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Economy performing as expected - Byles

Published:Wednesday | September 10, 2014 | 12:00 AM
File Co-chairman of the Economic Programme Oversight Committee, Richard Byles.

McPherse Thompson, Assistant Business Editor

Jamaica surpassed the targets for the primary surplus and the Net International Reserves (NIR) during the period April to July 2014, co-chairman of the Economic Programme Oversight Committee (EPOC), Richard Byles, said on Monday.

The July primary surplus of $25.4 billion exceeded the $21.8 billion target by 16.5 per cent, and the August NIR of $2.1 billion are considerably ahead of the September International Monetary Fund (IMF) target of $1.17 billion, he said.

Noting that "the economy is performing as per expectation", Byles said that in addition to surpassing its target, the current level of the NIR provides a cushion against external shocks such as a hurricane or rising oil prices.

Revenues and grants fell short by $2.6 billion. Of that amount, $2.4 billion is related to grants provided mostly by multilateral institutions, Byles told a press briefing at Sagicor Life Jamaica where he released the 16th communique of the non-public sector members of EPOC.

Tax revenue of $111.6 billion was $0.6 billion less than budgeted, while expenditure was $7.7 billion below budget, "a kind of prudent move to cover the shortfall in revenues and grants," the EPOC co-chairman said.

During the review period, the fiscal deficit of -$17.9 billion was better than the budgeted deficit of -$23.1 billion.

The primary commitments under the IMF extended fund facility for September 2014 are the completion of the Employee Census System (E-Census), which will provide Government with accurate data on its employees that is critical to the public-sector transformation process, and the development of an action plan for public-sector transformation, both of which are on track for completion, said Byles.

"So all of this talk about the bureaucracy and insensitivity, the difficulty in doing business, a lot of that is going to come up in this public-sector transformation plan," the EPOC co-chairman said.

The tabling of the Electricity Act, an IMF structural benchmark, has been postponed to allow for consultations with major stakeholders, given the mandate of the Electricity Sector Enterprise Team, which was established to oversee the construction of a 360 megawatt power plant.

Referring to the 1.2 per cent economic growth for the quarter ended June 2014, Byles said "persons who are impatient for bigger growth numbers ... have to realise that we are dragging this debt along with us and (it) has sucked up a lot of the revenues that could have been spent doing other stuff."

He said the 1.2 per cent expansion "is good news because in the final analysis what we do want is growth and employment."

The EPOC co-chairman added that "it wasn't long ago when we were not getting any positive growth and nowadays having got ... four quarters of positive growth back to back, growth is almost becoming blaze to us and it shouldn't, because it's not easy to come by."

Heavy debt burden

In most economies, trying to grow the government plays a big role in spurring investment. "The problem we have is this very heavy debt burden. When you look at the government's fiscal numbers for the period up to July, we spent $43 billion in paying interest and another $18 billion in amortising loans - $61 billion spent on debt servicing," he said.

If that was halved Jamaica would have had about $30 billion more, just for the period April to July, to spend on making things better in Jamaica, such as repairing roads, schools and hospitals, among other things, to improve the social infrastructure.

Byles said the inflation rate of 1.4 per cent for July "is pretty high. In fact it's one of the highest rates of inflation we have seen in any single month since sometime in 2013."

The increase was influenced by higher prices for food because of the drought experienced by the island over the past few months. However, if the drought breaks there should be some pullback in prices during the last quarter of the calendar year, he said.


This week's big number


Jamaica ranks 21 out of 144 countries for fiscal discipline, according to The Global Competitiveness Report for 2014/15. Last year, the Government ran a primary surplus of 7.5 per cent of Gross Domestic Product, equivalent to $111.67 billion.