Briefing | What is new in the Budget?
NO NEW TAXES
For the first time ever, to the best of my knowledge, the Government has tabled a Budget without implementing new tax revenue measures. Traditionally, we take it as a norm for the government to add a new tax category or increase tax on an existing source to help generate revenue, given the country's limited fiscal space.
When the average citizens listen to the national Budget, they are more concerned about what clever new taxes do the government plans to add this year; but not this year.
INCREASED TAX REVENUES
The Government collected $5 billion more than expected in tax revenues last year, although there was an increase in the income tax threshold, PAYE generated $47.8 billion compared to a budgeted $46.5 billion for financial year 2017-2018.
Jamaica has engaged medium- term planning. For the first time, they have tabled a Budget for a four-year period, from 2018 to 2022, as a part of the fiscal management strategy. This medium-term panning for budgetary expenditure is to help maintain fiscal discipline, increase efficiency and transparency as it relates to budgetary spending.
HOW MUCH REVENUE DOES THE GOVERNMENT PLAN TO GENERATE?
The Government has planned to generate total revenues of $699.192 billion or $700 billion. Total tax revenue for the 2018-2019 fiscal year is estimated to be $518.44 billion or (25.7 per cent of gross domestic product , GDP), compared to $478.25 billion for the 2017-2018 fiscal year. Non-tax revenue, including miscellaneous receipts, is $60.88 billion or 3.0 per cent of GDP, while grants are projected to increase by 101 per cent to $9.1 billion in total - $3.6 billion from the European Union (EU) and other grants of $5.38 billion. Loan receipts is $103.2 billion - $78.1 billion of this amount is to be raised in the domestic market, while the remaining $25.1 billion will be raised externally. Over the next three years, the Government has illustrated that more than 70 per cent of the budget will go towards recurrent expenditure, including debt servicing.
HOW MUCH DOES THE GOVERNMENT PLAN TO SPEND?
The total central government expenditure outlay for fiscal year 2018-19 is programmed at $773.7 billion and includes: non- debt expenditure of $484.7 billion and public debt service of $289.0 billion. Recurrent expenditure for the 2018-2019 fiscal year is approximately $560.045 billion, compared to $515.449 billion last year. Total capital expenditure for the 2018-2019 fiscal year is approximately $213.6 billion, compared to $290 billion (revised) for last year.
WHAT ABOUT CRIME?
Crime has been a major issue that has been negatively affecting the doing-business environment. The Ministry of National Security has been allotted a 23.4 per cent increase, up from $63.6 billion in fiscal year 2017-18 to $78.5 billion for fiscal year 2018-2019. Of this, $148 million is to purchase motor vehicles to improve the mobility of the Department of Correctional Services (DCS); $1.1 billion for the Citizen Security and Justice Programme; $6.6 million for the Rehabilitation and Reintegration of Local Offenders and Deported Persons; and $14 million for the Reintegration and Rehabilitation of Involuntary Returned Migrants in Jamaica (UNDP).
WHAT ABOUT INFRASTRUCTURE?
$16.7 billion or 81 per cent of the $20.6 billion allocated to the Ministry of Economic Growth and Job Creation is earmarked for work-related projects aimed at developing and improving the country's physical infrastructure for fiscal year 2018-19. US$2 billion for North-South Highway Development Project; US$385 million for the South Coast Highway Improvement Project; and US$220 million for the Montego Bay Perimeter Road Project.
MONTEGO BAY NEGLECTED
The inner-city road and special planning is causing severe floods in Montego Bay, St James, even after minimal rainfall. The infrastructure of the inner city is also very poor, including the road works and drainage.
The Government has successfully signed wage agreements with the Jamaica Confederation of Trade Unions, the junior doctors, the senior doctors, and certain categories of nurses with a proposed wage increase of five percent in year one, two per cent in year two; four per cent in year three; and five per cent in year four. More than $100 billion is earmarked for the Ministry of Education but wage negotiations with the teachers are at a standstill.
INTEREST RATE ISSUES
The Government has been able to solicit cheap interest rates on the domestic and international markets, given that the country's credit ratings have improved. The government- auction 180-day T-bill rate has fallen from 6.1 per cent in 2017 to 3.6 per cent currently.
Three-year Treasury bills, at an average yield of just 5.3 per cent with a low of 3.2 per cent, while the Bank of Jamaica has gradually reduced its signal rate from 3.75 per cent to 2.75 per cent. Nevertheless, average interest rate from the commercial banks are more than 15 per cent and their interest rate spread is more than 16 per cent per annum.
The country has a low private- sector credit-to-GDP ratio of 26.4 per cent, compared to 46 per cent in Latin America and the Caribbean, 95 per cent in other middle-income countries, and more than 100 per cent in some developed countries.
- Dr Andre Haughton is a lecturer in the Department of Economics on the Mona Campus of the University of the West Indies. Follow him on Twitter @DrAndreHaughton; or email email@example.com