Debt Management Front and Centre
Debt Management will be on the front burner as the Government embarks on its fiscal programme for financial year 2015-2016. That is the word from Finance and Planning Minister Dr Peter Phillips as he outlined the strategy for the just-tabled $641.6 billion Budget.
He says a significant portion of the 19 per cent increase in the Budget relates to higher expenditures on debt servicing. Phillips is indicating that well over $100 billion in debt becomes due this year. This is broken down as $62 billion in the repayments under the National Debt Exchange and another US$400 million in bonds.
Phillips says the Government is clear on its singularity of purpose. He says the reduction of the debt overhang, which is estimated at 131.6 per cent of GDP, is central to the programme of fiscal management and maximising the growth potential of Jamaica. He says this is a basic obligation that the Government has been pursuing since 2012, and Jamaica will continue to meet its obligations both locally and overseas. Phillips is stressing that Jamaica will not deviate from this path, even in the face of upcoming events.
"Despite the fact that we are approaching the close of the electoral cycle, we will continue. The Government of Jamaica - the entire Cabinet - is steadfast in meeting the obligations that we've entered into with respect to our primary-surplus targets, debt repayment obligations and running a fiscally prudent country," Phillips told a post-Budget press briefing yesterday.
The primary-surplus target for the upcoming financial year is 7.5 per cent of GDP.
The Fiscal Policy Paper accompanying this year's Budget is indicating that there will be a gap of $10.35 billion. Phillips says that more than $8 billion of this amount will have to come from new revenue measures and increased compliance.
Pressed as to the real meaning of this, he outlined that the Government will be closing several loopholes in the tax arrangements. He says there will be new transfer pricing rates that will affect payments for goods and services between related companies. In addition, finance houses will now be required to withhold tax payable on interest payments for bonds and other securities. The finance minister also warned that the Government will be seeking to broaden the tax base, even as it has lowered rates in several instances.
Phillips is talking tough on tax collection. He says the matter of tax compliance will be "beyond exhortation", indicating that the stage is set to deal with tax cheats.