AOV) remains underfunded, and the APC struggles to meet its target coverage ratio. Consideration should be given to further increasing the retirement age. Despite expected savings on medical services, further cost-cutting measures should be identified to offset the higher operating costs of the new hospital (especially if contributions do not rise). The design of some social welfare schemes (like sickness insurance and unemployment benefits) appears to create serious disincentives to work and would need to be reformed. Ensuring that the operations of the new hospital would be budget-neutral and the AOV is more self-sustainable are assumed to provide additional savings of ¾ percent of GDP by 2023.

  • Revenue administration reforms could help mobilize additional revenue of 0.2 percent of GDP annually, supported by TA in this area. Additional revenue from better tax administration could be saved to increase the fiscal buffers.

  • Fiscal buffers and public investment. The created fiscal space, in addition to providing a fiscal buffer, would allow a gradual increase in public investment over the medium term.

A01ufig7

Public Sector Wage Bill, 2017

(Percent of GDP)

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Sources: Authorities’ data, IMF WEO database, and IMF staff estimates.

Authorities’ Views

21. Maintaining a balanced current budget is one of the authorities’ main priorities, and they emphasized their continuing efforts to compensate for the 2017 deficit, in line with the agreement with the Cft (the Dutch-led Financial Supervision Board). They pointed out the multi-year nature of the ongoing cuts in personnel expenditure and across-the-board reductions in spending on goods and services and expressed readiness to look into possible implementation of the staff’s recommendations for further structural reductions and reforms. The authorities were mindful of the need to reduce the government debt closer to 40 percent of GDP and are considering options to reduce the large stock of arrears to the APC. They have embarked on technical assistance in revenue administration from the CARTAC, stepped up tax collection efforts, and noted the need to simplify tax filing and legislation. Sharing the concern about sustainability of social security schemes, the authorities are discussing solutions, including to reduce some non-contributory pension programs although excluding a further increase in the retirement age. They took note of the recommendations concerning the use of extra-budgetary funds, including for investment which they plan to finance primarily through privatization proceeds.

Sint Maarten: Post-Hurricane Response Requires Clear Prioritization and Strengthening Fiscal Resilience, with Critical Donor Support

22. After a significant deterioration in 2018, Sint Maarten’s fiscal position is expected to improve from 2019, as the economy recovers, and the envisaged measures are enacted (Table 4).7 The fiscal outturn in the first nine months of 2018 has been better than envisaged in the budget, with revenue collection overperforming budget expectations. Spending remained contained, reflecting in part delays in filling public sector vacancies. The stronger base would lead to higher revenue in 2019 compared to the authorities’ draft budget. The 2018 budget amendment and the 2019 draft budget include some measures to contain spending such as enacting a civil service pension reform and lower personnel costs.

Sint Maarten: Fiscal Projections and Comparison

(Millions of NAf)

article image

IMF projections incorporate Special Projects financed through Grants from the Trust Fund; these are not included in the authorities’ budget.

Social security payments to civil servants were reclassified from transfers to compensation.

Excludes depreciation.

23. Donor budget support will be critical for 2018–20. Donor budget support, totaling NAf 256 million (about US$140 million)—of which one third for capital spending—remains critical in 2018–20. On July 7, 2018, the Kingdom Council of Ministers approved Sint Maarten’s request for liquidity support in 2018, and the modalities for deficit financing have been under discussion as of end-November. The staff’s baseline assumes that the World Bank-managed Trust Fund will be used for reconstruction projects though grant financing, while the overall budget deficits (that is both current budget deficit and non-Trust Fund capital expenditure) will be financed through loans, within the “standing subscription” arrangement (Annex V).

24. There is a need for clear prioritization of government spending independently of the source of financing. As a medium-term plan underpinning their Governing Program and based in part on staff’s recommendations, the authorities have prepared a Financial Recovery Plan (FRP) 2018–2022. It envisages tax administration measures and tax reforms to increase revenue, plans to identify cost-cutting measures, repayment of arrears and building a fiscal buffer, as well as improvements in public financial management and government efficiency and modernization. In addition to the Trust Fund, the FRP assumes about US$410 million in loans over 2019–25 to finance capital expenditure and stimulate the economy. While the FRP assumptions may change (given the ongoing discussions on the modalities of deficit financing), such a borrowing scenario raises risks to fiscal sustainability. The program and implementation framework within the government should be strengthened around a comprehensive and clear budget plan, which should cover all priority projects (including the Trust Fund), be fiscally sustainable, and duly consider implementation and absorption capacity. The Ministry of Finance should build capacity to carry out medium-term macro-fiscal analysis, with a consolidated view on public finances and strong coordination within budget processes.

25. Significant fiscal effort will be needed over the medium term to ensure debt sustainability and build fiscal resilience. Fiscal measures leading to an overall budget surplus of ¼ percent of GDP by 2023 (an improvement of about ¼ percent of GDP relative to pre-hurricane average deficit of 0.6 percent of GDP in 2011–16) would ensure a firm decline of the debt-to-GDP ratio. Government debt is projected to peak at 46½ percent of GDP in 2020 before declining toward 40 percent by 2023. The path, however, is sensitive to adverse shocks, peaking at 63¾ percent of GDP in 2020 under a combination of low growth and a natural disaster shocks (Annex VII).

A01ufig8

Sint Maarten: Fiscal Balances and Gross Debt

(Percent of GDP)

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Sources: Authorities’ data, and IMF staff estimates.

26. Staff presented options for potential fiscal savings and building resilience over the medium term.

  • Spending measures. To rein in current spending, the authorities could, among other options, consider rationalizing spending on goods and services, reducing the cost of politics (such as wages and benefits of high public office holders), implementing a hiring freeze in the public sector and a pension reform. The envisaged introduction of a general health insurance should be budget-neutral (Annex VI).

  • Revenue measures. In addition to strengthening tax administration, simplifying tax filing, effectively utilizing new IT-systems, and expanding the taxpayer base to include new businesses (such as in the construction sector) could boost revenue.

  • Fiscal buffer. Sint Maarten’s recent membership of the Caribbean Catastrophe Risk Insurance Facility is a welcome step towards a broader disaster risk financing strategy which should include creating a fiscal buffer. The staff’s baseline envisages annual allocations in the amount of ½ percent of GDP, using as a guidance estimates from the staff advice provided to peer countries (for example, The Bahamas).

A01ufig9

Expenditures on Goods and Services, 2017

(Percent of GDP)

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Sources: Authorities’ data, IMF WEO database, and IMF staff estimates.

