Briefing | Demystifying the 2018-2019 Budget
Last week, the Department of Economics at the University of West Indies, Mona, held its usual policy forum to demystify the national budget for the 2018-2019 fiscal year. Speakers included Mrs Helene Davis-White, who gave the trade union point of view, Dr Damien King, who gave an assessment of the important long-term trends in the budget, and me.
As usual, it was highlighted that it is important for every Jamaican to understand the national budget. The Government has tabled a $773.7-billion budget for the 2017-2018 fiscal year. Of this amount, approximately $201 billion, or 26 per cent of the total budget, is allocated to employee compensation, including wages and salaries; 29 per cent has been earmarked for recurrent programmes, an allotted $222 billion; 37 per cent, or $289 billion, will go towards debt servicing, inclusive of principal and interest; and the remaining eight per cent, or $61.6 billion, for capital expenditure.
The Government has earmarked $16.7 billion for work-related projects aimed at developing and improving the country's physical infrastructure for the 2018-19 fiscal year, which include US$2 billion for North-South Highway Development Projects, US$385 million for the South Coast Highway Improvement Project, and US$220 million for the Montego Bay Perimeter Road Project. The Ministry of National Security has been allotted a 23.4 per cent increase from the $63.6 billion received in 2017-18 to $78.5 billion for the 2018-2019 fiscal year. The Government has allotted $148 million to improve the mobility of the Department of Correctional Services, $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.
The total tax revenue for the 2018-2019 fiscal year is estimated to be $518.44 billion compared to $478.25 billion for the 2017-2018 period. Non-tax revenue, including miscellaneous receipts, is estimated to be $60.88 billion. Grants are projected at $9.1 billion, loan receipts are projected at $103.2 billion.
... Trade unions point of view
Mrs Helene Davis-White highlighted that the budget is a necessary process that will establish how the country will operate for a one-year period. As a result, it must be credible. She outlined that tax packages outlined in previous budget processes increased her scepticism of the current budget proposals, as there is no guarantee that there will be no new taxes. She outlined that there are expectations for oil prices to increase that might lead to higher inflation, making it difficult for the government to achieve its 4-6 per cent inflation target. This, in turn, will have implications for the salaries and wages negotiations that government is pursuing. She appreciated the medium- to long-term approach to the budget planning process and encourages the government to keep it up. She pointed out that the anticipated 5-in-4 growth plan has fallen to 2.5 per cent, especially since the country anticipated to grow by 2.4 per cent in 2017-2018, but only grew by 0.9 per cent. She explained that the Government has not clearly articulated how the budgetary spending will translate into meaningful economic growth. For example, last year, one of the Government's aims was on small- and medium-sized enterprises. Banks, she emphasised, must make an effort to offer more loans geared towards the productive sector instead of consumption loans. To end, Mrs Davis-White pleaded for a more concerted effort towards growth, and stability for the government.
... Dr Damien King's view
Dr Damien King described the 2018-2019 Budget as the country's reward for past fiscal consolidation. For Dr King, Jamaica has demonstrated excellent fiscal responsibility over the past couple of years and this has resulted in a decline in the debt-to-GDP ratio from 147 per cent to less than 120 per cent, and is projected to decline to less than 100 per cent - 94 per cent - for the first time in two decades at the end of the fiscal year. Debt servicing, though burdensome, must be tolerated and interest payments have declined from 30 per cent in 2014 to 23 per cent in 2018. Dr King explained that the Government will no longer crowd out the private sector for loans, which should allow more private investment necessary to achieve economic growth. From an expenditure point of view, he highlighted that spending on socially related activities has increase to about $206 billion of the total budget. However, it remains the same as previous years in real terms when compared to previous years. Dr King expects no new taxes and highlighted that increased revenues are expected to be generated from indirect taxes.