The key driver for the review for downgrade is the decision by the Netherlands, the sole funding source for Sint Maarten’s government, to withhold certain liquidity payments which in turn resulted in payment delays on bilateral loans owed to the Dutch Treasury. The Netherland’s decision to temporarily deny liquidity support resulted from an ongoing political disagreement between the two governments on the pace of domestic policy reform in Sint Maarten. The delays in providing liquidity support also highlighted Sint Maarten’s limited funding options and amplified the challenges posed by Sint Maarten’s growing funding requirements.
The review will allow Moody’s to assess the impact of reduced timely fiscal support from the Netherlands in the face of a rising debt burden. Moody’s will also review the strength and development of Sint Maarten’s institutions, a key and ongoing challenge for the island nation since the dissolution of the Netherlands Antilles in 2010. The review may result in a repositioning of the rating to incorporate Sint Maarten’s growing funding needs and high dependence on a single source of financing.
The local and foreign currency country ceilings remain at A3 and Baa1, respectively. The local currency ceiling is set at three notches higher than the sovereign rating, reflecting the limited role of the government in the economy and general economic and financial support from the Netherland’s which assists economic growth. The one notch difference between the foreign and the local currency ceiling reflects the country’s monetary union which limits the risk of foreign exchange controls.