IT was as expected – a lower expenditure than the current fiscal year. This nominal reduction of approximately $20 billion translates into a greater reduction in real terms.
So, if one assumes inflation of 5 per cent, then the reduction in real terms may be more in the region of $60 billion. This is expected though as the slowdown of the economy from the COVID-19 impact means that revenues are less and, going forward, will be impacted even further before the recovery takes shape later this year, I expect.
The implication of this of course is that some social programmes and real allocation to some public bodies could see a small impact. So even though the allocation may be there, remember that even when revenues are up, there are many times difficulties in providing all the monies budgeted – especially towards the end of the fiscal year. I expect it may be more difficult
One challenge the Government faces is that they will not be able to get the shortfall from taxes, as any further taxes can cause even further negative impact. Hence the move to get the special dividend from Bank of Jamaica which, even though the last three years saw them making a surplus, the losses in previous years means the accumulated result is a deficit – so the dividend is actually not coming from surplus. This move is understandable, however, as they can’t get more money from places like National Housing Trust and have to therefore seek other sources. This is therefore a creative way.
Note, however, that the purpose of a central bank is not to make profits as is stated but to bring about a stable monetary policy. The central bank will optimise operations when it breaks even.
The SERVE (Social and Economic Recovery and Vaccine) Programme for Jamaica is a good move and is expected. This will allow some amount of economic activity to remain but will be far from what is needed, which is why Minister of Finance Dr Nigel Clarke said that if more could have been done, it would have been. This shows us the constraint the Government has. What is going to be important is that the programmes are executed as efficiently and as soon as possible. One of the reasons why our programmes do not have the impact they could is because of the bureaucratic process required for execution. My fear is that the bureaucracy will reduce the impact of this $60-billion spend also.
All this intervention will be nullified, however, if we do not manage the COVID-19 measures properly.
It is expected that as the United States vaccinates more of its citizens, tourism will return this year.
However, if we continue the curfews and restrictions on businesses, coupled with the lack of enforcement, then the $60-billion SERVE programme will be further dwarfed by the fallout.