Authorities’ Views

27. The authorities broadly concurred with the staff’s assessment of the fiscal outlook for 2018–19 and expect to achieve current budget surpluses after 2020. They pointed out the initial steps taken to strengthen tax administration, also with technical assistance from the regional Dutch counterparts. They are also working on a health system reform, including a new hospital and a general health insurance which they expect will increase coverage and transparency and achieve financial sustainability. The authorities noted that their Financial Recovery Plan (FRP), based in part on the IMF recommendations, presents an alternative scenario where additional financing (other than the Trust Fund and insurance payouts) through loans is used to cover part of the reconstruction needs and other government priorities. While noting that, under the extraordinary circumstances, the public debt will increase over the recommended 40 percent of GDP norm (in the FRP, it peaks at 66½ percent of GDP), the authorities expressed interest in looking into a Sint Maarten-specific assessment of a public debt ceiling to be used as a long-term fiscal anchor.

B. Enhancing Potential Growth and Competitiveness

28. Recent developments in the union underscore the urgent need to address the longstanding underlying structural weaknesses and strengthen productivity and competitiveness. Cumbersome regulations, red tape, weak governance, antiquated tax and labor laws, skills mismatches and restrictive labor markets, high energy costs and infrastructure bottlenecks, combined with political volatility, are among the main structural impediments to growth in these economies. In Curaçao, the authorities’ plans to simplify administrative procedures for business and work permits should be implemented without delay, supported by all involved ministries and agencies. In Sint Maarten, the government should streamline administrative requirements and regulations for businesses to facilitate the recovery. In both countries, labor market mismatches need to be addressed through retraining, improvements in educational and vocational training programs, and labor market regulations should facilitate economic adjustments. Boosting productivity would also contribute to strengthening external competitiveness.

A01ufig10

Labor Productivity Growth

(Perce nt)

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Sources: Authorities’ data, and IMF staff estmates and projections.

29. Improving the business environment is essential to promote diversification in tourism and other sectors and strengthen economic resilience. A strong tourism sector, with a modern and efficient infrastructure, high-quality accommodation, and a clean environment, could create further opportunities for other business, educational, and medical service sectors to develop around it. In Sint Maarten, improving resilience against natural disasters through enforcing hurricane-resistance building standards, regularly maintaining key infrastructure, and developing a crisis recovery framework could minimize hurricane damage as well as enhance long-term growth via stronger investor confidence. Ensuring policy continuity and political stability are critical factors for supporting business investment decisions.

Authorities’ Views

30. The authorities acknowledged the structural weaknesses affecting the economic performance and the need to eliminate the red tape, reduce cost of doing business and address labor market mismatches while promoting flexibility and security (flexicurity) in the labor market. In Curaçao, building on the National Development Plan 2015–2030 and the 2013 (TAC) report on “Strategies for Sustainable Long-Term Economic Development in Curaçao”, the authorities are working on a growth strategy, which will focus on policies to boost private investment. They noted concrete plans to simplify administrative procedures for business and work permits, including launching an automated application system, implementing ex-post (as opposed to ex-ante) controls, and revising the 1946 Establishment Law. They plan to enact some of these measures before March 2019 and were optimistic that it would be possible to re/train the labor force within a short period of time to match new labor demands. As highlighted in Sint Maarten’s Governing Program, the authorities see the post-hurricane recovery as a new opportunity for growth and general improvements. They noted the steps taken to facilitate building permits (by not requiring permits if just for rebuilding) and implement an expedited process for foreign worker permit for the construction sector. The authorities also stressed their plans to finalize the labor reform by executing the 2016 consensus document from the labor tripartite committee and, in this context, are revising the Civil Code to stem the misuse of short-term contracts.

C. Safeguarding External Stability

31. Policies in both countries and at the union level should contribute to strengthening external stability. A faster and sustainable improvement in the fiscal positions (Section A above) and structural reforms to boost competitiveness (Section B) would help safeguard external stability, especially over the medium term. High excess liquidity in the banking system—which largely reflects liquidity injections following the 2009–10 debt relief provided by the Dutch government and limited availability of domestic investment instruments—could put pressure on official reserves in the context of tightening U.S. monetary policy. The CBCS should continue to closely monitor developments in official reserves and remain ready to act if pressures emerge.

32. The role of monetary policy in supporting external stability, including through a further reduction of excess liquidity, would need to be further evaluated. While the CBCS has been increasing its policy rate in line with the U.S. Federal Reserve, competition among highly liquid banks and institutional investors has kept downward pressure on the interest rates domestically, creating incentives to search for higher returns abroad. Furthermore, according to the CBCS, the prolonged period of excess liquidity has also rendered the standard monetary policy instruments (auctioning of Certificates of Deposit and the reserve requirement) largely ineffective. Staff welcomes the CBCS’s intention to improve liquidity management, while helping to create local investment opportunities, such as reducing its outstanding loans to SOEs.

A01ufig11

Central Bank Liabilities to Deposit Money Banks

(Billions of NAf)

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Source: Centrale Bank van Curaçao and Sint Maarten.

Authorities’ Views

33. The CBCS is looking into ways to improve the monetary policy framework and the effectiveness of its instruments for liquidity management and requested a TA in this area. They noted that, in June 2018, the Dutch government paid off the final bond loan of the former Netherlands Antilles taken over under the debt relief program, ending the associated foreign exchange inflow (CBCS “Condensed Balance Sheet” August 2018). Previously, the holders of these securities (local private and institutional investors) reinvested only part of the received interest and principal payments abroad because of the very low international interest rates and the uncertainty in the securities markets. However, as the international interest rates are gradually rising, and the securities markets have improved, the appetite to invest more funds abroad increased. The CBCS monitors the developments in the official reserves closely and is committed to take timely measures as needed.

D. Reinforcing Financial Sector Oversight

34. Staff discussed the ongoing regulatory changes in the financial sector, stressing the urgent need to further strengthen financial sector oversight. Enforcement and gaps in the regulatory framework (such as inability to issue fines) are seen as the key areas of weakness in financial supervision and are the ones on which the authorities are currently focusing. The risks from withdrawal of CBRs persist, and the CBCS is strengthening its AML/CFT efforts and closely monitoring the institutions as regards to their CBRs, requiring those classified as medium risk to provide a de-risking contingency plan (or an action plan for high-risk institutions detailing how the forthcoming loss will be resolved). The process of updating macroprudential databases should conclude as quickly as possible to contribute to effective financial sector surveillance. As the authorities are working to develop a clear vision on Fintech companies and the application of new technology-driven financial products and services, staff advised to remain cautious, balancing the tradeoffs between potential efficiency gains and risks to stability and integrity, especially given the need to strengthen regulation and supervision of the traditional banking sector.

