We expect the monetary stance of the Centrale Bank van Curaçao en Sint Maarten (CBCS, the Curaçao and Sint Maarten joint central bank) to remain accom-modative in 2021, in order to create a conducive environment for economic recovery. The official interest rate was lowered to 3% in the second half of 2020, from 4.5% in the first half, and will be slow to bounce back to the pre-pandemic level. The pledging rate was lowered in March 2020 to 1% (from 2.5%) and has remained at that level ever since; we do not expect it to be raised before 2022. However, monetary transmission mechanisms are weak and interest-rate decisions by the central bank have only a limited effect on economic performance. We expect the reserve requirements in 2021 to be relaxed slightly to boost credit creation during a post-coronavirus recovery. Monetary tightening will be gradual and will not take place before the fourth quarter of 2021.

Reform of the currency union and the splitting of Curaçao and Sint Maarten's shared central bank will still be medium- to long-term goals, but will largely remain on hold in the short term as more immediate concerns, such as the post-pandemic economic recovery, remain a priority. Addressing reputational concerns stemming from high levels of fraud, tax evasion and money laundering will remain a priority for the CBCS. However, leadership instability will undermine its efforts and hinder the monetary union as it carries out its long-term plans.