We expect that the government will continue its fiscal consolidation efforts in 2023. However, additional fiscal measures to offset high inflation and anaemic global growth mean that there will be less progress on fiscal consolidation than we had expected. The government will have little option but to rely on Dutch financing to fund economic recovery efforts, as domestic revenue sources will remain inadequate in the near term. Liquidity funding is tied to progress on specific reforms and fiscal goals set by the Netherlands; during his election campaign, Mr Pisas was highly critical of these conditions-including adopting austerity measures in non-urgent areas of spending-but he has not managed to change the situation, as the lack of fiscal options leaves him with little bargaining power.

We expect the government to continue making progress on implementing fiscal reforms that were introduced late 2021. Curaçao also phased out liquidity support from the Netherlands late last year, but it still has the option to request fresh support if needed. Given the current context of high energy prices, the government could well make this move in the fourth quarter or in 2023 to ease the stress on the island's fiscal position. Although the MFK government is in a slightly stronger negotiating position than previous administrations, it is unlikely to be able to drastically alter the underlying terms of Dutch financing.

According to the Centrale Bank van Curaçao en Sint Maarten (CBCS, the Curaçao and Sint Maarten joint central bank), the fiscal deficit was 7% of GDP in 2021, and public debt stood at 86% of GDP. We believe that reining in non-emergency spending (such as on remuneration, hiring and appraisals) will prove difficult, but that revenue from enhanced tax collection efforts and tourism will increase significantly, narrowing the fiscal deficit to an average of 1.3% of GDP in 2022-23.