Published On: Wed, Oct 26th, 2016

Dutch remain critical of 26 million loan extension

stef-blok

Stef Blok: “We won’t let this pass silently.” Photo Caribisch Netwerk

THE HAGUE – The Netherlands has offered St. Maarten redemption on an existing loan, even though the country’s finances are not in order. St. Maarten would have gotten into more trouble if that had been blocked, Acting Minister Stef Blok (Kingdom Relations) said in the Second Chamber yesterday. He emphasized that it is about an existing loan, not a new one, Pieter Hofmann reports on Caribisch Netwerk.

André Bosman (VVD) had asked questions after reports that a 26 million guilders loan of St. Maarten had been extended by the Netherlands, in spite of the fact that St. Maarten’s 2016 budget does not meet the requirements of the consensus kingdom law financial supervision; for that reason the country is not allowed to contract new loans.

St. Maarten has to pay off the loan in seven annual installments of 5.2 million guilders. The first payment is due in 2019. The interest loan for this arrangement is 0.5 percent.

“Not extending a loan at all would have resulted in serious financial problems, but issuing a new loan just like that would not have been appropriate either,” Blok said. “We will not let this pass silently.” According to Blok, St. Maarten is capable to meet the demands for payment the Netherlands has imposed.

The government of St. Maarten has had financial problems for quite some time and it threatened to end up in technical default – a situation whereby a country is no longer able to pay off loans or meet other payment conditions. After a default the risk of a bankruptcy is significant. In that case there is hardly any money left for the basic facilities of a country. Blok mentioned as examples the salaries for the police, the water supply and food items.

According to the Kingdom Charter the kingdom countries have a duty to assist. The minister does not want to anticipate what the Netherlands would do in case of a default. For that, the situation is too serious. “But there is no carte blanche for the government if St. Maarten,” Blok said.

In the beginning of this month, the Central Bank was about to issue a 26 million guilders bond issue for St. Maarten and the Netherlands would be obliged to subscribe to this loan. Initially financial supervisor Cft approved the bond issue, but it changed its mind within a week when it opined that the 2016 budget no longer meets the requirements of the kingdom law financial supervision.

St. Maarten needed the bond issue to roll over an old debt dating back to 2010.

With the extension of the loan, the problem has been solved.

richard-f-gibson-sr-na8Finance Minister Richard Gibson said last week that he had mixed feelings about the loan-extension, mainly because the Cft had ignored information about the revenue the country is realizing. The extension carries a favorable interest rate of 0.5 percent, but St. Maarten is now obliged to pay off the principal in seven years – between 2019 and 2026.

The minister is also convinced that, when the year closes, the 2016 budget will show that it meets the requirements of the kingdom law financial supervision. He mentioned a windfall of 9.2 million in dividend from the Central Bank and another – expected – 17 million guilders in revenue from the water reserves of utilities company Gebe.