Dollarisation
Central Bank President Emsley Tromp may have surprised some (see Tuesday’s paper) by suggesting that dollarisation is an efficient and feasible alternative for St. Maarten. After all, one of his main tasks is protecting the Antillean guilder.
The fact of the matter is, however, that the limited use of the guilder on “The Friendly Island” is more by necessity and the fact that a one per cent licence fee is charged for transaction in dollars, supposedly to protect the guilder as official currency, but with very limited result in practice. With dollarisation, that penalty for using and doing business in the predominant currency can be eliminated as well.
While Tromp made clear he favours maintaining a joint Central Bank and common currency with Curaçao when the Netherlands Antilles is dismantled, he is realistic enough to realise that not everyone favours that idea, something local leaders and their experts have pointed out more than once. Talks on possibly sharing a Central Bank have not exactly gone smoothly till now.
He also has doubts that St. Maarten can sustain a full-fledged Central Bank of its own in a profitable manner and fears that having a government-dependent Central Bank will undermine its independence and credibility. In addition, having the dollar as official currency would eliminate the possibility of monetary financing and the budget would have to be balanced, which many might consider a good thing.
Also considering the increased expenses St. Maarten will take on as it achieves country status, there appears to be plenty of reason to at least seriously consider dollarisation as an alternative to either sharing the Central Bank or establishing a new one. The last thing “The Friendly Island” and its tourism economy need is too much government and big related institutions that may be hard to maintain in case the economy should decline at one point or the other.
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