Authorities’ Views

35. The authorities fully recognize the need to further strengthen financial sector supervision and plan to intensify it, along with strengthening the penalty regime and enforcement and seeking TA. Following the meetings between the CBCS and the U.S. Department of the Treasury, the CBCS established a De–Risking Task Force which developed an action plan to help successfully address the CBR/de-risking problem. In Curaçao, the authorities are working intensively to comply with the international standards on transparency and exchange of information for tax purposes (including preferential tax regimes) to protect the financial sector. In Sint Maarten, the authorities plan to implement the OECD Common Reporting Standards in 2019.

E. Strengthening Governance

36. Governance concerns remain at the forefront in both countries. Weak revenue and spending outcomes, limited transparency, inefficient public administration, weaknesses in central bank governance, and cases of corruption, tax fraud, and money laundering point to important challenges in the areas of governance and integrity. Both countries have taken first steps towards establishing an integrity body to combat corruption and promote integrity within the public administration. In Sint Maarten, the recently established Integrity Chamber—an independent body with broad powers, including to investigate suspected misconduct in public office and issue binding recommendations—needs to be operationalized; in Curaçao, the draft national ordinance to establish an Integrity Bureau is yet to be adopted.

37. Staff was encouraged by recent changes in the CBCS governance. There have been important gaps in central bank governance as demonstrated by a long-lasting absence of the CBCS president, efforts to enhance internal oversight, and weaknesses in financial sector supervision. The Supervisory Board of the CBCS was completed by early 2018, the CBCS has adopted a new Strategic Plan, supported by all stakeholders, and has taken actions to address financial stability risks (paragraph 9). Completing the CBCS Executive Board as quickly as possible is key to further strengthening the central bank governance.

38. Progress is also being made on strengthening the AML/CFT framework, especially on the regulatory front, but implementation needs to be accelerated. Staff discussed the actions being taken on the implementation of the 2012 Financial Action Task Force (FATF) standard, including the National Risk Assessment (NRA), and on the measures taken to ensure the effectiveness of enhanced due diligence for politically exposed persons (PEPs). The CBCS has provided guidance on detection and deterrence of money laundering/terrorist financing, including PEPs in the customer-risk categories. Strengthening the asset declaration regime, in particular to broaden its scope (currently only applies to (candidate) ministers in Curaçao), would assist anti-corruption bodies’ efforts to detect illicit enrichment and financial institutions’ implementation of AML preventive measures on PEPs.

Authorities’ Views

39. The authorities agreed with the need to strengthen the central bank governance and stressed their intention to complete the permanent CBCS Executive Board in a short period of time. Strengthening transparency is also one of the key objectives in the newly adopted CBCS Strategic Plan. The CBCS noted the progress being made on the NRA for Curaçao (to comply with the 2012 FATF Recommendation 1), with the help of the World Bank tool, which is expected to be completed by June 2019. The authorities are also revising regulations to strengthen the CBCS’s AML/CFT framework on enforcement actions and enhancing the sector’s awareness of AML/CFT compliance, including through training. To promote good governance, the authorities in Curaçao and Sint Maarten are working on establishing/operationalizing integrity chambers.

F. Building Capacity and Addressing Important Data Gaps

40. Current policy challenges have intensified the critical capacity- and institution-building needs that Curaçao and Sint Maarten have been facing. Strengthening institutions with a medium-term and macro-fiscal focus (including through building capacity for macro-fiscal analysis), addressing weaknesses in tax administration, public financial management, and IT systems, would help improve policy implementation and contribute to stronger growth. The authorities are encouraged to seek TA in these areas and consider Sint Maarten’s membership to CARTAC, following Curaçao’s membership in 2017.

41. Efforts to strengthen statistics and address critical data gaps should continue. Adequate resources would need to be allocated to this end, such as for revamping the National Accounts statistics in Curaçao in line with the recent CARTAC TA recommendations.

Authorities’ Views

42. The authorities recognize the need to further strengthen capacity in public administration and improve data quality and availability. In Curaçao, the authorities plan to further collaborate with the CARTAC, while in Sint Maarten, they are seeking assistance primarily within the Kingdom of the Netherlands and remain engaged with the World Bank in the context of the Trust Fund and the IMF on macro-fiscal framework, while CARTAC is being considered as well.

Staff Appraisal

43. Weak growth and underlying structural vulnerabilities persist in both Curaçao and Sint Maarten. Large negative external shocks—including spillovers from one of Curaçao’s largest trading partners and the impact of Hurricanes Irma and Maria on Sint Maarten— have significantly magnified these weaknesses. The fiscal and external positions of both countries have deteriorated, and high uncertainty is weighing on economic activity and outlook.

44. After another year of recession in 2018 in both Curaçao and Sint Maarten, growth will pick up slowly over the medium term. However, without major structural reforms, growth in Curaçao will remain weak. In Sint Maarten, a speedy and sustainable recovery and post-hurricane rebuilding remain the main priority. Risks are mainly on the downside reflecting both external and domestic vulnerabilities. The union’s current account deficit is expected to gradually improve over the medium term but remain elevated.

45. Curaçao and Sint Maarten should adopt a medium-term fiscal framework, with a long-term debt anchor, to help address structural fiscal challenges in a sustainable way. Further reforms are needed to ensure financial viability of the countries’ social security funds and healthcare systems and to systemically address budgetary arrears and fiscal risks. To facilitate effective policy analyses and decision-making, it is imperative to improve fiscal transparency, reporting and coverage, including by adopting international standards on government finance statistics. Budgetary decisions should be aligned with the governments’ policy priorities. Fiscal institutions and public financial management systems should be strengthened to support the implementation, monitoring, and enforcement of the medium-term fiscal framework and rules.

46. Fiscal effort should continue in both countries. Curaçao’s fiscal position is expected to improve from 2018, reflecting the authorities’ multiyear fiscal adjustment package. However, additional effort would be needed to put the public debt on a sustainable downward path. Further structural reductions in current spending and enhanced revenue mobilization would create space for fiscal buffers and public investment. After the sizeable post-hurricane deterioration, Sint Maarten’s fiscal position is also expected to improve as the economy recovers. While donor budget support is critical in 2018–20, significant fiscal effort—within a well-prioritized and comprehensive fiscal plan— would be needed over the medium term to ensure debt sustainability and build fiscal resilience.

47. Structural impediments continue to stifle growth in the union and should be decisively tackled. Red tape, weak governance, antiquated regulations, skills mismatches, and infrastructure bottlenecks are among the key impediments facing the private sector in both countries. Reducing costs of doing business, including through streamlining and modernizing regulations, and facilitating economic adjustments and attracting investments through improved business environment, resilient infrastructure, and more dynamic labor markets should help enhance growth, productivity, and competitiveness of the economies.

