Fewer demands by MDAs help contain spending
A drop in recurrent demands from ministries, departments and agencies (MDAs), which have built up sizeable arrears, extending more than 90 days in the past, has helped to contain government spending during the first quarter of fiscal 2014-15.
Moreover, the overall past expenditure in arrears, more than 90 days, declined by just under $200 million during the quarter, according to the Government's fiscal-policy paper for the current fiscal year.
It noted that the Government has continued to comply with the performance criteria under the International Monetary Fund (IMF) economic support programme of not accumulating expenditure arrears more than 90 days during the first quarter, ending June.
Under the quantitative performance criteria, central government accumulation of domestic arrears includes debt payments, expenses for supplies and all recurrent and capital expenditure.
The paper, tabled by Finance and Planning Minister Dr Peter Phillips in Parliament recently, said total expenditure for the period April to July totalled $139.7 billion, which was $7.69 billion, or 5.2 per cent, below the budgeted level.
Recurrent and capital expenditure were $3.51 billion and $4.17 billion less than budgeted.
The net reduction in spending during the period resulted mainly from a combination of significant saving in interest costs, lower-than-programmed recurrent demands MDAs, as well as slower-than-planned execution of some investment projects, the paper said.
Saving in interest costs aside, the other factors contributed to non-debt, or primary, expenditure of $96.4 billion being $6.12 billion less than the amount originally programmed.
The policy paper said notwithstanding the lower primary expenditure relative to budget, the Government was able to maintain its commitment to protect specified social spending, consistent with the requirement under the IMF's extended fund facility.
Spending in those social areas, for the period April to June, totalled $4.7 billion, ahead of the IMF's indicative target floor of $4.2 billion.
Spending on recurrent programmes of $35.19 billion was two per cent less than the amount budgeted, due to continuing fiscal consolidation efforts, which have served to contain housekeeping expenses as well as below programmed requests from ministries, departments and agencies.
When compared with the same period last year, the fiscal policy paper said recurrent programmes rose by $6.43 billion, or 22.4 per cent, partly arising from higher costs for travelling, pension, purchase of goods and services, and utilities. It also includes payments associated with reducing the arrears.
Expenditure on wages and salaries for the quarter totalled $53.4 billion, $1.21 billion less than the amount budgeted.
"Contributing to the lower spending is the fact that some of the budgeted payments have been shifted to later in the fiscal year," the paper said.
"Of note," it added, was that "spending on wages and salaries declined by 0.1 per cent relative to the similar period last year, representing a significant real contraction in the wage bill."
Interest costs of $43.32 billion were $1.56 billion less than the amount budgeted. Domestic interest payments accounted for $35.96 billion, $965.6 million, or 3.6 per cent lower than budgeted, while external interest payments totalled $17.35 billion, $603.6 million or 3.4 per cent below budget.
Spending on capital programmes of $7.8 billion was a significant 34.8 per cent below the amount budgeted and $3.49 billion less than the corresponding period in fiscal year 2013-14.
The lower capital spending was due largely to slower-than-anticipated execution of some capital projects, the fiscal policy paper said.
Domestic arrears are defined as payments to residents determined by contractual obligations that remain unpaid 90 days after the due date. Under this definition, the due date refers to the date in which domestic debt payments are due, according to the relevant contractual agreement, taking into account any contractual grace periods.
This accumulation of arrears is measured as the change in the stock of domestic arrears, relative to the stock at end-March 2013, which stood at $21.6 billion.
The ceiling on central government accumulation of domestic arrears will be monitored by the IMF on a continuous basis. Data must be provided to the Fund with a lag of no more than four weeks after the test date.