1

SUMMARY

FINANCIAL SITUATION OF LOCAL

PUBLIC BODIES IN NEW CALEDONIA

2023

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Warning

This summary is intended to facilitate the reading and use of the report of the territorial audit

office. Only the report engages the territorial audit office.

The answers, if expressed, of the administrations, organizations and local bodies concerned

are included after the report.

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TABLE OF CONTENTS

1

AN UNDERPERFORMING YEAR IN 2023

.................................................................

4

1.1

A resumption of economic activity

...................................................................................

4

1.2

Continuation of French financial transfers

.......................................................................

4

2

PUBLIC SPENDING MAINTAINED A STRONG DYNAMIC

..................................

5

2.1

Operating revenues and expenses are both increasing

......................................................

5

2.2

Public investment at a record high

....................................................................................

6

2.3

Decreasing liquidity leading to an increase in the supplier debt turnover rate and the level

of social debts

...................................................................................................................

6

3

HEALTH AND SOCIAL SCHEMES STILL IN FINANCIAL TROUBLE DESPITE

RISING TAX REVENUES

..............................................................................................

7

3.1

An increase in tax revenues

..............................................................................................

7

3.2

Public health and social accounts, in particular the local retirement fund, require urgent

action

.................................................................................................................................

8

3.3

Local management of water, sewage and waste services remains unsatisfactory

............

8

4

2024, A TENSE YEAR FOR PUBLIC FINANCES

......................................................

9

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The territorial audit office has analyzed the financial situation of New Caledonia, the provinces

and cities for the year 2023. Its work, carried out between February and May 2024, does not

take into account the serious public order disturbances that the territory experienced from May

13 onwards and their consequences on the private economy sector as well as on local public

finances.

1

AN UNDERPERFORMING YEAR IN 2023

The resumption of economic activity, confirmed for the first half of 2023, was not sustained

until the end of the year.

1.1

A resumption of economic activity

The resumption of economic activity, confirmed for the first half of 2023, was not maintained

until the end of the year. The territorial audit office estimates that the territory’s gross domestic

product remained at its 2022 level in volume during 2023. Inflation was limited to 1.8 % in New

Caledonia (compared to 4.9 % in mainland France) due to, among other things, the control of

energy prices.

Employment remained at a high level and both the minimum wage and agricultural minimum

wage increased by approximatively 4 % between 2022 and 2023. The number of tourists and

cruise passengers returned to a pre-pandemic level and extraction, exportation and

metallurgical production were up, benefiting from more favorable weather conditions. However,

nickel price dropped by nearly 20 % in 2023, while energy prices remained high. These factors

weighed negatively on the profitability of metallurgical plants.

A “nickel plan” for the recovery

of the sector was being discussed without the parties coming at an agreement by the end of

2023.

Economic indicators deteriorated during the second half of 2023, amid strong uncertainties

about the future of the North plant and the institutional context. To improve public accounts,

several major reforms were undertaken in the mining and energy sector, as well as intellectual

property and education but other important topics such as health insurance funding were left

unresolved.

1.2

Continuation of French financial transfers

The French government pursued its engagement with significant financial transfers for

education

and

security.

The

total

amount

of

these

transfers

increased

from

164.78 billion F CFP in 2022 to 166.27 billion F CFP in 2023 (+ 1 %). An exceptional grant was

made to New Caledonia for an amount of 4.4 billion F CFP to avoid any disruption in the

payments from the local pension fund and for disability benefits as well as to ensure the proper

execution of the public bodies

’

budgets until the end of 2023.

The fifth generation of development contracts ended in 2023 and a sixth generation is set to

begin for the period 2024-2027 with an average annual commitment from the French state of

10.35 billion F CFP. Tax exemptions mechanisms at the national level was slightly less used,

notably in terms of social housing, historically low, with only two new projects validated.

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Weight of transfers from the French state including the budgetary cost of national level tax

exemption in New Caledonia’s gross domestic

product

Source : ISEE

–

Direction des finances publiques locales (2023 to be confirmed)

In total, the weight of French state financial transfers including the budgetary cost of national-

level tax exemption, in New Caledonia’s gross domestic product retur

ned to 2019 level, prior

to the covid crisis, at 179.22 billon F CFP (16,34 % of gross domestic product).

