News item | 12-10-2023 | 08:58
Sint Maarten, Curaçao and Aruba have signed the loan agreement for the refinancing of the Covid loans. The Netherlands has shown its willingness to refinance the loans worth 1.17 billion euros, because it was known that the countries would not be able to repay them in one go. The loans were necessary during the Covid pandemic because the Countries themselves did not have sufficient financial buffers to cope with the negative consequences of Covid and needed to be supported.
In addition to the loans, the Netherlands also provided the countries with humanitarian aid worth more than 220 million euros during that period.
Risks for the state treasury
Negotiations on the terms for refinancing have been ongoing since February this year. The Netherlands was prepared to refinance the loans at a low interest rate if the countries met a number of conditions. This was necessary because the Netherlands itself also has to borrow money with interest, now 3.2%, to make the refinancing possible. All countries have been asked to make an independent calculation of the refinancing. This made it possible to determine the debt burden per country. Moreover, the Countries were able to simultaneously demonstrate their plans for strengthening the economy. In addition, a number of specific conditions applied to Aruba, Sint Maarten and Curaçao that help these financially vulnerable countries to prevent future financial problems. The Netherlands imposed these conditions because the risks for the countries and the Netherlands if the loan is not repaid are too high.
Aruba
After intensive consultations with Aruba in recent days, the loan agreement has been adjusted on a number of points. Aruba is offered a long-term refinancing of the loan at an interest rate of 6.9%. This corresponds to the interest that the Netherlands would ask from countries with a comparable low credit rating as Aruba. If Aruba still agrees to a Kingdom Act, the Country will also be eligible for a lower interest rate of approximately 3.4%.
A Kingdom Act is necessary because it contributes to sound financial management. It is an important precondition for healthy public finances to be able to realize sufficient investments for residents, even in times of adversity. The Netherlands is willing to discuss adjusting the current bill, but believes it is important that budget standards cannot be adjusted unilaterally.
Curacao
For both Curaçao and Sint Maarten, it was necessary to have an administrative agreement on a financially realistic and solid rescue plan for the ailing pension insurer ENNIA. A rescue plan was necessary because from January 1, 2024, poverty threatened 30,000 policyholders in both countries. Both the inhabitants and the Countries would face major personal and social consequences. Although Curaçao has signed the loan agreement, the country has attached three conditions to it. The Netherlands can agree to two of these conditions. This concerns a reservation for the approval of the loan agreement by the Council of Ministers of Curaçao and – if necessary – the States. The Netherlands regards these as resolutive conditions for the loan agreement. This means that if there is no approval from the Council of Ministers or the Curaçao parliament, the loan agreement will still be canceled. This will make the entire loan immediately due and payable. Curaçao’s third condition concerns the content of the loan agreement. The Netherlands has presented Curaçao with its interpretation of this and asked whether this interpretation is correct. As soon as this confirmation has been received, final agreement will have been reached with Curaçao on the loan agreement.
St Martin
Sint Maarten was the first to sign the loan agreement after previously indicating that it agreed with either a restart or settlement of ENNIA. As a result, Sint Maarten is offered a short-term refinancing at the lowest interest rate (3.4%). As soon as there is a solid solution for ENNIA that is agreed upon by all countries, it will be converted into a long-term, interest-only loan as previously intended.