Advice to cover Saba’s budget deficit from its general reserve

The 2022 draft bud­get was discussed during a Central Committee meet­ing of the Island Council on Tuesday, November 9. The Executive Council has advised to approve the draft budget and to finance the US $1 million deficit, for which there is no im­mediate solution, through the general reserve.

Finance Commissioner Bruce Zagers said in his presentation that balanc­ing the budget from the general reserve was not sustainable for obvious reasons, but that there were no other alterna­tives. He said that avoid­ing more intense financial supervision or having the Committee for Financial Supervision CFT balance the budget are not good options.

According to Zagers, it is important for Saba to con­tinue the lobbying efforts for a higher free allowance (“vrije uitkering”) during the formation process of a new Dutch government. He said that while there was a possibility that a pos­itive decision will be made on the free allowance when the new Dutch coalition is complete, he did not ex­pect this to happen before the November 15 deadline to have a budget adopted by the Island Council.

“Presenting a budget that is balanced on paper, but knowing that the only way this is possible is by using the general reserve, is dis­appointing,” said Zagers. “Two years ago, around this time, the Island Coun­cil decided to walk out of the budget debate to send a message to The Hague that Saba’s financial posi­tion was not good and that the free allowance had to be increased. Last year, we sat here and I presented a budget with a deficit.”

Creative measures

With some creative measures, involving CO­VID-19 relief funds, the anticipated loss of revenue because of the pandemic and by partially making use of the general reserve, the budget for 2021 could be balanced. “However, for the draft budget 2022, such creative opportunities do not exist and the only possible way to balance the budget is to take the entire $1 million deficit from the general reserve,” said Zag­ers.

The CFT has technically not approved this year’s move. No other solution has been brought forward and more cuts to the bud­get at this point are impos­sible. It is generally known and acknowledged, also in The Hague, that the free allowance, which has not been adapted since 2012, is too low for Saba, said Zag­ers.

“For years, with the help of incidental projects and funding, we have been able to maintain a certain standard for government while being able to execute projects that improved our infrastructure. By covering structural overhead with incidental funds, and by downsizing several depart­ments, government was able to produce balanced budgets. Unfortunately, this has come at the cost of the government organ­isation and its ability to properly carry out its legal obligations.”

Many excuses

“Over the years we have heard the many reasons, excuses why the free al­lowance could not be in­creased. Not diminishing the problems in the Neth­erlands, but conversion rates, refugee problems, economic recessions, polit­ical climates and now care­taker governments are all excuses that have allowed Saba’s financial position to worsen year by year,” Zag­ers said.

He warned that the back­log in maintenance, in services and in the civil service will only continue to grow. “Vital services to the community and several positions that are now covered by incidental funds are potentially at risk, while in the Netherlands it is acknowledged that the free allowance is too low. Yet a decision cannot be made to increase it.”

He said that while some civil servants of the public entity Saba were paid be­low the liveable wage due to financial constraints, the National Department Ca­ribbean Netherlands RCN, which he called “the su­perior Caribbean govern­ment,” can afford to pay much higher salaries, of­fer far better employment opportunities and make considerable investments, especially in Bonaire.

Zagers said the CFT knows that Saba is not in a position to make addi­tional cuts to its budget, that the island government has been engaged with The Hague about the level of the free allowance and that the public entity is not in a position to decide on an increase of the free allow­ance.

Proper answer

“By not increasing the free allowance the relevant ministries are forcing us to underfund vital services, to pay salaries below the social minimum, to pro­vide employment benefits that are inferior to those that are available at RCN and to further weaken the liquidity position. I am yet to hear a proper answer why this part isn’t being re­ported by the CFT.”

Zagers said that Saba has done its utmost over the years to ensure that strong financial management was a priority and was at the core of all decision-making.

“Being the best in the class, which we are of­ten referred to as, hasn’t brought the benefits one would expect.

“Yes, there are many improvements we can speak about and indeed Saba continues to benefit from projects such as the harbour. But the core op­erations of government, which are funded by the free allowance, have been ignored and the situation will only worsen if a struc­tural solution is not found. By balancing the budget from the general reserve, the liquidity position, which was already weak, will now be further weak­ened,” he said.

The Island Council will deliberate and vote on the draft budget today, Wednesday, November 10.

The Daily Herald.