CARIBBEAN-IMF says reserve coverage of the monetary Union of Curaçao and Sint Maarten remains adequate

WASHINGTON, CMC – The International Monetary Fund (IMF) says the current account deficit of the Monetary Union of Curaçao and Sint Maarten is expected to improve gradually but remains elevated, while reserve coverage remains adequate.

The IMF Executive Board has just concluded the 2025 Article IV consultation discussions with Curaçao and Sint Maarten, noting that after a widening in 2024 driven by construction-related imports in Curaçao, the current account deficit for the Union is expected to narrow to around 10 percent of gross domestic product (GDP).

The Washington-based financial institution said that the deficit would continue to be financed by private investment inflows and decumulation of assets held abroad. At the same time, international reserves are projected to remain stable and adequate.

“The Union’s external position was weaker than the level implied by medium-term fundamentals and desirable policies. The assessment is subject to uncertainty given a significant measurement gap with respect to mirror data,” the IMF said.

It stated that monetary policy remains appropriately anchored in maintaining the currency peg. The Central Bank of Curaçao and Sint Maarten (CBCS) has kept its benchmark rate unchanged since late 2024, following earlier cuts in line with United States monetary policy.

However, the IMF notes that the transmission of monetary policy to bank lending and deposit rates remains weak, mainly due to excess liquidity and the absence of active interbank and government securities markets.

It said lending rates have declined, and credit growth is now driven almost entirely by mortgages in Curaçao, with real overall credit growth being negative in the Union.

The IMF stated that financial sector risks are contained, but macroprudential surveillance needs to intensify as mortgage lending accelerates.

“Banks are well-capitalized and highly liquid, though profitability falls somewhat behind the regional median, and sector concentration remains elevated. Risks have further declined with the resolution of ENNIA and continued progress on the CBCS’s reform agenda.

“However, the rapid growth in mortgage credit, especially in Curaçao, warrants close monitoring and closing of data gaps to identify potential vulnerabilities in household balance sheets and prevent overheating in the real estate sector.”

The IMF said that the CBCS is making progress in developing macroprudential tools, including countercyclical capital buffers and limits on loan-to-value and debt-service-to-income ratios, to safeguard stability.

The Washington-based financial institution said that the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) frameworks of Curaçao and Sint Maarten need significant improvements.

“Close cooperation and more effort are required from all stakeholders to swiftly address the shortcomings identified by CFATF’s mutual evaluation and exit the CFATF’s enhanced follow-up process.

“Given an extensive catalogue of measures, work on lower-hanging fruit should be expedited in the coming months, including ongoing operationalization of beneficial ownership registers, together with both islands’ chambers of commerce.

“To increase the effectiveness of both countries’ AML/CFT frameworks, preventive measures need to be strengthened on the part of high-risk entities such as casinos,” the IMF added.