THE HAGUE/SABA--The Government of Saba doesn't have more leeway to acquire new interest-free loans after securing a US $2.5 million loan for an infrastructural project because of its deteriorated cash-flow situation.
The Committee for Financial Supervision CFT stated this in a recent letter to Dutch Minister of Infrastructure and Environment Melanie Schultz van Haegen. The letter, sent on April 9, 2015, has been published on the CFT website.
The CFT was asked to update its February and May 2014 advice, drafted on the request of the Saba Island Council to the Ministry of Infrastructure and Environment I&M to issue interest-free loans to the public entity for infrastructural projects. At the time the CFT rendered positive advice.
The CFT recently took a look at the repayment capacity of the island government in the case that the Ministry of I&M supplied an interest-free loan of US $2.5 million for infrastructural works on the island, namely the S-bend in the Fort Bay Road which is in need of renovation.
According to the CFT, Saba's cash-flow position has deteriorated since last year's advice. With this new loan the Island Government would end up below the target balance of US $618,000, which is considered the safe buffer to be able to maintain regular financial management, in other words to pay the bills.
The deteriorated cash position was not of such a worrisome nature that the CFT has decided to render a negative advice on this loan in particular. However, the committee did warn that there was no space for new interest-free loans after the US $2.5 million loan had been approved.
The CFT calculated that Saba had a gross cash position of more than US $4.6 million on January 1, 2015, which will have dwindled to US $550,000 by the end of this year. "The CFT wants to point out to you and to the Minister of Home Affairs and Kingdom Relations that this amount is US $68,000 lower than the target balance," it was stated in the letter to Schultz van Haegen.
The CFT concluded that Saba would have to generate additional means if it didn't want to end up below the target balance of US $618,000. Saba would not have to generate additional means and be able to maintain a better cash-flow position if the local government managed to realise a structural cutback in maintenance of US $0.3 million per year as was discussed in 2014.
Saba has already taken an interest-free loan of US $1.2 million to tackle the traffic intersection in Windwardside which is being realised through an advance of the Ministry of Home Affairs and Kingdom Relations BZK on the free-remittance ("vrije uitkering") for the public entity.