This article is based on the briefing by the Aruba government on August 12th, 2020, and the information provided therein by the Head of the Department of Finance.
Due to coronavirus: a deficit of 1,1 Billion in 2020
As a consequence of the coronavirus, Aruba went from a 46 Million surplus to a 1,1 Billion deficit in 2020 which amount consists of the following:
A) A decrease in income of 565 Million, due to:
- Less revenue from the economy
- Income-generating plans had to be placed on hold
B) A cost increase of 596 Million consisting of:
- The wage subsidy program 323,5 Million
- An AZV/SVB deficit of 234,1 Million
- The FASE program 53,8 Million
- The SME-program 32,2 Million
- Awg 20 Million in extra investments to stimulate the economy
The government will have to find financing for the deficit of 1,1 Billion, as well as for the refinancing of loans expiring in 2020 to the amount of Awg 295,9 Million. In total 1,4 Billion will have to be borrowed for Aruba to comply with its financial obligations.
Loans have been secured or are pending to the amount of 931,5 Million (longterm loans – longer than 1 year):
- 243 Million on the international market
- 61,3 Million on the local market
- 204,8 Million from the Netherlands (liquidity support program)
- Financing is about to be finalized for an amount of 218,4 Million
- An amount of 204 Million from the Netherlands is approved condition to Aruba accepting the RAft (Rijkswet Aruba financieel toezicht) which will give the Netherlands more control over Aruba’s finances.
Remains an amount of 478,4 Million for which there is yet no financing.
For 2021: additional financing to the amount of 579 Million
For 2021, the Aruba government will have to find financing to the amount of 318 Million for the expected deficit for said year as well as 261 Million to refinance loans expiring in 2021: in total 579 Million.
The Netherlands will help with the refinancing of loans expiring in 2021-2022
The Netherlands will help out with an amount of 523 Million to refinance loans expiring in 2021 and 2022 at an interest rate of 2%. That will save the government an amount of 82 Million over 8 years, compared to if Aruba has to borrow on the international market.
The months of July / August 2020: the costs of alleviation programs are lower than projected
The costs to support and stimulate the economy (wage subsidy program, FASE, SME-program, AZV contribution) are 40 Million lower than expected for July and August 2020. Said amount was used to cover the costs of wage subsidies for July 2020.
Objective norms to ‘get out of’ the RAft
Aruba will have ‘a way out’ of the RAft (if accepted) based on the following objective norm (Artice 15 of the draft RAft):
- Aruba will reduce its debt-to-GDP ratio to 50% by 2039
- Aruba will have a structural (at least 3 years) surplus of 1% per year, starting as of 2022 (dispensation for 2021)
- The financial accounts of Country Aruba should be certified by an accountant over the 3 year period.
It is noted that the objective norm mentioned above is not included in the Rft that applies to Curacao and St. Maarten.