Sint Maarten, a constituent country of the Kingdom of the Netherlands, funds itself solely with the Dutch Treasury and has not demonstrated independent market access. This results in very low borrowing costs for Sint Maarten but also requires continued political support from the Netherlands. Last year differences between the two nations, including lack of agreement on the speed of implementation of certain cost reduction measures, led to the government of the Netherlands to temporarily withhold liquidity support and a delay in debt payments by Sint Maarten.
On 18 December 2020, the government of Sint Maarten missed a NAF50 million maturity repayment on debt owed to the government of the Netherlands. The maturity of the debt had previously been extended twice, originally on 21 October and then again on 16 November, as negotiations for a new tranche of liquidity support from the Netherlands failed to reach a conclusion. The delays were the result of lack of progress on several policy reforms requested by the Netherlands including compensation cuts for public employees in Sint Maarten.
The conditional access to funding has exacerbated rising fiscal pressures as Sint Maarten’s government debt is projected to reach over 70% of GDP in 2021 compared to 26% in 2016. The increase is the result of dealing with large shocks in recent years, Hurricane Irma in 2017 and the worldwide pandemic in 2020. Concessional lending terms, including no interest loans, have limited the rise in interest payments which Moody’s estimates will end at 3.7% of revenues this year, lower than the 5% for Baa3-rated peers and only slightly higher than the 3.2% average of the prior five years.
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. During the review, Moody’s will also assess the ability and willingness of the respective governments to reach long-term funding solutions for Sint Maarten, including the need for Sint Maarten to prioritize proposed policy reforms. The review will also evaluate Sint Maarten’s debt sustainability prospects and the institutional arrangements in place to make timely debt payments.
Categories: Netherlands Vs Former Antilles