Willemstad/Philipsburg – On March 31, 2026, the Centrale Bank van Curaçao en Sint Maarten (CBCS) decided to maintain its monetary policy stance unchanged. This decision reflects a cautious approach in response to heightened uncertainty surrounding the potential spillover effects of the ongoing conflict in the Middle East on commodity and financial markets, and the resulting impact on the monetary union. This stance is also consistent with the U.S. Federal Reserve’s decision (Fed) in March to keep the target range for the federal funds rate unchanged. In the current environment of heightened uncertainty, the CBCS will continue to monitor domestic and international economic developments closely and stands ready to adjust its monetary policy as needed.
Despite heightened uncertainties and volatility in the global environment, gross official reserves have continued to increase in 2026, after rising substantially by Cg 402.2 million in 2025. Up to March 13, 2026, gross official reserves have increased by Cg. 102.2 million, bringing the import coverage to a comfortable 5.3 months. The external position is expected to remain solid by year-end, with reserves projected to increase by Cg 161.8 million and the average import coverage reaching 5.2 months, well above the norm of 3 months. Nevertheless, the ongoing conflict in the Middle East poses a potential risk to the outlook.
In particular, a prolonged effective closure of the Strait of Hormuz, one of the world’s most critical maritime chokepoints, will affect global energy supply and trade flows, leading to higher oil prices, as well as increased freight, insurance and transportation costs. For the monetary union, such developments could translate into higher inflation and lower purchasing power, increased travel costs and a deterioration in tourism demand. At the same time, heightened uncertainty may weigh on investor sentiment, resulting in more cautious investment behavior and lower economic growth.
Under a scenario that the Strait of Hormuz is effectively closed for a period of three months,
annual average oil prices could rise to USD 100 in 2026, before easing to USD 85 in 2027. In this case, the external position of the monetary union would weaken, with the current account deficit of the balance of payments widening to 12.9% of GDP, compared to 7.2% under normal conditions. Gross official reserves would decline by Cg 74.7 million, instead of increasing by Cg 161.8 million, while the import coverage would fall to 4.4 months, compared to 5.2 months under normal conditions.
In a more severe scenario, involving a six-month disruption, oil prices could increase to around USD 150 on average in 2026 and ease to USD 135 in 2027. In this case, the impact on the external position of the monetary union would be more pronounced, with the current account deficit reaching 17.1% of GDP, gross official reserves declining by Cg 246.8 million, and the import coverage falling to 3.8 months.
While the monetary union maintains a solid foreign exchange position, risks are tilted to the downside. In addition to developments in the Middle East, other geopolitical tensions, including the war in Ukraine and developments involving Venezuela and the United States continue to contribute to global uncertainty. Furthermore, uncertainty surrounding global trade policies, particularly U.S. tariff measures may affect trade relations, increase policy unpredictability, and weigh on investment and economic activity.
Taking these developments into consideration, the CBCS has maintained its monetary policy stance in line with the Fed. On March 18, 2025, the Fed maintained its target range for the federal funds rate unchanged at 3.50-3.75%, reflecting still-elevated inflation and increased uncertainty surrounding the economic outlook. Against this backdrop, the CBCS decided to keep its pledging rate unchanged at 4.25%, maintaining a 50 basis point spread above the federal funds rate.
At the same time, the CBCS has kept the reserve requirement percentage unchanged at 18.50%. It will also continue to offer attractive rates on its weekly auctions of certificates of deposit (CDs), with the aim of holding more bank liquidity domestically, and thereby safeguarding the monetary union’s foreign exchange position. These policy decisions are
supported by the monetary union’s solid foreign exchange position and a prudent, forward looking approach in an uncertain global environment.