48. Fiscal policy and structural reforms in both countries should contribute to safeguarding external stability. The external positions of Curaçao and Sint Maarten are moderately weaker than justified by medium-term fundamentals and desirable policies. While the fixed exchange rate regime limits the effectiveness of monetary policy, high excess liquidity in the banking system poses challenges to liquidity management and could put pressure on official reserves. The authorities’ efforts to improve the monetary policy framework are welcome, and they should aim to reduce excess liquidity while continuing to closely monitor developments in official reserves, remaining ready to act if pressures emerge.

49. There is an urgent need to further reinforce financial sector oversight and monitor the risks from the withdrawal of CBRs. The authorities’ emphasis on strengthening the enforcement, addressing regulatory gaps, and collaborating internationally to alleviate CBR pressures are steps in the right direction. Macroprudential databases should be completed and macroprudential policy framework utilized to bolster financial sector resilience. The efforts to comply with the international standards on AML/CFT, transparency and exchange of information for tax purposes (Curaçao) and the OECD Common Reporting Standards (Sint Maarten) should continue. The authorities’ cautious approach to financial innovations is warranted, helping balance the tradeoffs between potential efficiency gains and risks to stability and integrity.

50. Efforts to improve governance should intensify, including by strengthening anti-corruption institutions, promptly taking steps to operationalize the Integrity Chamber for Sint Maarten and establishing one for Curaçao, completing the CBCS Executive Board, successfully carrying out the NRA, and effectively implementing the AML/CFT framework to comply with the 2012 FATF Recommendations.

51. Developing capacity in public institutions and improving statistics remain a key priority. The authorities’ efforts to seek TA in various fiscal and monetary policy areas are welcome. Data quality and availability need to be strengthened significantly for effective surveillance.

52. It is envisaged that the next Article IV Consultation discussions with the Kingdom of the Netherlands—Curaçao and Sint Maarten will be held on the 12-month cycle.

Annex I. Implementation of the Recommendations of the 2016 Article IV Consultation Discussions

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Annex II. External Sector Assessment

The external positions of Curaçao and Sint Maarten are moderately weaker than implied by medium-term fundamentals and desirable policies, as suggested by indicator-based approaches. Data availability is insufficient to conduct model-based assessments.

1. Curaçao’s real effective exchange rate (REER) has appreciated in recent years (Figure 1A). The large exchange rate and inflation swings in Venezuela—which historically accounts for about one third of Curaçao’s trade—complicate the analysis. However, even excluding Venezuela, the REER has appreciated since 2013, reflecting the U.S. dollar appreciation against the euro, and remains above its Hodrick-Prescott filtered trend. The average tourism cost in Curaçao— measured by the “Week at the Beach” index based on average cost of food and lodging—is still lower than in other Caribbean countries.

2. For Sint Maarten, the REER appreciated by more than 10 percent between 2008 and 2017, driven mostly by higher inflation, and, in recent years, the U.S. dollar appreciation. It is not possible to assess the impact of Hurricane Irma on prices as no CPI data is available for 2018. The “Week at the Beach” index shows that Sint Maarten’s prices have declined relative to the regional averages so far in 2018, although this could be driven by the sample selection as many high-end hotels are still under reconstruction.

A01ufig12

Week at the Beach Index, October 2018 1/

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Source: IMF staff calculations.1/ “Week at the Beach Index (W@TB)” measures the average cost of a 7-day-trip in a country’s beach destinations. The index is a composition of an average hotel price (3 to 4 ‘bubble’ rating) from TripAdvisor and over 80 million crowdsourced data on meals, taxi fares, water, coffee, and beer.

3. The tourism shares in the Caribbean have increased for Curaçao but decreased somewhat for Sint Maarten in the last decade. European tourists account for about a half of total arrivals in Curaçao but there has been an increase in tourism from Canada and the rest of the world. Further appreciation of the U.S. dollar relative to other trading partners may pose risks for Curaçao’s competitiveness in the future. For Sint Maarten, tourist arrivals from North America—two thirds of total arrivals—grew steadily but have been offset by the decline in tourists from other Caribbean countries.

A01ufig13

Tourism Market Shares

(Percent)

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Source: IMF staff calculation.

4. Official reserves of the monetary union declined since end-2017. Gross external reserves amounted to 5.7 months of imports in 2017, higher than in most of tourism-dependent Caribbean countries. However, reserves declined by US$240 million in August and September of 2018 as local investors purchased foreign exchange to invest abroad. Official reserves stabilized at US$1.3 billion in November and are projected to stay at about four months of imports over the medium term, in line with the average in the region. The current account deficit is projected to remain large albeit narrowing over time.

5. The persistently high current account deficit in Curaçao and large appreciation of the REER in Sint Maarten point to moderately weaker external positions. Curaçao’s current account deficit averaged about 20 percent of Curaçao’s GDP since 2013, with a large deficit in the goods account more than offsetting the (declining) surplus in the services account (Figure 1A). In Sint Maarten, where the current account on average recorded a small deficit, the REER was strongly appreciating prior to 2017. For both countries, the need for further fiscal consolidation and for structural reforms to boost labor productivity suggests that Curaçao’s and Sint Maarten’s external positions are moderately weaker than justified by medium-term fundamentals and desirable policies.

6. Limited availability and low quality of data preclude the model-based analyses for the external assessment. In addition, potential inconsistencies between the net international investment position and the current account balance hinder the use of the external sustainability models in assessing the gap between the projected current account and its norm (the level that would stabilize the external position at a benchmark level).

Figure 1A.
Figure 1A.

Curaçao and Sint Maarten: External Sector Developments

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Sources: Authorities’ data, IMF WEO database, and IMF staff calculations.1/ Average shares during 2015-17.

Annex III. Curaçao: Potential Output Estimates

1. Curaçao has historically suffered from negative labor productivity growth. With the average real GDP growth at zero over the past decade, labor productivity contracted on average by 2 percent per year. Dare (2017)1 finds that labor productivity contributed negatively to output growth over 2003–15; the negative contribution was mainly driven by the impact of within-industry contributions to overall productivity growth, and more recently, by the increase in the employment shares of sectors with below-average productivity growth (such as tourism sector).

2. Employment outlook is slightly positive under certain assumption. While the working-age population has expanded slowly in recent years and is expected to continue to do so in the medium term due to aging, there has been a slight upward trend in labor force participation among men and women. Assuming that the labor force participation continues to increase of structural reasons (such as the recent pension reforms discussed in Annex VI) and using the average unemployment rate of 13.6 percent during 2000–17 as a proxy for the natural rate, the employment would grow by 0.7 percent annually in the medium term.

