Debt relief in Curaçao and Sint Maarten was of limited effectiveness

In 2010, the Netherlands took over most of the debt of the then Netherlands Antilles. Curaçao and Sint Maarten thus started as autonomous countries with sustainable government debts. Amsterdam Bureau for Economics investigated the effectiveness and efficiency of debt relief.

Since 2010, Sint Maarten has always managed to keep the government debt at a sustainable level, despite the severe economic shocks (hurricanes, Covid-19) that the country has had to contend with. Curaçao’s government debt has developed in an unsustainable manner since 2010.

Although debt restructuring made an important contribution, the objective of a healthy starting position was achieved to a limited extent. As a result, both countries remained vulnerable to external shocks and Curaçao did not have, and Sint Maarten had to a limited extent, a vital economy that developed in a balanced manner, as had been intended. This is because the necessary economic reforms have not been implemented. With the implementation of the country packages, Curaçao and Sint Maarten, in collaboration with the Netherlands, are still trying to arrange this.

To achieve the long-term goals of sustainable public finances, structurally sound socio-economic development and promotion of autonomy, a number of preconditions must be met: socio-economic reforms and improvement of financial management. As long as these preconditions are not met, the intended long-term consequences cannot be achieved or can only be achieved to a limited extent and the effectiveness and efficiency of policy instruments aimed at improving public finances will remain limited.

Sound public finances and structurally sound socio-economic development go hand in hand. It is important in the design and use of policy instruments that this relationship is explicitly taken into account and that agreements relating to public finances are accompanied by agreements on associated preconditions and that these are complied with.

Read the entire report by Amsterdam Bureau for Economics on the Debt Relief of Curaçao and Sint Maarten here (in Dutch).