�Sets Govt a Feb 17 deadline�
PHILIPSBURG--The Committee for Financial Supervision CFT has branded the 2011 budget approved by Parliament on December 23 as unbalanced and instructed government to trim another NAf. 30 million.
In a letter dated January 25, the CFT indicated that figures outlined by government had to be adjusted/reduced based on certain realities and other speculative financial conclusions by government.
More specifically, the CFT informed government that revenue from the increase of the turnover tax (ToT) from three to five per cent had to be adjusted downwards considering that the ToT would only be implemented six weeks into the year and revenue from those six weeks must be excluded.
Additionally, the CFT is not in agreement with Minister of Finance Hiro Shigemoto, who projected that the economy of St. Maarten would grow by two per cent in 2011. CFT's dismissal of this argument is in line with that of the Central Bank of Cura�ao and St. Maarten, which expects St. Maarten's economy to expand slightly, by 0.3 per cent, after zero growth in 2010 (according to the bank).
Government is of a different opinion. It says the first and second quarter figures of 2010 are not complete and cannot be used as an accurate basis to determine the growth for 2011.
Minister of Finance Hiro Shigemoto confirmed late Monday night that the "perceived difference" was a sum of NAf. 30 million. The CFT has given the Government of St. Maarten until February 17 to present an adapted budget that also has been approved by Parliament. According to the CFT, they have to come up with a budget of NAf. 414 million compared to the NAf. 444 million that was approved by the Parliament of St. Maarten.
Negotiation with the unions regarding the cost-of-living adjustment for the years 2006, 2007 and 2009 retroactive to January 1, 2011, will cost an additional NAf. 15 million that has to come from somewhere and could drive up the perceived deficit to NAf. 45 million, Shigemoto explained.
"The Government was only able to budget the two per cent out of the 5.3 per cent in the 2011 budget and none was taken up in the 2010 budget. Therefore, the retroactive payment realistically cannot be made until the 2011 budget gets a positive advice from the CFT. Since this is not the case, the Government just cannot commit to this payment until it has had the time to amend the budget, which first has to be accepted.
"If cost-cutting proves to be a challenge and would start to affect the services rendered to the community, additional measures may need to be taken in order to close the gap," Shigemoto explained on Monday.
The overall consensus is that dialogue will continue with respect to making sure the budget complies with the financial supervision rules and regulations that have been established, according to the Minister. He said this course of action would continue between the CFT and government, to come to a final advice from the CFT.
"Our deliberations (two weeks ago in Cura�ao) in particular focused on the status of the advice from the CFT regarding the 2011 budget. The advice regarding the budget is not complete as yet and aspects pertaining to the realised income for 2010 were discussed.
"The CFT's analysis of government's income over 2010 differs considerably from that of government and they have sent their analysis on to the Secretary General of Finance for further comments. Also noted in the analysis of the CFT's observations thus far is particularly the reported economic growth for St. Maarten by the Central Bank of Cura�ao and St. Maarten," the Minister said.
"The government indexed its realised income 2010 by an average 2.0 per cent for the budget 2011. The government strongly believes that this indexing is closer to the reality than to say that there is practically no or very little economic growth projected for St. Maarten in 2011."
He added that two options were available to the Government of St. Maarten. One is to allow the CFT to give a negative advice and let the process take its course, which leads to the Kingdom Council of Ministers and possibly to the Kingdom Council of Ministers sending directives as to how to balance the budget. The second option is to delay the CFT's advice temporarily to have a more realistic budget rather than one based on perceived analysis of the income generated over 2010.
However, it is not clear whether the "delay" option is acceptable to the CFT, especially considering that a February 17 deadline has been imposed.
"The government is busy with an answer to the analysis of the CFT of the 2010 income collected. It will show that the difference in estimated income is not as great a gap as the CFT indicated in its analysis. The discussions and exchange of viewpoints is expected to continue until consensus can be arrived at or one party proves their analysis to be more correct," Shigemoto said.
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