$57b NHT rescue - Gov't clawing $11.4b annually over five years to cushion COVID collapse
Jovan Johnson/Senior Staff Reporter
The Andrew Holness administration will be seeking $57 billion over the next five years from the National Housing Trust (NHT) to help cushion the economic fallout from the coronavirus pandemic.
That proposal will be among three critical pieces of legislation to institutionalise transparency in Jamaica’s fiscal affairs that Finance Minister Dr Nigel Clarke is expected to table in the House of Representatives this afternoon.
A four-year drawdown of $11.4 billion annually from the NHT that was approved by Parliament in 2017 to support tax reform and debt payments expires at the end of this fiscal year on March 31, 2021.
However, COVID-19 has been wreaking havoc with the nation’s treasury given the forecast for a 10 per cent contraction in the economy and a projected $84-billion loss in revenues for the 12-month period to March next year.
“It is expected that it will take four years for economic output to return to pre-COVID levels in real terms,” Clarke said in a statement to The Gleaner last night, explaining why the new drawdown for five years “will be necessary”
“Although current year-to-date (April-October) central government revenues are ahead of the supplementary budget, revenues remain approximately 17 per cent lower ($60 billion) than the prior fiscal year (April-October 2019-20) even after including the annual NHT contribution.”
He said the Government's recovery plans rest on ensuring the “continued existence of a credible fiscal path that both supports economic recovery and retains debt sustainability”.
Meanwhile, Clarke is seeking to assure that the additional demands on the NHT, which by 2025 would have given more than $145 billion to central government since 2013, will not impair the entity’s function of providing homes to Jamaicans.
“NHT housing starts have increased dramatically in recent years," he told The Gleaner. "This is testimony to the ability to significantly improve NHT housing starts even while these annual contributions are made to central government through policy focus.”
The policy of the Government, Clarke said, to work with developers to “significantly increase” the supply of affordable houses “will be unaffected” by the proposed withdrawal of the NHT funds for central government.
“We have a full range of demand subsidies (zero per cent and two per cent loans, home grants, etc), but if houses don’t exist at levels people can afford, demand remains unfulfilled. The GOJ understands this and the problem is best solved by government intervention,” said Clarke, a former NHT board chairman.
Over the four-year period 2016-17 to 2019-20, the NHT has delivered 18,967 housing starts, compared with 7,420 in the People's National Party (PNP) years of 2012-13 to 2015-16, the ruling Jamaica Labour Party (JLP) argued in the run-up to the September 2020 national polls.
The NHT, set up in 1976 to increase the housing stock for citizens, is mainly financed through statutory taxes on employees and employers.
In its 2018-2019 annual report, the latest available on its website, the NHT said it had $292 billion in assets, $160 billion in accumulated profits, and 37.5 billion in annual housing expenditure.
Both main parties, the JLP and the Opposition PNP, have traded criticisms over the years for the use of the funds to supplement government expenditure.
Meanwhile, in a major development, Clarke is expected to table the long-awaited Independent Fiscal Commission Act, 2020 which will establish a body to ensure that the Government maintains sound economic policies.
“The Fiscal Commission will be the guardian and interpreter of Jamaica’s fiscal rules, monitoring compliance with these fiscal rules, reporting on fiscal outcomes and keeping the public informed by providing independent analysis on fiscal policy developments,” the finance minister said.
“The GOJ proposed this independent fiscal institution, committed to it, and is delivering on its commitment.”
The Financial Administration and Audit (Amendment) Act, 2020 that is also expected to be tabled is aimed at providing greater flexibility to support economic recovery, while still ensuring that the 60 per cent debt-to-GDP target is achieved by the new date of 2027-2028.
The initial deadline was 2025-2026 but was moved earlier this year because of the pandemic effects.
The law requires a correction over a two-year period, but the Government is proposing to change the pace.
"Given the magnitude of the fiscal deviation caused by the COVID-19 pandemic, approximately four per cent of GDP, the amendment is aimed at moderating the correction mechanism to ensure a path to recovery," Clarke said.