Under pressure from the Kingdom Council of the Netherlands, the government will intensify its fiscal consolidation efforts. However, in view of anaemic economic growth, we expect continued (albeit small) overall fiscal deficits as a percentage of GDP in 2020-21, despite spending restraint and the implement-ation of revenue-raising measures (including the introduction of a 15% general consumption tax in April). On the upside, we expect that continued adjustment efforts mean that the government is likely to achieve primary fiscal surpluses during this period.

Dutch oversight will temper government spending in the short term, as the government must eliminate its budget deficit in line with the Kingdom Act on Financial Supervision, which stipulates that the country must balance its budget. Revenue-raising measures have had some success, but poor progress in reducing current expenditure prompted the Dutch government to impose binding restrictions in 2019. The Netherlands will soften the blow by pairing the instruction with an agreement to support the Curaçaoan government's Growth Strategy, which aims to improve financial management and engender sustain-able development. In November 2019, however, with the economy continuing to struggle, Mr Rhuggenaath requested additional financing assistance to support economic modernisation efforts. Although the Dutch government appears willing to meet the Curaçaoan government's request (given the poor state of the economy), the disbursal of loans has not materialised as the Financial Supervision Board still needs to assess the loan application. As of March 4th, the board has expressed concerns that spending is still not in line with the island's small economy, suggesting that further oversight to reduce spending is likely.

Despite Dutch support, the government will struggle to keep the island's many social funds well capitalised, while continuing to upgrade infrastructure. The public debt burden is fairly heavy, exceeding 50% of GDP. Officials aim to reduce this to 40% in the medium term, but it will be difficult in the absence of larger fiscal surpluses. Nevertheless, we continue to expect Dutch-led budgetary tutelage gradually to pare back the debt burden over the long term.