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International Monetary Fund. Monetary and Capital Markets Department
The CBvCSM is the sole supervisory authority for all regulated financial institutions operating locally and in the offshore (or international) sector, as well as the stock exchange in Curacao and St Maarten. The financial sector comprises different types of institutions, which include banks and non-bank institutions, insurance companies (both Life, and Non-life), securities intermediaries, asset management firms, investments institutions, fund administrators, management of pension funds, reinsurers, and trust companies.
International Monetary Fund. Fiscal Affairs Dept.
Sint Maarten’s economy has been hit hard over the last 4 years. In 2017, two major hurricanes struck the island causing significant damage. While reconstruction was largely financed by insurance proceeds and grants from The Netherlands, economic recovery from the hurricane damage was slow and in early 2020 the coronavirus pandemic shut down most of Sint Maarten’s tourism sector. As a result, fiscal revenue declined by 15 percent since 2016; payroll tax revenue declined by only 4.5 percent, whereas the turnover tax revenue declined by 23 percent. Since April 2020, The Netherlands has provided immediate financial support to cushion the economic shock of the pandemic. In December 2020, Sint Maarten concluded an agreement with The Netherlands to receive more substantial financial support for recovery and ensuring long-term fiscal sustainability. In return, the authorities committed to make structural changes to their tax system, making it more growth-friendly and equitable, while optimizing and ensuring its revenue mobilization capacity.
International Monetary Fund. Western Hemisphere Dept.
The COVID-19 pandemic inflicted another major shock on the economies of Curaçao and Sint Maarten, which followed category 5 hurricanes in Sint Maarten in 2017 and the spillovers of the Venezuelan crisis on Curaçao. Despite the substantial response measures financed by The Netherlands, the economic contraction in 2020 was severe.
International Monetary Fund. Western Hemisphere Dept.
This 2019 Article IV Consultation focuses on Curaçao and Sint Maarten’s near and medium-term challenges and policy priorities and was prepared before coronavirus disease 2019 became a global pandemic and resulted in unprecedented strains in global trade, commodity and financial markets. The fiscal position in Curaçao improved in the past two years, in part due to implemented fiscal measures. Both Curaçao and Sint Maarten would benefit from introducing a Fiscal Responsibility Framework. It could incorporate a central government debt ratio as a long-term anchor and operational rules calibrated to meet it. The report suggests that risks in the financial sector need to be addressed as a matter of priority. The authorities should develop a strategy for addressing financial sector vulnerabilities with the objective of preserving financial stability while minimizing fiscal costs. Significant strengthening of supervision and a complete overhaul of the bank resolution framework are also urgently needed. An across-the board improvement in the governance framework should be a key priority in both countries. Vulnerabilities in the financial system point to the need to strengthen governance in the financial sector.
International Monetary Fund. Western Hemisphere Dept.
Weak growth and underlying structural vulnerabilities persist in both Curaçao and Sint Maarten. Worsened macroeconomic conditions—reflecting the spillovers from one of Curaçao’s largest trading partners and the devastation from Hurricanes Irma and Maria in Sint Maarten—make the need for policy adjustment and structural reforms aimed at ensuring fiscal sustainability, enhancing competitiveness, strengthening investor confidence, and developing capacity more urgent.
International Monetary Fund. Western Hemisphere Dept.
This 2016 Article IV Consultation highlights that the fiscal situation in Curaçao and Sint Maarten remains relatively stable, following the debt relief in 2010, but progress on necessary fiscal and structural reforms has been slow. Curaçao experienced modest growth in 2015 of 0.1 percent, reflecting a turnaround from the contraction of 1.1 percent in 2014. The economy of Sint Maarten expanded by 0.5 percent in 2015, a slowdown compared with the 1.5 percent recorded in 2014. Real GDP growth in 2016 is expected to reach 0.5 percent in Curaçao and 0.7 percent in Sint Maarten. Over the medium term, growth is expected to pick up moderately to 0.9 percent and 1.3 percent for Curaçao and Sint Maarten, respectively.
International Monetary Fund. European Dept.
KEY ISSUES Context: The union’s current account deficit—the key economic vulnerability flagged in the previous (2011) consultation—has declined over the past few years, including thanks to fiscal adjustment in Curaçao. But it remains large. Curaçao’s growth and job creation remain lackluster, due to weak competitiveness, adverse sectoral trends (e.g., in the international financial center), red tape, and rigid labor laws. Sint Maarten’s tourism-based economy is recovering but remains vulnerable to shocks and suffers from weak administrative capacity—as underscored, for example, by weakening tax collection. Risks: Both Curaçao and, especially, Sint Maarten are exposed to shifts in tourism demand. Curaçao is vulnerable to the uncertain situation in Venezuela, its main trading partner. If long-discussed flexibility- and competitiveness-enhancing structural reforms are not implemented, both countries’ capacity to absorb shocks may prove limited, and pressures on FX reserves and, ultimately, the peg may intensify. Policy recommendations: Fiscal policies should entrench recent gains to facilitate continued external adjustment (especially in Curaçao) and build buffers against shocks. Curaçao should extend the reform of its pension system to public sector workers, further streamline its administrative apparatus, and address weak governance and finances in state companies. Sint Maarten needs to increase revenues to support an expanding administration, including through stronger tax collection and greater contribution from its profitable state companies. The common central bank must monitor closely the deterioration in banks’ loan portfolios and refrain from direct financing of non-financial companies. It should also use more standard sterilization tools to control banks’ excess liquidity. Urgent action is required to lower the cost of doing business and remove pervasive disincentives to both supply and demand of labor.
International Monetary Fund
The two newly autonomous countries within the Kingdom of the Netherlands face substantial challenges. Growth has been low, and unemployment high. The current account deficit has widened to worrisome levels, increasing the vulnerability of the peg to the U.S. dollar and stimulating calls for dollarizing or dissolving the currency union. A substantial adjustment is needed to bring the underlying current account deficit to historically sustainable levels over the medium term. This could be facilitated by measures to restrain credit growth, supported by fiscal consolidation.
International Monetary Fund
The Netherlands has a long-standing legal framework concerning Anti-Money Laundering and Combating the Financing of Terrorism preventive measures, which dates back to 1993. The legal framework for Customer Due Diligence is generally adequate; however, a number of provisions are problematic. The Dutch system of preventive measures emphasizes the risk-based approach, complemented by a principles-based approach. The principles-based approach should be better supported with guidance for financial institutions. Although most elements of the Suspicious Transaction Report reporting requirements are in place, the reporting regime has one minor legal shortcoming and raises effectiveness concerns.