3. Curaçao’s potential growth in the long run would likely remain low, absent major structural reforms. Using productivity growth of 0.1 percent per year, which assumes some potential positive effects from recent investment projects and the planned measures discussed in this report, and employment growth of 0.7 percent would result in a long-run potential growth of about 0.8 percent.

4. A multivariate filter model is used to estimate Curaçao’s potential output.2 A small structural model, including key macroeconomic equations for inflation (Phillips curve), unemployment (Okun’s law), and a tourism block, is estimated. The model parameter values and the variances of shock terms are estimated using Bayesian estimation methods, with the data on GDP, CPI, unemployment rate, and stay-over tourist arrivals since 2000. The above-discussed estimate of the long-run potential growth is used as the steady-state value in the model.

5. Model results. Potential output growth has been negative since 2014 and is estimated to contract by about one percent in 2018, before converging slowly to zero growth over the medium term. The output gap (not shown here) is estimated at -2 percent in 2018 and will gradually close by 2023.

A01ufig14

Curaçao: Real GDP and Potential Output Growth

(Percent)

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Source: IMF staff estimates.1/ The shaded area shows the paths of real GDP growth when the latter is estimated in the model after 2019.

Annex IV. Risk Assessment Matrix

Curaçao and Sint Maarten: Risk Assessment Matrix 1/

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The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff). The relative likelihood is the staff’s subjective assessment of the risks surrounding the baseline (“low” is meant to indicate a probability below 10 percent, “medium” a probability between 10 and 30 percent, and “high” a probability between 30 and 50 percent). The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities. Non-mutually exclusive risks may interact and materialize jointly.

Annex V. Fiscal Framework: Current Setup and Main Challenges

1. In 2010, alongside the debt relief given by the Dutch government to Curaçao and Sint Maarten, a new rules-based fiscal framework was introduced, enacted by the 2010 Kingdom Act on Financial Supervision of Curaçao and Sint Maarten (Kingdom Act 334, July 7, 2010). The framework is monitored by the Dutch-led Financial Supervision Board (Cft). The framework prohibits current budget deficits, caps interest payments to 5 percent of fiscal revenues (averaged over three years), and requires multi-year budgeting. Borrowing is only permitted for capital expenditure, with Cft agreement (so-called, ‘golden rule’), and fiscal outturns are to be reported on a quarterly basis to the Cft. Under this framework, the Dutch State Treasury Agency is legally obliged to bid on the debt securities issued by Curaçao and Sint Maarten (referred to a “standing subscription” rule) which allows Curaçao and Sint Maarten to borrow long-term at the interest rates prevailing in the Dutch capital market. As envisaged in the Kingdom Act, the current supervision arrangement and the countries’ compliance with it are being assessed in 2018 by an evaluation committee to advise, among other issues, on the continuation of the supervision beyond 2018.

2. The track record of Curaçao and Sint Maarten with complying with the fiscal framework has been mixed. While the interest cap rule has not been binding (and the interest-to-revenue ratio remained well below 5 percent in recent years given the debt relief and concessional financing), the current balance was in deficit in most years in Curaçao and in 2014–15 in Sint Maarten. In Sint Maarten, in 2015, the government’s failure to settle the arrears with the health insurance and the pension fund triggered a decision by the Kingdom Council of Ministers to issue several targeted instructions (including payment of arrears, compensation for the deficits accumulated prior to 2015, implementation of pension and healthcare reforms), the meeting of which was the necessary condition for allowing Sint Maarten to borrow for capital expenditures. In Curaçao, following the large current budget deficit recorded in 2017, negotiations with the Cft were held on the path and measures needed to compensate for the deficit (by achieving current budget surpluses) in 2018 and beyond.

3. At the same time, the current fiscal framework has some drawbacks. First, the framework does not have a long-term anchor, and the ‘golden rule’ provides a relatively weak link to debt sustainability. Second, the “standing subscription” agreement could allow for a large debt accumulation even if the interest cap rule holds. In addition, the government bond yields do not reflect the risk premium relevant for Curaçao and Sint Maarten, and when support and supervision from the Netherlands end, Curaçao and Sint Maarten will have to turn to the market, which would translate into higher borrowing costs. Third, while the Kingdom Act includes an escape clause that allows, in special circumstances (including natural disasters), deviating from the fiscal rules, the Act provides no further guidance on its implementation. Fourth, there is no formal requirement to have a fiscal buffer against natural disasters or other shocks despite Sint Maarten being in the hurricane belt (affected, on average, by one hurricane every year and a half since the mid-1990s).

Annex VI. Curaçao and Sint Maarten: Social Security Schemes

1. Curaçao and Sint Maarten have similar and relatively comprehensive social security schemes. The social security schemes—administered by the Social Insurance Bank in Curaçao (SVB) and the Social Insurance Fund in Sint Maarten (SZV)—offer a wide range of benefits such as old-age pension, survivor’s pension, and severance pay, as well as benefits for sickness and employment injuries. Both schemes are broadly similar in design, with the current contributors paying for the current defined benefits and needs. In addition, both countries offer social welfare benefits for those who lack the means for subsistence. Public sector workers are also covered by public pension schemes (APC in Curaçao and APS in Sint Maarten). In 2013, Curaçao introduced a Basic Health Insurance to provide uniform insurance for all non-privately insured residents; a reform to introduce a similar general health insurance in Sint Maarten is under consideration.

A01ufig15

Curaçao and Sint Maarten: Comparative Demographics and Retirement Age 1/

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Sources: IMF FAD Expenditure Assessment Tool, and IMF staff calculations.1/ Latest data available.

Pension Systems

  • Pension funds in Curaçao remain underfunded despite past reforms. Several measures were implemented in 2013 to improve the financial situation of the general old-age pension fund (AOV), including a raise in the premiums and an increase of the retirement age from 60 to 65. However, premiums do not cover the current pension benefits, and the fund is reliant on budget transfers. With current policies, the AOV deficit is likely to increase in the coming years due to the weak growth outlook, longer life expectancy, and an ageing population. In 2016, major reforms were implemented to the public pension system (APC) as well.1 Still, the coverage ratio (the relationship between the fund’s capital and pension benefits) of the APC is only slightly above 100 percent and below the target ratio of 105 percent.

  • Pension reforms are underway in Sint Maarten. While the retirement age within the old-age pension fund (AOV) is still 62 years, the premiums cover the pension benefits due to the relatively favorable old-age dependency ratio. However, the economic downturn in the wake of Hurricane Irma has had a negative effect on the contributions, and the government is considering an increase in the retirement age to 65 years in the coming years. The coverage ratio within the public pension fund (APS) is currently below the target of 105 percent. To address this and reduce the fiscal impact of the scheme, the government intends to raise the retirement age within the APS to 65 years from the beginning of 2019, lower the premium from 25 to 18 percent, and change the pension base from the last two years of service to an average of the employment period. Increases in the pension allowance will be conditional on meeting the coverage ratio target.

