More austerity on the way
Government tax revenues have been running behind Budget in the majority of months since the start of fiscal 2014-15. At the end of December 2014, tax revenues for the nine months trailed Budget by $9.7 billion, causing the Government to miss the $260 billion minimum tax revenues that the International Monetary Fund (IMF) expected for April-December 2014. Did the Government pass that test?
By the end of FY 2014-15, the Government and the IMF have projected tax revenues of $384.3 billion. So far for the nine months, tax revenues totalled $258.6 billion. Simple arithmetic says the Government needs tax revenues of $125.7 billion for the final quarter of this fiscal year. If you believe this number to be huge, it is.
The Jamaican economy has not generated $125.7 billion in any March quarter when one looks at the data going back six years. Viewed another way, no March quarter has ever generated tax revenues that are 24 per cent higher than the similar quarter in the previous year. From whence comes this confidence then on the part of the Government?
For this final quarter of the fiscal year, our analysis suggests that unless the Government raids the National Housing Trust (NHT) fund again, sells some big asset or require large companies to prepay tax bills, the all-important primary balance of $121.3 billion seems highly unlikely to be met. Simply put, if in nine months, the Government has only reached $66.5 billion of primary surplus, by what miracle will it get to $121. 3 billion at the end of March 2015? More austerity? More taxes?
How long can the Government continue to squeeze the capital budget, which provides for hospitals, clinics, schools, police stations, roads and other capital items, to ensure it reaches a 7.5% primary balance? There is hardly anything left to squeeze. The capital budget for the fiscal year is $34.6 billion. So far after nine months, the Government could only muster enough tax revenues to spend $18.3 billion, a shortfall of 47% relative to budget.
In the meantime, we, the Jamaican people, suffer a reduced quality of life. That was not the election promise. It was Jamaica Emergency Employment Programme and oxtail. We know now those were empty-barrel promises.
The finance minister tells us that the goal of maintaining a 7.5% primary balance is to achieve the objective of reducing the public debt and maintaining it at sustainable levels. Check the Government's fiscal policy paper for 2014-15. Is this happening? Judge for yourself. The debt mountain continues to grow higher, now $2.1 trillion, and the more important debt-GDP ratio is at approximately the same level at which the Jamaica Labour Party (JLP) left it when it demitted office in December 2011. Where is the progress? Jamaicans need a new way, which only economic growth can provide.
JLP GROWTH PRESCRIPTIONS
Use legislation to fast-track solar installations. Loads of young men and women could be trained to put the panels on roofs. This creates jobs.
Utilise the massive capacity of the local stock market to access equity capital for government companies such as the National Water Commission so it can upgrade the system and expand water distribution across the length and breadth of Jamaica. Many women and men could be put to work digging trenches and laying pipes. This creates jobs.
Make changes in legislation to fast-track land titling, thus facilitating usable collateral for thousands of Jamaican small farmers and others. This is nation building.
Shake up the NHT. Install a new board and new management that will focus on the true mandate of the trust and create housing solutions to meet the needs. We need to put construction workers to work. This creates jobs.
Help small businesses to gain access to capital by utilising tried-and-proven financial structures to facilitate their receivables by using the broader capital markets.
These are but a few prescriptions to begin to grow the economy and create jobs.