Debt continues to pose a significant problem for the Netherlands Antilles, ballooning by the end of 1998 to a massive US$1.75 billion. An appeal to the IMF produced a structural adjustment program that is heavily geared toward debt reduction, and through a combination of cutting its costs and raising its income the governmental aims by 2002 to reduce its budget deficit , which in 1998 hovered at 5.3 percent of the GDP, to 2 percent of the GDP. But maintaining parity between the country's sizable trade deficit and its invisible services earnings is a juggling act that is easily upset by glitches and ticks in the world economy. Shortfalls usually have to be supplied by borrowing—usually from the Dutch government
|Exchange rates: Netherlands Antilles|
|Netherlands Antillean guilders, gulden, or florins and Aruban florins per|
|Note: Currency rates have been fixed since 1989.|
|SOURCE: CIA World Factbook 2001 [ONLINE].|
and private sector . In 1999 talks began with the Dutch about possible debt restructuring or forgiveness. A 117-percent jump in the price of oil in 2000, which inflated the annual deficit by 13.6 percent, has now made these urgent. Rises in the world prices of oil have also accelerated inflation , which—climbing through the late 1990s—reached 6.6 percent in 2000.
Aruba's debt problems are more manageable. In 1998 the total external foreign debt was US$199.5 million, a rise of 11 percent over the 1998 level of US$180 million. Like the Netherlands Antilles, Aruba is vulnerable to high oil prices, which lift its import bill and inflates its currency. In 1999 inflation sat at 2.9 percent.
Since 1971 both the Netherlands Antilles and Aruba have adhered to the "dollar standard," with each pegging its guilder at US$0.56 (US$1.00=G1.79). Their central banks, therefore, play an important role in ensuring that each country has sufficient foreign exchange reserves to maintain the standard. In 2000 the Central Bank of the Netherlands Antilles held reserves equaling 1.6 months of import coverage, which was 2.4 months below the international norm; the Central Bank of Aruba held 5 months' worth.