CURACAO AND SINT MAARTEEN'S CENTRAL BANK TIGHTENS MONETARY POLICY

CURACAO  AND SINT MAARTEEN'S CENTRAL BANK TIGHTENS MONETARY POLICY

By JJosephaNews

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Willemstad, Curacao. The Central Bank of Curacao and Sint Maarten released a letter effective August 13th 2019 to inform the countries about  the tightens of monetary policy. This letter was released after former Minister of finance, Jose Jardim; which was chiefly responsible for the financial position is currently in, became a member of the CBCS Board of Directors. Will international investors think twice and will the pegged defunct Netherland Antillean guilders be unloosened and fall to a ANG:USD ratio by 7.8% to 12.3% to the US dollars? This could lead to a tremendous increase in USD cash injections but maybe classified as "insider trading", which can be a crime if it was in the US and trading occurred on the US stock exchange, therefore warranting the attention possibly of US Secretary of the Treasury; Steven T. Mnuchin, and officials related with FATCA.

Central Bank of Curacao and Sint Maarten Press release [2019-028]:

Central Bank of Curacao and Sint Maarten tightens monetary policy.

Willemstad/Philipsburg - The Central Bank of Curacao and Sint Maarten (CBCS) considers it prudent to "preventatively" stabilize the gradual decline in the gross official reserves and import coverage. This will provide room to the governments of Curacao and Sint Maarten to implement strong economic policies, including a gradual and sustainable reduction of the budget deficits and the introduction of structural reforms directed at a strong competitive position for sustainable export growth and mitigation of import growth. Consequently, the deficit on the current account of the balance of payments can be reduced and the foreign exchanges reserves strengthened.

The gross official reserves (excluding gold) of the monetary union shows a gradually declining trend as of August 2018. Consequently, the import coverage slowly declined to 3.7 months as per July 2019.

The main reasons for this trend are the following:

• 1.) The considerable external shocks to the economies of the monetary union. In Sint Maarten, the tourism industry was affected by the hurricane disaster. In Curacao, the crisis in Venezuela impacted the oil sector (refinery) as well as the harbor, aviation (the collapse of InselAir), and free-zone activities.
• 2.) The conclusion of the debt relief of the former Netherlands Antilles by the Netherlands, which ended the related inflow of foreign exchange in 2018.
• 3.) Higher imports due to increased oil prices and the reconstruction needs of Sint Maarten.
• 4.) Higher foreign interest rates.

The monetary tightening implies that the CBCS will reintroduce biweekly tenders of Certificates of Deposit (CDs) among the local banks in the second half of August 2019. The CBCS will offer CDs both in Netherlands Antillean guilders (NAf.) and US dollars (USD) on a regular basis. While the CDs in NAf. are intended to further reduce the excess liquidity in the banking system, the CDs in USD are aimed at making it attractive for the banks to hold US dollars with the CBCS. Furthermore, the CBCS decided to maintain its pledging rate at 2.50%.

Willemstad, August 13, 2019
CENTRAL BANK OF CURACAO AND SINT MAARTEN

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