2

PUBLIC SPENDING MAINTAINED A STRONG DYNAMIC

The year 2023 is characterized by a resumption of growth in local public spending which

reached nearly 243 billion F CFP against 224 billion F CFP in 2022 (+ 8 %, a rate well above

inflation).

2.1

Operating revenues and expenses are both increasing

All local bodies experienced a dynamic year, marked by increasing revenues (nearly

201 billion F CFP in 2023, + 8 % compared to 2022), particularly tax revenue, and increasing

operating expenses (nearly 170 billion F CFP in 2023, + 8 % compared to 2022).

Personnel costs (73.74 billion F CFP in 2023) remained significant and financial charges

(3.39 billion F CFP in 2023) increased despite the slight decline in outstanding debt

(177.8 billion F CFP at the end of 2023). Conversely, purchases of goods and services

(35.10 billion F CFP) and grants paid out (15.19 billion F CFP) decreased, reflecting the

growing

rigidity of local authorities’ operating expenses.

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2.2

Public investment at a record high

This favorable situation has enabled each level of local authority to improve its gross savings

as well as its savings net of loan repayments. The net savings rate of the territory's local

authorities rises to 9.3 % in 2023 (4.9 % for New Caledonia, 11.7 % for the provinces, 10.8 %

for the cities and 2.5 % for their groupings), which is still low.

Capital expenditure (46.29 billion F CFP in 2023) is at its highest level since 2017. In 2023,

New Caledonia, the provinces, municipalities and their groupings will have a financing

requirement of 20.65 billion F CFP, or 1.9 % of gross domestic product, an increase of almost

22 % compared with 2022.

Financing requirement of New Caledonia, the provinces and the cities

Source : DGFiP

Outstanding local authority debt, mainly borne by New Caledonia, has started to decline by

almost 3 % compared with 2022, reaching 173 billion F CFP, or almost 16 % of gross domestic

product.

2.3

Decreasing liquidity leading to an increase in the supplier debt turnover rate

and the level of social debts

The cash position of local authorities remains limited, falling to an average of 51 days of actual

operating expenses at the end of 2023, compared to 79 days at the end of 2022 and only 13

days at the end of 2023 for New Caledonia. New Caledonia's cash flow problems lead to an

increase in the payment delays of amounts due regarding taxes collected. This situation

resulted in obliging some provinces or cities and their groupings resorting to lines of credit

generating additional financial costs.

In the absence of sufficient cash, some local authorities are extending their payment terms,

harming their suppliers

’ financial position

and having a negative impact on social protection

accounts.

30,66

20,66

29,83

10,79

12,36

16,99

20,65

0

10

20

30

40

50

60

70

80

2017

2018

2019

2020

2021

2022

2023

Dépenses réelles d'investissement

Ressources propres

Besoin de financement

7/10

Outstanding suppliers balance in days of operating expenses

Source : DGFiP

This is particularly the case for the Loyalty Islands Province, whose outstanding suppliers

balance increased by 34 % between 2022 and 2023, reaching 0.11 billion F CFP at the end of

the year, or 7 % of general expenses net of repayments in 2023, while its social debts reached

0.37 billion F CFP, or a third of the province's social expenses.

3

HEALTH

AND

SOCIAL

SCHEMES

STILL

IN

FINANCIAL

TROUBLE DESPITE RISING TAX REVENUES

Between 2019 and 2023, tax revenues have been, on average, equal to transfers from the

French state. The tax burden has increased by 0.83 points to 19.66 % in 2023, compared with

18.83 % in 2022.

3.1

An increase in tax revenues

Tax revenues collected by New Caledonia, CAFAT and the cities increased by 3.6 % between

2022 and 2023, reaching 209.2 billion F CFP in 2023 against 201.9 billion F CFP in 2022. This

can be explained by the good performance of the economy in the first part of the year and the

effect of some tax measures taken in 2022, in particular the increase in the Caledonian

solidarity contribution rate.

