## Kingdom of the Netherlands – Sint Maarten: Staff Concluding Statement of the 2023 Article IV Consultations Mission _IMF News, May 30, 2023_ ## Source details **Canonical URL:** [Kingdom of the Netherlands – Sint Maarten: Staff Concluding Statement of the 2023 Article IV Consultations Mission](https://www.imf.org/en/news/articles/2023/05/30/sint-maarten-staff-concluding-statement-of-2023-article-iv-consultations-mission) ## Other formats - [Markdown version](/en/news/articles/2023/05/30/sint-maarten-staff-concluding-statement-of-2023-article-iv-consultations-mission/index.md) - [Structured JSON version](/en/news/articles/2023/05/30/sint-maarten-staff-concluding-statement-of-2023-article-iv-consultations-mission/index.json) - [Bundle manifest](/en/news/articles/2023/05/30/sint-maarten-staff-concluding-statement-of-2023-article-iv-consultations-mission/bundle-manifest.json) ## Bibliographic details - Published: May 30, 2023 --- ### Key takeaways - Sint Maarten is experiencing strong recovery growth led by tourism and investment, but benefits of growth are slow to reach the rest of the economy. - With narrowing fiscal and external deficits, the time is ripe to advance key fiscal and structural reforms, including medium-term investment planning and execution and streamlining business procedures. - Capacity limitations exist in economic statistics and financial intelligence and require adequate resourcing. ### Economic developments and outlook - Output and growth - Sint Maarten grew an estimated 10 percent last year. - Output per capita is expected to surpass pre-pandemic levels this year and pre-hurricane levels next year. - Growth led by buoyant tourism arrivals and robust private and public investment. - Formal employment rose by 5 percent last year but remained below even the 2020 average. - Indicators (consumer credit growth down, subdued car demand, social assistance beneficiaries not falling meaningfully) suggest a job-poor recovery that is slow to reach households. - Major investment projects experienced delays due to supply chain and commodity price difficulties. - Tourism dynamics - Stayover arrivals grew 50 percent in 2022, putting them substantially above their pre-pandemic levels. - Hotel room inventory is higher now than before the pandemic and growing, but room stock is still more than 15 percent below pre-hurricane capacity and will recover slowly, expected to increasingly act as a bottleneck. - Cruise arrivals are growing quickly from lower levels but are also expected to slow. - Tourism recovery will slow well before achieving pre-hurricane numbers. - External sector and inflation - The current account deficit narrowed dramatically, down nearly twenty percent of GDP to an estimated 2.7 percent of GDP in 2022 and expected to reach balance in 2024. - Tradable goods prices broadly tracked U.S. inflation with a sharp impact on energy prices. - Inflation was 3.8 percent, kept lower than expected by a subdued housing sector. - Inflation is expected to slow slightly this year then normalize quickly. - External support - The US$520 million, grant-financed Trust Fund for hurricane reconstruction remains the principal source of public investment and an important driver of growth. - The Netherlands provided liquidity support through the pandemic, conditional on a reform program (landspakket) that delivered technical assistance and policy improvements. ### Fiscal reforms and public finances - Recent fiscal performance and outlook - The overall fiscal deficit was 1 percent of GDP last year, down from 6 percent the previous year and smaller than the budgeted figure. - Performance driven by under-execution of the wage bill on sluggish hiring and goods and services, with support from buoyant growth-related revenues. - Government debt to GDP ratio is projected to decline by 7 percentage points by the end of the forecast horizon, placing it in the bottom quintile of Caribbean economies.[2] - Debt treatment scenarios - In the baseline, pandemic-era liquidity loans falling due in October are refinanced as long-duration bullet loans. - An annuity structure would result in additional reduction of debt to GDP, with the reduction in the debt stock partially offset by a reduction in GDP from compressed expenditures. - Policy priorities - Reverse earlier compression of high-quality expenditures and move forward with revenue reforms. - Consider further increases in spending for improved public services, wages in key capacity areas, and transfers to clear outstanding domestic payment arrears to the pension fund and SZV. - Raise domestic revenue by completing the cleansing of the tax database and ensuring that current tax payments are properly reconciled with taxpayers and tax types. - Conduct a functional review of the Ministry of Justice to ensure consistent job grading, aligned with hiring needs and offering competitive wages. - Continue steps to build public investment capacity: 2023 budget marked the first approval of public investment projects since the hurricanes; Trust Fund execution is expected to be substantial through 2027, and large additional public investment risks hitting supply constraints in the construction sector. - Strengthen Ministry of Finance forecasting capacity and link medium-term budgeting to key policy measures and budget discussions. - Ongoing efforts to develop a debt management strategy with IMF technical support are welcome to support financing scenarios and capital expenditure plans. - Financial management and revenue administration - Addition of six staff in the tax office has helped ease staffing constraints and may underlie recent positive results. - Rollout of recently approved tax and financial management systems is expected to underpin improvements in tax administration and expenditure management. ### Supply-side reforms and governance - Business environment and public services - Meaningful progress toward e-government, but processes need to be end-to-end to realize efficiency gains. - Priority reforms: reduce turn-around time for work permits, business licenses, and building permits. - Initiatives to establish single-window transactions and increase coordination between government agencies could benefit from a firmer timeline. - Financial Intelligence Unit (FIU) and AML/CFT - FIU has updated laws and advanced key legislation but requires an expanded budget and competitive wages to attract and retain staff. - Dedicated financial crimes counterparts are needed in law enforcement and prosecution; integration with the FIU could be considered. - The national risk assessment process is underway and must conclude in advance of the 4 th round Mutual Evaluation scheduled for September 2024. - Laws underpinning a gaming authority and strengthening the FIU’s sanctioning authority are needed. - The ultimate beneficial ownership registry, approved by legislation in 2019, should be prioritized. - Statistics and data capacity - GDP compilation has rapidly improved in timeliness and reliability; inflation statistics have improved in timeliness with further estimation improvements underway. - The pandemic-delayed census is in its final stages and results are expected by the end of the year. - The statistics department remains understaffed and requires a sufficient budget and competitive pay to attract and retain high-skill staff. ### Implementation risks and capacity constraints - Capacity limitations in key areas—economic statistics and financial intelligence—are binding and require adequate resourcing. - Large-scale public investment could face supply constraints in the construction sector. - Refinancing choices for pandemic-era liquidity assistance materially affect debt dynamics and fiscal space.[1] ### Mission acknowledgements and timing - The IMF mission conducted discussions during May 3-10, 2022. - Issues related to the Curaçao and Sint Maarten monetary union were further discussed in the mission to Curaçao and covered in that mission’s concluding statement. *Kingdom of the Netherlands – Sint Maarten: Staff Concluding Statement of the 2023 Article IV Consultations Mission, May 30, 2023.* --- ## References - [Kingdom of the Netherlands-Sint Maarten and the IMF](http://www.imf.org/external/country/SXM/index.htm) - [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance) - [Mission Concluding Statements](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2023/05/30/sint-maarten-staff-concluding-statement-of-2023-article-iv-consultations-mission_