Sint Maarten, Curaçao and Aruba have signed the loan agreement to refinance the Covid loans. The Netherlands agreed to refinance the loans worth €1.17 billion, as it was known that the Countries would not be able to repay them at once. The loans were needed during the Covid pandemic because the Countries themselves had insufficient financial buffers to cope with the negative consequences of Covid and needed to be supported in doing so.
Besides the loans, the Netherlands also gifted the Countries with humanitarian aid worth over EUR 220 million during that period.
Risks to state treasury
Negotiations on the terms for refinancing have been ongoing since February this year. The Netherlands was willing to refinance the loans at a low interest rate if the Countries met a number of conditions. This was necessary because the Netherlands itself had to borrow money with interest, now 3.2%, to make the refinancing possible. All countries were asked to make an independent calculation of the refinancing. This allowed the debt burden per country to be determined. Moreover, the Countries could simultaneously show their plans for strengthening the economy. In addition, Aruba, Sint Maarten and Curaçao were subject to a number of specific conditions that would help these financially vulnerable countries, to avoid future financial problems. The Netherlands imposed these conditions because the risks for the Countries and the Netherlands in case of non-repayment of the loan are too high.
Aruba
After intensive consultations with Aruba the past days, the loan agreement has been amended on a number of points. Aruba will be offered a long-term refinancing of the loan at an interest rate of 6.9%. This corresponds to the interest rate that the Netherlands would demand from countries with a similar low credit rating as Aruba. Should Aruba still agree to a Kingdom Act (Rijskwet), the Country will also qualify for a lower interest rate of around 3.4%. A Kingdom Act (Rijkswet) is necessary because it contributes to sound financial governance. It is an important prerequisite for sound public finances to ensure sufficient investments for residents even in times of setbacks. The Netherlands is prepared to discuss adjusting the current bills but considers it important that budget conditions cannot be adjusted unilaterally.
Curaçao
For both Curaçao and St Maarten, there needed to be an administrative agreement on a financially realistic and solid rescue plan for the ailing pension insurer ENNIA. A rescue plan was needed because poverty threatened 30,000 policyholders in both countries from the 1st of January 2024. Both residents and Landen would face major personal and social consequences. Although Curaçao signed the loan agreement, it attached three conditions to it. With two of these conditions, the Netherlands can agree. These are a reservation for the approval of the loan agreement by Curaçao’s Council of Ministers and – if necessary – the Parliament. However, the Netherlands considers these to be resolutive conditions to the loan agreement. This means that if, unexpectedly, there is no approval from the Council of Ministers or the Curaçao Parliament, the loan agreement will still expire. This will make the entire loan immediately due and payable. Curaçao’s third condition concerns the content of the loan agreement. The Netherlands has submitted its interpretation of this to Curaçao and asked whether this interpretation was correct. As soon as this confirmation is in, final agreement on the loan agreement will also be reached with Curaçao.
St Maarten
St Maarten was the first to sign the loan agreement after previously signalling their agreement to either a relaunch or resolution of ENNIA. As a result, St Maarten will be offered a short-term refinancing at the lowest interest rate (3.4%). Once there is a solid solution for ENNIA on which all Countries agree, it will be converted into a long-term, grace-free loan as previously intended.
