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IMF Country Report No. 20/94

KINGDOM OF THE NETHERLANDS— CURACAO AND SINT MAARTEN

2019 ARTICLE IV CONSULTATION—PRESS RELEASE AND STAFF REPORT

April 2020

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2019 Article IV consultation with the Kingdom of the Netherlands-Curacao and Sint Maarten, the following documents have been released and are included in this package:

  • A Press Release.

  • The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on a lapse-of-time basis following discussions that ended on November 22, 2019 with the officials of the Kingdom of the Netherlands-Curacao and Sint Maarten on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on March 3, 2020.

  • An Informational Annex prepared by the IMF staff.

The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.

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© 2020 International Monetary Fund

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KINGDOM OF THE NETHERLANDS—CURAÇAO AND SINT MAARTEN

STAFF REPORT FOR THE 2019 ARTICLE IV CONSULTATION DISCUSSIONS

March 30, 2020

COVID-19. The staff report was prepared by a staff team of the IMF for the Executive Board’s consideration on March 18, 2020. The staff report reflects discussions with the Kingdom of the Netherlands—Curaçao and Sint Maarten authorities in November 2019 and is based on the information available as of March 3, 2020. It focuses on Curaçao and Sint Maarten’s near and medium-term challenges and policy priorities and was prepared before COVID-19 became a global pandemic and resulted in unprecedented strains in global trade, commodity and financial markets. It, therefore, does not reflect the implications of these developments and related policy priorities. The outbreak has significantly worsened the outlook and greatly amplified uncertainty and downside risks around it. Staff is closely monitoring the situation and will continue to work on assessing its impact and the related policy response in Curaçao and Sint Maarten and globally.

Context. The monetary union of Curaçao and Sint Maarten (Union) has been grappling with negative shocks. Curaçao experienced four years of recession mainly due to significant spillovers from the Venezuela crisis and has fragilities in the financial system. Sint Maarten’s recovery after the devastating 2017 hurricanes has been uneven, demonstrating small island constraints and structural impediments. The external position of the Union worsened in the past two years, putting some pressure on international reserves. These shocks have exposed long-standing rigidities and highlighted the need for wide-ranging reforms. Governance concerns remain at the forefront in both countries.

Outlook and risks. The Union’s growth outlook is improving but remains fragile. Curaçao’s outlook is vulnerable to setbacks with reviving the oil refinery and to possible spillovers from financial sector fragilities. The ongoing recovery of Sint Maarten is vulnerable to delays in key projects such as reconstruction of the airport.

Policy recommendations. Improving the functioning of the Union requires better policy frameworks, stronger buffers, and a strong macro framework based on better data. Both countries need steady implementation of structural reforms in conjunction with gradual fiscal adjustment to raise potential growth and maintain fiscal sustainability. Sint Maarten should step up efforts in post-hurricane reconstruction and building resilience to natural disasters and climate change, which require enhanced capacity to absorb available reconstruction resources, as well as better planning and prioritization. At the Union level, the Centrale Bank van Curaçao en Sint Maarten (CBCS) needs to continue to implement monetary policy consistent with the pegged exchange framework. Financial sector vulnerabilities need to be addressed as a matter of priority, especially in Curaçao. Both countries need improvements in governance frameworks including better transparency, stronger public financial management, comprehensive implementation of the AML/CFT framework, operationalizing integrity bodies and improving financial supervision and resolution regimes in the CBCS.

Approved By

Patricia Alonso-Gamo (WHD) and Martin Sommer (SPR)

Discussions took place in Philipsburg (November 5–13, 2019) and Willemstad (November 14–22, 2019). Upon return to headquarters, the team met with a Sint Maarten delegation from the interim government. These consultation discussions form part of the Article IV consultation with the Kingdom of the Netherlands. The staff team comprised of Messrs. Dmitriy Kovtun (head), Caroline Flodberg, Oscar Hendrick, and Atsushi Oshima (all WHD). Jesper Hanson (OED) joined the discussions. Tianle Zhu, Cristina Barbosa and Soungbe Konate (all WHD) provided valuable assistance from headquarters.

Contents

  • CONTEXT

  • RECENT ECONOMIC DEVELOPMENTS

  • A. Curaçao

  • B. Sint Maarten

  • C. The Monetary Union

  • OUTLOOK AND RISKS

  • POLICY ISSUES

  • A. Enhancing Potential Growth and Overcoming Small Island Constraints

  • B. Fiscal Policy: Strengthening Fiscal Frameworks and Building Resilience

  • C. Monetary Policy and Financial Sector Policies: Supporting the Peg and Improving Financial Sector Resilience

  • D. Improving Governance

  • E. Capacity Building and Improving the Data Framework

  • STAFF APPRAISAL

  • BOXES

  • 1. Strengthening the Monetary Union of Curaçao and Sint Maarten

  • 2. Curaçao: Growth Accord and Kingdom Instruction

  • FIGURES

  • 1. Regional Comparison

  • 2. Real Sector Developments

  • 3. Fiscal Developments

  • 4. Monetary Developments

  • 5. Risk Assessment Matrix

  • TABLES

  • 1. Curaçao: Selected Economic and Financial Indicators, 2016–25

  • 2. Curaçao: Government Operations, 2016–25, Millions of Naf

  • 3. Curaçao: Government Operations, 2016–25, Percent of GDP

  • 4. Sint Maarten: Selected Economic and Financial Indicators, 2016–25

  • 5. Sint Maarten: Government Operations, 2016–25, Millions of Naf

  • 6. Sint Maarten: Government Operations, 2016–25, Percent of GDP

  • 7. Curaçao and Sint Maarten: Balance of Payments, 2016–25

  • 7a. Curaçao: Balance of Payments, 2016–25

  • 7b. Sint Maarten: Balance of Payments, 2016–25

  • 8. Monetary Survey, 2016–19

  • 9. Central Bank Survey, 2016–19

  • 10. Financial Soundness Indicators, 2014–19

  • ANNEXES

  • I. Implementation of the Recommendations of the 2018 Article IV Consultation Discussions

  • 11. Spillovers from the Venezuela Crisis

  • III. External Sector Assessment

  • IV. Labor Market Challenges in the Union

  • V. Debt Sustainability Analysis

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KINGDOM OF THE NETHERLANDS—CURAÇAO AND SINT MAARTEN

STAFF REPORT FOR THE 2019 ARTICLE IV CONSULTATION DISCUSSIONS—INFORMATIONAL ANNEX

March 3, 2020

Prepared By

The Western Hemisphere Department (In consultation with other departments)

Contents

  • FUND RELATIONS

  • STATISTICAL ISSUES

  • COLLABORATIONS WITH OTHER INTERNATIONAL FINANCIAL INSTITUTIONS

Kingdom of the Netherlands-Curacao and Sint Maarten: 2019 Article IV Consultation-Press Release and Staff Report; and Statement by the Executive Director for the Kingdom of the Netherlands-Curacao and Sint Maarten
Author: International Monetary Fund. Western Hemisphere Dept.