Health Care Systems

  • Curaçao’s Basic Health Insurance fund (BVZ) remains heavily reliant on budget transfers. Premiums to the BVZ—one of the SVB’s largest schemes—have been raised in several steps since its introduction. Still, in 2017, health care costs per insured were almost 80 percent higher than the premiums per insured, necessitating large budgetary transfers. The new hospital, envisaged to be operational in the second half of 2019, is expected to decrease some expenses, such as costs for medical specialists and medical treatments abroad. However, the new hospital will have noticeably higher operating costs than the current one. Low contributions owing to weak growth and high unemployment, together with an ageing population, pose further challenges to the sustainability of the health care insurance in Curaçao in the coming years.

  • Sint Maarten’s government has been preparing a major health care reform, aimed to broaden the health care insurance coverage and reduce costs. The health care system in Sint Maarten is fragmented and non-transparent, with different health care insurance schemes and a relatively large segment of the population estimated to be uninsured. Some of the health care insurance funds within the SZV are running deficits, and the government is considering increasing the tariffs at the local hospital. As part of the envisaged health care reform, the government plans to merge some of the existing health insurance funds within the SZV into a General Health Insurance (GHI). To contain costs, the reform would also incorporate changes in the reimbursement of medicines and focus more on preventive health care. There are also advanced plans to build a new hospital, which could help reduce the need and expenses for medical referrals abroad.

2. Other parts of the social welfare schemes appear to create serious disincentives to work. The sickness insurance in both Curaçao and Sint Maarten covers medical costs and income loss due to sickness. While generous both in terms of reimbursement and duration, the design of the scheme creates disincentives to return to work after a period of illness. In Curaçao, unemployment benefits, in combination with subsidies for water, electricity and other benefits, can reportedly exceed the minimum wage, thus creating disincentives to work in the formal sector. Limitless duration combined with weak controls has also led to a large amount of non-eligible persons receiving these benefits. Sint Maarten has no formal unemployment benefits, but those lacking the means of subsistence can receive other social welfare benefits. These benefits are less generous and do not exceed the minimum wage.

Annex VII. Public Debt Sustainability Analysis

In Curaçao, gross government debt increased to over 50 percent of GDP in 2017, driven by domestic arrears, and is expected to decline only slightly over the medium term. In Sint Maarten, large deficit financing needs will increase debt from relatively low levels to its peak of about 46½ percent of GDP in 2020. For both countries, the debt path is sensitive to adverse growth, fiscal, and interest rate shocks, in addition to country-specific shocks. As a mitigating factor, all external public debt of Curaçao and Sint Maarten is owed to the Netherlands, in local currency, at very low rates and long maturities, within the “standing subscription” arrangement since 2010 (Annex V), which is assumed to remain in place during the projection period. Furthermore, total gross debt includes domestic debt, mainly in the form of payment arrears to the social security administration and pension funds, which the authorities plan to repay over the medium term.

A. Curaçao: Baseline Scenario

1. Curaçao’s gross government debt reached about 50½ percent of GDP at end-2017.1 The debt held by the Netherlands amounted to over 80 percent of total debt, while the majority of the remaining domestic debt was in the form of payment arrears to the public pension fund (APC) and the Social Insurance Bank (SVB), totaling almost 8½ percent of GDP. The significant build-up in these arrears was the main driver of the nearly 5 percentage points of GDP increase in gross debt in 2017. With just a small increase in the government’s bank deposits in 2017, the net government debt increased by about the same magnitude as the gross debt. Preliminary data suggest that the government’s arrears, especially to SVB increased further during 2018, while the government deposits in the banking sector fell.

Curaçao: Government Debt and Liquidity

(Millions of NAf unless otherwise indicated)

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Sources: Authorities’ data, and IMF staff calculations.

2. In the staff’s baseline, Curaçao’s government debt is projected to decline slowly over time, as the primary deficit narrows while growth remains weak (Figure 1A). Fiscal adjustment measures being implemented by the authorities would help bring the primary deficit of 2.3 percent of GDP in 2017 to close to zero over the medium term. Still, this would not be sufficient to put debt on a sustainable downward path, and it will remain above its 2016 level in 2023, similar to the levels of 2009. Gross financing needs would decrease from about 3½ percent of GDP in 2017 to the average of ¾ percent of GDP in 2018–19 and stabilize at around 1½ percent of GDP over the medium term. The high-risk assessment for the external financing requirements reflects the scheduled repayment of a loan to the Netherlands in 2020 which is expected to be rolled over (Figure 3A).

B. Sint Maarten: Baseline Scenario

3. Sint Maarten’s gross government debt amounted to 34¼ percent of GDP at end-2017 but has increased since then. Both external (liquidity support from the Netherlands) and domestic (arrears) debt increased, reaching 40 percent of GDP by end-September 2018, while government deposits (liquidity) in the banking sector declined. Government arrears or accounts payable to the public pension fund (APS) and Social Insurance Fund (SZV) are estimated to amount to about NAf 136 million, more than twice the government’s total liquidity position.

Sint Maarten: Government Debt and Liquidity

(Millions of NAf unless otherwise indicated)

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Sources: Authorities’ data, and IMF staff calculations.

Arrears figures for end-September 2018 are preliminary.

4. Given the ongoing discussions on the modalities of deficit financing by the Netherlands, the staff’s baseline scenario assumes the following:

  • The World-Bank managed projects are financed through grants (within the Trust Fund), while remaining budgetary shortfalls (current budget deficits and government’s capital expenditure) are financed through loans (outside the Trust Fund).

  • The loans are provided within the current “standing subscription” arrangement, and the maturing debt is rolled over with the terms consistent with this arrangement.

  • All gross financing needs are financed by newly issued bullet bonds, with a grace period of 10 years (not uncommon in Sint Maarten’s experience), 20-year maturity, and an annual interest rate based on the Dutch sovereign bond rate.

5. In the staff’s baseline, Sint Maarten’s government debt is projected to increase to about 43½ percent of GDP in 2018 and peak at 46½ percent of GDP in 2020 (Figure 4A). Gross financing needs will double in 2018 to about 7 percent, from 3½ percent of GDP in 2017, and decline gradually after 2018 to zero after 2023, when the overall fiscal surplus offsets debt amortization. After 2020, the debt starts to decline toward 40 percent by 2023.

C. Curaçao and Sint Maarten: Stress Tests

6. In both Curaçao and Sint Maarten, the debt path is sensitive to adverse growth, fiscal, and interest rate shocks, in addition to country-specific shocks (Figures 2A and 5A).

