The Government of Jamaica is proposing to spend more on public infrastructure to stimulate economic activity, said Minister of Finance and the Public Service Dr Nigel Clarke during yesterday’s opening of the debate on the second supplementary estimates.
The government is proposing an increase in the capital expenditure component of the budget by J$6 billion, of which J$4.6 billion will go towards the South Coast Highway Improvement Project
Clarke outlined, “We believe that the South Coast Highway Improvement Project meets the definition of the kind of public investment that catalyses economic activity and jobs which is precisely what is needed at this time.”
He added, “Even in the face of the worst pandemic, we will be scaling up public investment. Increasing public investment at this time can help revive economic activity and maintain jobs. It is also an important signal to the private sector of the Government’s confidence about the future.”
Clarke said that the COVID-19 pandemic has had a severe impact on the Jamaican economy with preliminary numbers for the six months ending September 30, showing that overall revenues were 18.8 per cent lower than for the corresponding six months last year.
Under the new estimates, overall expenditure proposed is additional expenditure of $15.7 billion to generate a total expenditure budget of $853.7 billion.
In presenting the new estimates for the fiscal year 2020 to 2021, he said that the proposals were done against this context of falling tax revenues and the urgent needs associated with COVID spread.
While, overall revenue and grant inflows for the full fiscal year are now estimated to be $5.2 billion more than indicated in the first supplementary estimates, with the prolonged and increasing impact of the pandemic, the Government has found it necessary to increase expenditure to meet COVID-19 related needs in health, education and social welfare in the form of unemployment support, Clarke outlined.
“It is also an important signal to the private sector of the Government’s confidence about the future.”– Minister of Finance and the Public Service Dr Nigel Clarke
The Government is also increasing capital expenditure to support and catalyse economic activity.
Increased primary expenditure of $16.6 billion is proposed in the second supplementary estimates. This will be facilitated by the $5.2 billion in additional revenue and $11.4 billion arising from a downward adjustment to the primary balance target.
Contributing to this level of expenditure also is debt service which declines by $0.9 billion due to interest payments that are expected to be $1.4 billion lower than forecast in the first supplementary estimates, he said.
The increased spending projected will go towards continuing to address the health requirements, continuing to assist individuals who have lost jobs and on increasing public investment to assist in fast tracking the economic recovery, the Finance minister stated.
New recurrent spend also includes extending the unemployment support SET Cash and the employment support BEST Cash components of the CARE Programme to December 2020 ($5.0 billion including utilisation of an existing $2.2 billion.)
The government will also be providing an additional $1.5 billion to the Ministry of Health and Wellness to aid in the response to COVID-19 which includes an increase in medical personnel.
It is also proposed that $1 billion be given to the Ministry of Education to assist in procurement of tablets for students in need.
Under the second supplementary estimates, previously announced elements of the CARE Programme, such as the back-to-school grant, are also being regularised.
Overall, the 19 GOJ expenditure impact to date is $43.8 billion, the Finance Minister estimates.
Clarke outlined that the proposed increases in recurrent and capital expenditure in the second supplementary expenditure will be financed by the level of expected revenue over-performance as well as by further reducing the primary balance target from 3.5 per cent of GDP to 3.1 per cent of GDP.
He said the downward revision to the primary balance target for this fiscal year will be addressed in subsequent years, consistent with Fiscal Responsibility Law, to ensure that the 2027/28 timeline for achieving the debt/GDP of 60 per cent is met.