WILLEMSTAD/ PHILIPSBURG:--- The College financieel toezicht (Cft) has published its response to the fourth implementation report (UR) of 2024 from Sint Maarten. This report, delayed by over three months beyond the statutory deadline, details the country's financial performance, ongoing challenges, and specific recommendations from the Cft. The document sheds light on the successes and areas needing urgent attention in Sint Maarten's fiscal management.
Financial Performance in 2024
The report reveals that Sint Maarten ended 2024 with a preliminary surplus of XCG 0.7 million on its ordinary service account. This positive outcome ensures compliance with the central budgetary norms established by the Kingdom Financial Supervision Act (Rijkswet financieel toezicht, or Rft). The Cft highlighted the constructive steps taken to avoid a deficit, stating, "Sint Maarten has followed the Cft’s recommendation to prevent a deficit in the fourth UR, which is positive." However, the realization of income and expenditures remains uneven.
Revenue Performance
Sint Maarten recorded XCG 522 million in total revenues as of Q4 2024, falling short of the budgeted XCG 550 million. This gap was attributed to lower-than-expected tax revenues, licenses, and subsidies. A portion of revenues remains unclassified due to ongoing issues with bank descriptions, hampering accurate categorization. The Cft reiterated the importance of resolving this issue promptly, remarking, "It is essential that this process is expedited so that revenues can be appropriately allocated, improving transparency in public finances."
While some tax categories exceeded expectations, including wage tax (XCG 15 million above budget) and turnover tax (XCG 3 million above projections), others faltered. The report outlines significant shortfalls in profit tax (-XCG 14 million), transfer tax (-XCG 4 million), and excise duties (-XCG 6 million).
Expenditure Overview
On the expenditure side, Sint Maarten managed to lower its costs, with total spending reaching XCG 521 million, substantially below the budget of XCG 547 million. Reduced spending on personnel costs (XCG 15 million below budget) and goods/services (XCG 12 million below budget) were key contributors to this variance. The Cft linked these reductions to unfilled government vacancies and constrained liquidity, which limited the execution of planned projects.
Investment Challenges
Despite allocating XCG 280 million for investments in 2024, which included XCG 90 million for delayed projects from 2023, only XCG 41 million was executed by year-end. The Cft expressed its concerns over this stagnation, particularly in critical projects financed by a December 2024 Dutch loan of XCG 132 million. These included constructing a new prison and procuring generators for GEBE. The Cft urged Sint Maarten to "prioritize the actual implementation of investment projects to stimulate development."
Challenges in Investments and Recommendations by CFT
The College financieel toezicht (Cft) highlighted significant delays in investment projects in its response to the fourth implementation report (UR) of 2024 for Sint Maarten. The report reveals a stark contrast between the planned investment budget and the actual execution. While Sint Maarten allocated XCG 280 million for investments in 2024, only XCG 41 million was utilized by the end of the year. This includes XCG 90 million earmarked for projects delayed from 2023.
Such underperformance in investment execution has been a recurring point of concern for the Cft. Specific projects, such as the construction of a new prison and the procurement of generator equipment for GEBE, were partially funded by a substantial loan from the Netherlands amounting to XCG 132 million. However, the execution of these projects remains pending and is expected to progress in the upcoming years.
The Cft noted, "Sint Maarten gives priority to project execution but has yet to utilize budgeted funds effectively." The limited execution capacity and persistent liquidity constraints are key reasons for the delays. Without adequate resources and organization to facilitate project delivery, investments have failed to reach their expected outcomes.
This is particularly troubling as the timely implementation of such projects is essential to addressing critical infrastructural needs across the territory. The Cft stated that "serious concerns remain about the pace and efficacy of investment progress." To combat this, they urged Sint Maarten to assign greater priority to executing planned investments, stressing that delayed projects lead to compounded setbacks in economic and social development.
Looking ahead, the Cft recommended better financial planning and coordination to enhance execution rates. Additionally, they emphasized the importance of maintaining transparency and accountability in reporting investment progress to ensure stakeholders can monitor how resources are utilized.
The challenges in project implementation continue to reflect broader issues in financial and administrative management within Sint Maarten. Overcoming these hurdles will require systematic reforms and a sustained commitment from relevant authorities. Only then can investments transform from budget lines into real-world progress, providing benefits for the people of Sint Maarten.
Ongoing Challenges
The Cft identified multiple structural and operational challenges affecting Sint Maarten's financial management and performance.
Liquidity Position
The report highlights that Sint Maarten's liquidity position remains opaque due to the absence of a multi-year liquidity forecast and an overview of free liquidity. While end-of-year liquid funds stood at XCG 151 million, much of this was earmarked for investments. The Cft voiced concerns, noting, "Without a clear projection of free cash flow, it is impossible to accurately assess Sint Maarten's financial standing in the medium term."
Financial Management
The quality of financial management saw limited improvement in Q4 2024. The Cft emphasized that "the explanatory value of the quarterly reports requires enhancement," including clear distinctions between incidental and structural financial variations. This would help in better understanding budget execution.
Collective Sector and Debt
Sint Maarten's reporting on the collective sector remains incomplete, with figures for 2021 and 2022 still pending, despite repeated requests. Furthermore, year-end government debt totaled XCG 1.427 billion, representing 48% of the country's GDP. The Cft pointed out that the continued lack of documentation hinders assessment of compliance with debt norms.
Payment Arrears
At the close of 2024, overdue payments to public entities totaled XCG 144 million. The bulk of this debt relates to the Social and Health Insurance Executive Agency (SZV). Despite discussions, no payment arrangement was finalized. Resolving this arrears issue remains a critical priority for the Cft.
Recommendations from the CFT
The Cft provided clear directives to improve Sint Maarten’s fiscal sustainability and compliance:
- Enhance Revenue Generation: Implement new taxes, such as a tourism levy and general health insurance, and focus on improving tax collections.
- Prioritize Investments: Expedite the execution of key investment projects, especially those funded by external loans.
- Improve Financial Reporting: Include multi-year liquidity projections and detailed explanations of financial discrepancies in future URs.
- Address Payment Arrears: Finalize and implement payment arrangements with entities like SZV.
- Resolve Classification Issues: Accelerate the resolution of bank description problems to ensure accurate revenue categorization.
Conclusion
While Sint Maarten has demonstrated progress in adhering to essential budget norms, significant challenges persist. The Cft's report underscores the urgency of enhancing financial management practices, resolving liquidity concerns, and pushing forward with vital investments. These steps are critical for Sint Maarten to build a stable fiscal future and effectively manage its financial resources in the years to come.
Click here for the CFT Report.