  • Growth shock. An adverse growth shock scenario assumes the negative growth continues in 2019–20, with the output growth lower by one standard deviation in Curaçao (a more negative growth shock is considered below) and two standard deviations in Sint Maarten. This implies the average annual growth in 2019–20 would be -0.9 percent instead of 0.2 percent in the baseline in Curaçao, and -1.7 percent instead of 2.1 percent in Sint Maarten. In Curaçao, the debt-to-GDP ratio would be about 2 percentage points higher compared to the baseline over the medium term, while it would exceed the baseline by 5½ percentage points in Sint Maarten.

  • Fiscal or contingent liability shock. A temporary shock in 2019 weakens the fiscal situation— for example, because of contingent liabilities arising from SOEs in Sint Maarten or higher-than-expected healthcare costs in Curaçao—assumed to result in a 3 percentage points of GDP increase in the government expenditure. In both countries, the debt-to-GDP ratio would be 2½–3 percentage points of GDP higher over the medium term compared to the baseline.

  • Interest rate shock. The standard interest rate shock is expected to have a relatively moderate impact over the projection horizon given the favorable maturity profile of the countries, with most borrowing at fixed rates and low refinancing needs. Instead, with a permanent increase in the nominal interest rate of 600 basis points starting in 2019, public debt will stay close to the baseline until 2021, and start diverging it thereafter, by 1 and 2 percentage points of GDP by 2023 in Curaçao and Sint Maarten, respectively.

  • Curaçao: Venezuela shock. Under an extreme shock scenario, aligned with the authorities’ views, if the current economic links with Venezuela (including the operation of the Isla refinery) collapse, this would lead to a broad-based contraction in GDP, resulting in about 3 percentage points increase in Curaçao’s debt-to-GDP ratio over the baseline scenario.

  • Curaçao: Combined macro-fiscal shock. A combination of the above shocks (including the Venezuela shock) would put the debt on an unsustainable path, raising it to about 56½ percent of GDP by year 2023 (over 9 percentage points of GDP higher than the baseline).

  • Sint Maarten: Natural disaster and combined shocks. Another hurricane event in 2019, assumed to cause a 10 percent of GDP fiscal cost, would worsen the debt profile by a similar magnitude, resulting in the debt peaking at about 56 percent of GDP in 2020 and declining to just below 48 percent of GDP by 2023. Combing this shock with the growth and interest rate shocks would bring the debt up to a peak of 63¾ percent of GDP in 2020, with a gradual decline toward 59 percent by 2023.

  • Sint Maarten: No fiscal adjustment after 2018. In the scenario without any adjustment on the revenue and spending side after 2018, the debt path will be unsustainable, with the debt rising to 49 percent of GDP in 2019 and reaching 72 percent by 2023.

Figure 1A.
Figure 1A.

Curaçao: Public DSA—Baseline Scenario

(Percent of GDP, unless otherwise indicated)

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Source: IMF staff.1/ Public sector is defined as general government.2/ Based on available data.3/ Long-term bond spread over German bonds.4/ Defined as interest payments divided by debt stock (excluding guarantees) at the end of previous year.5/ Derived as [(r - π(1 +g) - g + ae(1 +r)]/(1 +g+π+gπ)) times previous period debt ratio, with r = interest rate; π = growth rate of GDP deflator; g = real GDP growth rate;a = share of foreign-currency denominated debt; and e = nominal exchange rate depreciation (measured by increase in local currency value of U.S. dollar).6/ The real interest rate contribution is derived from the numerator in footnote 5 as r - π (1 +g) and the real growth contribution as -g.7/ The exchange rate contribution is derived from the numerator in footnote 5 as ae(1 +r).8/ Includes asset changes and interest revenues (if any). For projections, includes exchange rate changes during the projection period.9/ Assumes that key variables (real GDP growth, real interest rate, and other identified debt-creating flows) remain at the level of the last projection year.
Figure 2A.
Figure 2A.

Curaçao: Public DSA—Stress Tests

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Source: IMF staff.
Figure 3A.
Figure 3A.

Curaçao: Public DSA—Risk Assessment

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Source: IMF staff.1/ The cell is highlighted in green if debt burden benchmark of 85% is not exceeded under the specific shock or baseline, yellow if exceeded under specific shock but not baseline, red if benchmark is exceeded under baseline, white if stress test is not relevant.2/ The cell is highlighted in green if gross financing needs benchmark of 20% is not exceeded under the specific shock or baseline, yellow if exceeded under specific shock but not baseline, red if benchmark is exceeded under baseline, white if stress test is not relevant.3/ The cell is highlighted in green if country value is less than the lower risk-assessment benchmark, red if country value exceeds the upper risk-assessment benchmark, yellow if country value is between the lower and upper risk-assessment benchmarks. If data are unavailable or indicator is not relevant, cell is white. Lower and upper risk-assessment benchmarks are:400 and 600 basis points for bond spreads; 17 and 25 percent of GDP for external financing requirement; 1 and 1.5 percent for change in the share of short-term debt; 30 and 45 percent for the public debt held by non-residents.4/ Long-term bond spread over German bonds, an average over the last 3 months, 01-Sep-18 through 30-Nov-18.5/ External financing requirement is defined as the sum of current account deficit, amortization of medium and long-term total external debt, and short-term total external debt at the end of previous period.
Figure 4A.
Figure 4A.

Sint Maarten: Public DSA—Baseline Scenario

(Percent of GDP, unless otherwise indicated)

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Source: IMF staff.1/ Public sector is defined as general government2/ Based on available data.3/ Long-term bond spread over German bonds.4/ Defined as interest payments divided by debt stock at the end of previous year.5/ Derived as [(r - p(1 +g) - g + ae(1 +r)]/(1 +g+p+gp)) times previous period debt ratio, with r = interest rate; p = growth rate of GDP deflator; g = real GDP growth rate; a = share of foreign-currency denominated debt; and e = nominal exchange rate depreciation.6/ The real interest rate contribution is derived from the denominator in footnote 4 as r - π (1+g) and the real growth contribution as -g.7/ The exchange rate contribution is derived from the numerator in footnote 5/ as ae(1+r).8/ Includes asset changes and interest revenue (if any). For projections, includes exchange rate changes during the projection period.9/ Assumes that key variables (real GDP growth, real interest rate, and other identified debt-creating flows) remain at the level of the last projection year.
Figure 5A.
Figure 5A.

Sint Maarten: Public DSA—Stress Tests

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Source: IMF staff.

