CAft: Aruba has improved, but is not yet prepared for another crisis

ORANJESTAD — Aruba’s public finances are genuinely improving and public debt is falling rapidly, but the country still lacks sufficient fiscal room to withstand another international crisis without potentially having to borrow heavily again. That is the assessment of Hans Hoogervorst, chairman of the Aruba Board of Financial Supervision (CAft), in a recent interview with Tito Laclé of Noticiacla. Hoogervorst rejected the suggestion that the positive budget figures paint an overly favourable picture of the financial situation. According to him, both the previous and current governments have shown discipline in their use of additional revenue. “Both the previous government and the current government have resisted the temptation to spend the extra money coming in on a large scale. They have made some additional expenditures, but within limits. That deserves a compliment,” he said.

POSITIVE ASSESSMENT WITH AN IMPORTANT CONDITION

His positive assessment nevertheless comes with an important condition: Aruba must maintain this discipline for several more years to strengthen its position. “We are not there yet. Public debt is still high, but it is now falling really quickly.”

INTEREST CONTINUES TO WEIGH ON THE BUDGET

During the interview, Laclé cited the budget projection putting public debt at approximately 4.6 billion florins by the end of 2027. He also noted that around 15 cents of every florin in revenue goes towards interest payments. Hoogervorst acknowledged that, despite the rapid debt reduction, interest costs continue to absorb a considerable amount of government money. “A lot of money still goes towards interest payments. That is a shame. If public debt can be reduced further, that would provide an enormous boost,” he said.

REFINANCING DEBT

Asked how much Aruba could save by refinancing its debt on more favourable terms through the opportunities offered by the new framework for sustainable public finances, Hoogervorst indicated that annual savings could rise to 60 million. He did not provide a cumulative calculation during the interview or a date by which that amount could be reached. His message was that the potential benefit is substantial enough to warrant serious consideration. “It involves a lot of money, something that needs to be looked at very seriously.”

“NOT YET” ENOUGH OF A BUFFER

His most direct response came when Laclé asked whether Aruba had built up sufficient fiscal room to absorb another international economic crisis without borrowing heavily again. “Not yet,” Hoogervorst replied. He explained that even a country that has repaid all its debt might need to borrow during a crisis. The difference lies in its financial position before the crisis begins. When debt is low, additional borrowing is more manageable. When debt is already high, an economic shock can create a much bigger problem. “We are now at approximately 70%. If you move towards 40%, and that can happen fairly quickly, you are in a much better position,” he said, referring to the ratio of public debt to the size of the economy. Hoogervorst did not give a date for reaching that level. He emphasised that developments in the global economy remain beyond Aruba’s control.

LESS INTENSIVE SUPERVISION COULD COME SOONER

The financial progress also opens up the prospect of less intensive external supervision. According to Hoogervorst, that point could arrive sooner than CAft considered possible three years ago. “If things continue as they are now and there are no major setbacks, that point could come sooner than we could have imagined three years ago,” he said. However, he did not commit to a specific year. An international crisis could change the outlook, and Aruba’s ability to absorb such a shock would be important in any future assessment. “I believe Aruba has made substantial progress” For taxpayers, however, Hoogervorst did not translate that progress into a specific amount or a date for financial relief. When Laclé asked for a direct example of what the improvement means for citizens, he said the future was too unpredictable to offer such a guarantee. “Four years ago, we could not have predicted that Aruba would be in the position it is in today.”