Fri | Sep 22, 2017

Don't read too much into big surpluses - Byles

Published:Friday | July 15, 2016 | 7:00 AMMcPherse Thompson
Richard Byles, cochair of EPOC.

A 118.75 per cent out-performance in the primary surplus and a 277.5 per cent reduction in the fiscal balance were among the key macroeconomic indicators that Jamaica produced above the Government's budget for the first two months of fiscal year 2016-17.

However, co-chairman of the Economic Programme Oversight Committee (EPOC), Richard Byles, has urged caution about how those large surpluses are read, saying that as the year progresses they will even out with the budget.

The primary surplus in May was $17.5 billion against a target of $8 billion, or $9.5 billion above.

The net international reserves at the end of June stood at US$2.3 billion, ahead of the US$1.81-billion International Monetary Fund (IMF) target, Byles said.

Tax revenues collected totalled $67.6 billion against a target of $63.8 billion, or a $3.9-billion overperformance.

On the expenditure side, a significant $3.3-billion underspend on programmes and $3.2 billion on capital expenditure, coupled with a positive variance on revenues and grants, accounted for the strong primary surplus, Byles said.

Noting that interest payments were also $1.5 billion less than budget, the EPOC co-chairman said "all of this contributed to the primary surplus over-performance and to the fiscal balance, which turned out to be negative $4 billion compared to a budgeted negative $15.1 billion."

However, he pointed out that the under-expenditure was primarily because a Budget for fiscal year 2016-17 was not approved in April and for most of May and, as a result, the Government released funds very conservatively during that period.

Byles added that all categories of taxes more or less performed positively during the review period.

Notwithstanding, the first impact of the increase in the personal income tax threshold will be felt this month in that there will be a slowdown in the pay-as-you-earn tax collection somewhere in the region of about $1 billion each month, Byles told a press briefing at Sagicor Life Jamaica in New Kingston, where he released the 38th communique of the non-public sector members of EPOC on Wednesday.

He said that with the Budget approved in late May, "as the year progresses, expenditure is going to pick up and start match more closely with the budgeted numbers. The personal income tax trips in in July, and you will see the tax performance slows a bit in respect of producing these very large surpluses above Budget".

Byles said the Statistical Institute of Jamaica announced inflation of 0.2 per cent for May 2016, the first increase since the start of the calendar year, following four consecutive months in negative territory.

Calendar year-to-date, that is, January to May, inflation has been minus 1.4 per cent and the trailing 12-month rate is 2.1 per cent.

He said the depreciation of the Jamaican dollar for the calendar year to May was four per cent so that the gain in competitiveness has been 5.4 per cent for the first five months of the year and the gain over the last 12 months was 5.9 per cent.

"So anywhere you look at it, Jamaican goods and services have become more competitive," said Byles.

The Bank of Jamaica released information on private-sector credit, which shows that, in real terms, it increased by 10 per cent over the last 12 months.

EPOC began concentrating on private-sector credit a few briefings ago "because it is a good indicator of how active the private sector is in drawing down loans to make investments," said the co-chairman, whose committee is monitoring the Government's implementation of the four-year economic support programme with the IMF.

Referring to the percentage growth, Byles added that "this is a pretty good number, and I think that all the economists would be quite happy to see that this number has hit double digits."

mcpherse.thompson@gleanerjm.com