- Norman Grindley/Staff Photographer
Financial Secretary Shirley Tyndall (right), briefs Minister Omar Davies and Murna Morgan, senior director of the Debt Management Unit.
THE COUNTRY'S seven per cent inflation target for this financial year might not be met, says Finance and Planning Minister Dr. Omar Davies.
Prices for basic food items have shot up during the financial year. This follows a heavy tax package by the Minister in April, as well as the impact on general prices of the depreciation in value of the foreign exchange rate.
"It would be a major achievement to meet the inflation target, given what has happened in the first quarter," Dr. Davies said. He was speaking at a press conference at the Ministry's Kingston office yesterday.
The Statistical Institute of Jamaica recorded 2.5 per cent inflation in June, in May at 1.9 per cent and at 1.6 per cent for April. This amounts to six per cent inflation in prices for the first three months of the fiscal year, against the seven per cent inflation target for the entire year.
"I am very concerned, very concerned," Dr. Davies said when asked his opinion on the inflation upsurge. There were many who once said, let's gamble a little with inflation. I hate to prove the point this way. I think the population now understands that rationale for the focus on inflation."
Two issues which could have a further negative impact on inflation this year are proposed increases in bus fares and water rates, he said.
The Consumer Price Index, which gives the inflation rate, is based on a basket of goods and services in which the costs of bus fares and water supply play a significant role.
PUBLIC ENTITIES
"You have public entities which are providing vitally needed services," he said. "The question is not whether there should be subsidies but the size of those subsidies."
The Ministry of Finance and Planning maintains a subsidy of over $100 million per month for the Jamaica Urban Transit Company (JUTC), he said.
The JUTC has operating costs of about $3.4 billion and fares cover about half of that. The Ministry of Finance has accepted that it would assume responsibility for all the acquisition of capital such as depots and buses.
"The submission we have taken to Cabinet is an explicit long term policy whereby the taxpayer will provide the rolling stock for the JUTC and the fare box will cover operational costs,' he said. "We feel that is sustainable in the long term."
Regarding the National Water Commission (NWC), "look at your water bill and compare it with your electricity bill or your varying telephone bills."
The rates have no bearing on the cost of providing the water, he said. The Ministry of Finance has assumed a significant debt of the NWC, because the rates presently preclude an allowance for a borrower repaying capital.
"Even when there is a fare increase, there is a significant burden being assumed by the Ministry of finance in providing this service," he said. "In neither case will either bus fares or water rates come close to meeting the real cost of providing these services."