Annex VIII. External Debt Sustainability Analysis

(Percent of GDP, unless otherwise indicated)

article image

Derived as [r - g - r(1 +g) + ea(1 +r)]/(1 +g+r+gr) times previous period debt stock, with r = nominal effective interest rate on external debt; r = change in domestic GDP deflator in US dollar terms, g = real GDP growth rate, e = nominal appreciation (increase in dollar value of domestic currency), and a = share of domestic-currency denominated debt in total external debt.

The contribution from price and exchange rate changes is defined as [-r(1 +g) + ea(1 +r)]/(1 +g+r+gr) times previous period debt stock. r increases with an appreciating domestic currency (e > 0) and rising inflation (based on GDP deflator).

For projection, line includes the impact of price and exchange rate changes.

Defined as current account deficit, plus amortization on medium- and long-term debt, plus short-term debt at end of previous period.

The key variables include real GDP growth; nominal interest rate; dollar deflator growth; and both non-interest current account and non-debt inflows in percent of GDP.

Long-run, constant balance that stabilizes the debt ratio assuming that key variables (real GDP growth, nominal interest rate, dollar deflator growth, and non-debt inflows in percent of GDP) remain at their levels of the last projection year.

Figure 1A.
Figure 1A.

Curaçao and Sint Maarten: External Debt Sustainability: Bound Tests 1/2/

(External debt in percent of GDP)

Citation: IMF Staff Country Reports 2019, 023; 10.5089/9781484395929.002.A001

Sources: International Monetary Fund, Country desk data, and staff estimates.1/ Shaded areas represent actual data. Individual shocks are permanent one-half standard deviation shocks. Figures in the boxes represent average projections for the respective variables in the baseline and scenario being presented. Ten-year historical average for the variable is also shown.2/ For historical scenarios, the historical averages are calculated over the ten-year period, and the information is used to project debt dynamics five years ahead.3/ Permanent 1/4 standard deviation shocks applied to real interest rate, growth rate, and current account balance.4/ One-time real depreciation of 30 percent occurs in 2018.

1

Using the authorities’ definition of the current balance, which includes depreciation of fixed assets as an expenditure item, the current balance deteriorated from close to zero in 2015 to a deficit of 2.1 percent of GDP in 2017.

2

According to the Centrale Bank van Curaçao en Sint Maarten, the real GDP contacted by 4.8 percent in 2017, while Sint Maarten’s Department of Statistics estimates the contraction at 8.4 percent, reflecting a much larger drop in exports.

3

See Informational Annex.

4

There are no data on inflation for 2018 as the Department of Statistics discontinued the CPI processing system in end-2017 and is working on a new system which will be rolled out in January 2019, with the base year of 2018.

5

Historically, the speed of recovery following a natural disaster varied widely across countries, but in case of tropical cyclones (including hurricanes), studies find that their effects on output can be very persistent. For example, a comprehensive empirical study of the effects of tropical cyclones since 1950 finds that seven years after an average storm strikes, per capita output is almost 1 percent lower than if the storm had not happened (with 2.5 times larger losses experienced by small states), and even after 20 years, the economy has not fully recovered from the shock (October 2017 WEO, Chapter 3).

6

A debt ceiling should preferably be set first, including a sufficient safety margin to absorb shocks. The ceiling would then be used to calibrate operational rules consistent with it. The recommended level of 40 percent of GDP long-term debt anchor is close to the average debt ratio in emerging market and middle-income economies over the past decade, and to the median of countries with a similar credit rating as Curaçao and Sint Maarten.

7

The staff’s baseline scenario assumes that the World-Bank managed projects are financed through grants and the remaining budgetary shortfall is financed through loans, with resources outside the Trust Fund.

1

Dare (2017), “Measuring Labor Productivity in Curaçao,” CBCS Working Paper.

2

See, Alichi and others (2015), “Multivariate Filter Estimation of Potential Output for the Euro Area and the United States,” IMF Working Paper WP/15/253; and IMF Country Reports No. 17/155 (Aruba) and No. 18/118 (The Bahamas).

1

The retirement age was increased to 65 years, premiums were lowered from 25 to 18 percent, the pension base was changed from the last two years of service to an average of the entire employment period, and the indexation of the pension allowance was changed from inflation to increases in civilian workers’ salaries. Increases in the pension allowance were also conditioned on meeting the target of 105 percent coverage ratio.

1

The gross debt amount of NAf 2,813 million for 2017 differs from that in the CBCS 2017 Annual Report by an amount of NAf 7.3 million associated with end-year account-closing loans, which the CBCS is not including in the debt figure as these loans would have been repaid in early 2018.

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Cover IMF Staff Country Reports
Kingdom of the Netherlands—Curaçao and Sint Maarten: 2018 Article IV Consultation-Press Release and Staff Report
Author:
International Monetary Fund. Western Hemisphere Dept.
Volume/Issue:
Volume 2019: Issue 023
Publisher:
International Monetary Fund
ISBN:
9781484395929
ISSN:
1934-7685
Pages:
63
DOI:
https://doi.org/10.5089/9781484395929.002

Real GDP Growth

(Percent)
Figure 1.

Curaçao and Sint Maarten: Real Sector Developments
Figure 2.

Curaçao and Sint Maarten: Fiscal Developments

Stay-over Tourist Arrivals

(Percent change relative to the same period of the previous year)

Monetary Union: Current Account

(Percent of GDP)
Figure 3.

Curaçao and Sint Maarten: Monetary Developments

Curaçao: Real GDP Growth and Estimated Contributions

(Percent)

Current Account Balance and Official Reserves

Stock of Government Domestic Arrears

(Percent of GDP)

Public Sector Wage Bill, 2017

(Percent of GDP)

Sint Maarten: Fiscal Balances and Gross Debt

(Percent of GDP)

Expenditures on Goods and Services, 2017

(Percent of GDP)

Labor Productivity Growth

(Perce nt)

Central Bank Liabilities to Deposit Money Banks

(Billions of NAf)

Week at the Beach Index, October 2018 1/

Tourism Market Shares

(Percent)
Figure 1A.

Curaçao and Sint Maarten: External Sector Developments

Curaçao: Real GDP and Potential Output Growth

(Percent)

Curaçao and Sint Maarten: Comparative Demographics and Retirement Age 1/
Figure 1A.

Curaçao: Public DSA—Baseline Scenario

(Percent of GDP, unless otherwise indicated)
Figure 2A.

Curaçao: Public DSA—Stress Tests
Figure 3A.

Curaçao: Public DSA—Risk Assessment
Figure 4A.

Sint Maarten: Public DSA—Baseline Scenario

(Percent of GDP, unless otherwise indicated)
Figure 5A.

Sint Maarten: Public DSA—Stress Tests
Figure 1A.

Curaçao and Sint Maarten: External Debt Sustainability: Bound Tests 1/2/

(External debt in percent of GDP)