201,70

222,03

196,98

252,47

277,65

243,60

195,03

93,85

62,79

20,33

14,96

23,92

50,46

27,31

124,43

124,73

86,25

87,62

98,68

91,49

72,46

-

50

100

150

200

250

300

2017

2018

2019

2020

2021

2022

2023

Nouvelle-Calédonie

Provinces

Communes

Moyenne

8/10

3.2

Public health and social accounts, in particular the local retirement fund,

require urgent action

Public health and social a

ccounts are still deteriorating. CAFAT’s income will increase by 5.3

%

between 2022 and 2023 thanks to an 8.3 % rise in social security contributions and a 10.5 %

increase in public contributions (from New Caledonia and from the health and social agency).

However, expenses increased by almost 8 % between 2022 and 2023, including a rise of 8.6 %

of benefits paid out.

The local retirement fund, which manages the civil servants’ pensions, posted its seventh

consecutive operating deficit since 2017 of nearly 1 billion F CFP in 2023. Its cash position has

shrunk by 64 % since 2017 and is equivalent to only 51 days of current expenditure at the end

of 2023. Emergency measures were taken by congress in September 2023 to increase

contribution rates and to tighten retirement conditions. At the same time, some public bodies

agreed to pay in advance their contributions and the French state gave an exceptional grant

to ensure the continuity of pensions payments.

Although the gross operating margin of the three local hospitals recovered slightly in 2023

(2.64 billion F CFP at year end), their gross operating margin as a percentage of operating

income remained low, at 6 % in 2023. The cumulative net cash position of the three

establishments is negative at the end of the year (- 1 billion F CFP) and both the territorial

hospital and the North hospital benefited from cash advances totaling 2.1 billion F CFP in 2023.

3.3

Local

management

of

water,

sewage

and

waste

services

remains

unsatisfactory

An analysis of municipal annex budgets shows that most of them are unable to break even

without an exceptional grant from the main budget. The total amount of special grants paid by

the municipal main budgets to balance the annex budgets reached 1.29 billion F CFP in 2023

compared to 0.91 billion F CFP in 2022 (+ 40 %). These balancing subsidies represented one

third of current operating revenues of water service budgets.

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Balancing subsidies for each type of ancillary budget

Source : territorial audit office

The level of outstanding receivables of all ancillary budgets is very high and reflects the

difficulties towns are having in getting users to pay for the service delivered. This is a major

challenge for industrial and commercial public services. Outstanding receivables from all

ancillary budgets totalled 2.81 billion F CFP at the end of 2023, an increase of 7.2 % compared

to 2022.

4

2024, A TENSE YEAR FOR PUBLIC FINANCES

From 13 May 2024, the territory experienced serious public order problems, leading to the

introduction of a state of emergency followed by a curfew that was in force until December

2024. On 3 July 2024, the New Caledonian government presented indicators showing that

nearly 700 businesses had been affected, 25 school buildings had been partially or totally

damaged, 31 health facilities had been partially or totally damaged and the overall cost of the

crisis was estimated at that date at 265.79 billion F CFP, i.e. almost a quarter of the gross

domestic product, including 120.8 billion F CFP in public expenditure (69 billion F CFP in

property damage, 28.1 billion F CFP in specific unemployment until 31 December 2024 and

43.5 billion F CFP in tax, customs and social security revenue losses until 31 December 2024).

This major crisis has had different repercussions on the financial situation of New Caledonia,

the provinces, the cities and their groupings. The provinces' real operating expenses increased

by almost 2 % between 30 June 2023 and 30 June 2024, while their real operating revenue

fell by 44 %. As for the cities, their real operating costs fell by almost 10 % between 30 June

2023 and 30 June 2024, but their real operating revenue fell by 41 %. Taking into account the

transfer and distribution budgets, New Caledonia's actual operating revenue fell by 56 %, this

reduction being linked to the loss of tax revenue, while actual operating expenses fell by only

24 %. At the end of September 2024, New Caledonia's situation improved, with actual

operating revenue at 80 % of actual operating revenue at the end of September 2023. A 10 %

increase in grants received has partially offset the 23 % decrease in tax revenue.

0,00

0,20

0,40

0,60

0,80

1,00

1,20

1,40

2017

2018

2019

2020

2021

2022

2023

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