CFT clears St. Maarten for loan financing, says swift budget amendments necessary

GREAT BAY--St. Maarten’s 2025 budget has cleared an important hurdle, with the Committee for Financial Supervision (CFT) granting approval for the country to proceed with loan financing, while cautioning that swift budget amendments and stronger financial management reforms remain necessary.

In a series of exchanges between the Ministry of Finance and the CFT over the past month, both sides acknowledged progress but stressed that challenges persist in revenue projections, personnel expenditures, investment execution, and healthcare financing.

𝐂𝐅𝐓’𝐬 𝐂𝐨𝐧𝐜𝐞𝐫𝐧𝐬 – 𝐉𝐮𝐥𝐲 𝟐𝟒

On July 24, the CFT issued its official advice on the 2025 budget, identifying significant risks:

• Revenue projections: Government expects tax revenues to rise by 9 percent in 2025, but the CFT found this increase insufficiently substantiated. It also flagged the planned 2026 tourist tax, expected to yield XCG 18 million annually, as uncertain due to pending legislation and lack of a firm implementation timeline.

• Expenditures: Personnel costs are projected to grow by XCG 33 million, a 15 percent increase. The CFT noted that only half of this increase was explained. It also raised questions about rising outlays for goods, services, and legal costs.

• Investments: Capital investments were budgeted at XCG 278 million, largely rolled over from 2023 and 2024. The CFT warned that delays and limited execution capacity risk leaving loans unused while interest payments accumulate.

• Healthcare funds: Deficits in social and medical insurance funds pose urgent risks, with the potential for liquidity shortfalls that could strain the national budget.

• Financial management: St. Maarten has not adopted a budget on time since 2010. The CFT pressed for modernization of the tax system, strengthening of the Tax Department, and improved reporting on government-linked entities.

Minister Gumbs’ Reply – July 31

Finance Minister Marinka Gumbs responded on July 31, defending the budget’s integrity while pledging adjustments in key areas:

• Revenue growth: She pointed to provisional revenue realization of XCG 300 million in the first half of 2025, arguing this aligned with budget expectations and supported the 9 percent growth projection. She stressed that compliance improvements and a broadened tax base made the forecast achievable.

• Tourist tax: Gumbs reaffirmed the government’s commitment to introducing the new levy on January 1, 2026. The proposal has already received advice from the Social Economic Council and is expected to be submitted to the Council of Advice within weeks. She pledged that any changes in timing would be reflected in a 2025 budget amendment (BW 2025) and the 2026 budget.

• Personnel costs: The Minister explained that increases were tied to overdue salary adjustments, collective labor agreements, and justice sector placement costs. These expenditures, though heavy, were described as unavoidable commitments that fulfill legal obligations and stabilize the workforce.

• Goods, services, and legal costs: She acknowledged higher spending but pointed to ongoing legal disputes, administrative modernization, and enforcement measures as drivers. Such investments, she argued, would strengthen government efficiency and compliance in the long term.

• Investments: Gumbs confirmed that the government would scale back its loan request from the Netherlands from XCG 52 million to XCG 32 million, prioritizing shovel-ready projects and deferring those requiring more preparation.

• Healthcare funds: She acknowledged the risks highlighted by the CFT but noted that the Ministry of VSA was working on structural reforms, with short-term government support bridging liquidity gaps.

• Financial management: Gumbs stressed ongoing reforms in digitization, strengthening the Tax Department, and developing a joint financial management assessment framework with the CFT. She emphasized that timely adoption of the 2026 budget remained a priority.

• Partnership with CFT: While questioning aspects of the CFT’s tone, she reaffirmed that her ministry valued the oversight body’s guidance and sought a more predictable, standardized evaluation process for future budgets.

𝐂𝐅𝐓’𝐬 𝐅𝐨𝐥𝐥𝐨𝐰-𝐔𝐩 – 𝐀𝐮𝐠𝐮𝐬𝐭 𝟏𝟒

On August 14, the CFT issued its response to the Minister’s letter, formally concluding the Article 12 exchange:

• Overall judgment: The CFT concluded that St. Maarten had sufficiently addressed its recommendations, allowing the country to proceed with borrowing under Article 16 of the Rijkswet financieel toezicht, on the strict condition that promised adjustments are passed in a budget amendment before year-end.

• Revenue and tourist tax: While noting the government’s interim revenue figures, the CFT stressed that without the tourist tax it remains uncertain whether St. Maarten can balance its 2026 budget. It urged continued urgency in advancing the legislation.

• Investments: The watchdog welcomed the scaled-down loan request but called for a broader reassessment of multi-year investment ambitions, tied to realistic execution capacity.

• Financial management: The CFT acknowledged the steps taken since March 2025 to develop a financial management framework and expressed willingness to work with the government to finalize it.

• Partnership: Rejecting the suggestion that it had been unconstructive, the CFT highlighted its history of providing support, guidance, and flexibility. It signaled its intent to continue discussions with Gumbs during its September visit to Philipsburg.

The conclusion of the Article 12 process clears the way for St. Maarten to secure loan financing for capital projects, but also places the burden squarely on government to follow through on its commitments. The passage of a 2025 budget amendment, successful implementation of the tourist tax by 2026, and credible investment planning will be key to restoring confidence in fiscal policy.