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Reforms having positive effect on growth - Byles

Published:Friday | December 11, 2015 | 12:00 AM
Co-chairman of the Economic Programme Oversight Committee, Richard Byles.

'Reforms having positive effect on growth'

McPherse Thompson

Assistant Editor - Business

Jamaica's economic support programme with the International Monetary Fund (IMF) is very much on track and is having a more and more positive effect on growth, according to co-chairman of the Economic Programme Oversight Committee, Richard Byles.

Noting that the major macro-economic indicators were showing positive signs, Byles said: "I'm not given to superlatives and to being excessively optimistic, though I am generally optimistic, but all of these indicators - and these are facts, these are not opinions - are pointing in the right direction and in a much improved fashion."

Measured against the Government's budget, the country produced a primary surplus of $53.8 billion compared to a budget of $44.3 billion for the fiscal year to October, the EPOC co-chairman reported at a press briefing at Sagicor Life Jamaica, New Kingston, yesterday.

At the end of November, the net international reserves stood at US$2.34 billion, comfortably ahead of the IMF target of US$1.6 billion for the end of December.

He said that revenues for the first seven months of the fiscal year were $3 billion or 1.2 per cent ahead of target, and 12.8 per cent or $27.8 billion above the same period last year.

Tax collections continue to outperform budget by $6.8 billion and last year by $29.3 billion, Byles said, noting that tax on interest performed better by $3.4 billion; special consumption tax also by $3.4 billion; general consumption tax by $1.8 billion and company tax by $1.7 billion.

Expenditure for the April to October period was $11.1 billion below budget, of which recurrent expenditure was $7.5 billion below budget, mainly accounted for by savings of $4.6 billion on interest and $1.6 billion on wages.

Byles said capital expenditure picked up considerably in October, but year to date lags budget by $3.5 billion or 16 per cent.

It was a consequence of the overperformance of revenues and the under-expenditure why the primary balance was $9.4 billion or 21 per cent ahead of budget, but it is expected to track closer to budget as the year progresses, he said. The fiscal balance, at negative $18.1 billion, was $14 billion or 43.6 per cent ahead of budget.

"After seven months of the fiscal year, we are pleased to see tax revenues outperforming the budget," said Byles, observing that that has been a target Government has struggled to meet in the past, and shows that progress in being made with tax compliance.

Among the other macro-economic indicators showing positive signs is inflation, which he says is at an almost 50-year low; the trade deficit is showing continued improvement; and the current account deficit is projected to decline to about three per cent of gross domestic product this fiscal year, the lowest in 19 years, said Byles. Of the reduction in the current account deficit, he said that "is really superb for a country like Jamaica and, internationally, would be considered to be world-class".

The Bank of Jamaica reported that credit to the private sector grew by 7.8 per cent over the trailing 12 months to the end of September 2015.

"This is important because, previously, we were growing about 4.5 per cent, which is almost below inflation. So you would say that there is no big demand for credit in the private sector over inflation," he said.

"But what we are seeing with this 7.8 per cent is just that - that the demand for credit in the private sector is growing faster than inflation and that's a positive sign. It says that there is growing confidence, growing investments, renewal of capital, expansion of production," he suggested.

"Interestingly, too, when you look in that growth, what you see for the first time is that credit demanded by the productive sectors is greater than credit demanded by the consumer sectors," said Byles.

"In the past, what we have seen is that a big chunk of the credit growth has been on the consumer side. Now we are seeing a switch over to the productive side. We hope that that is a trend that continues. We have to wait and see," Byles said.