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Debt reduction target reached 20 months ahead of schedule

Published:Thursday | August 13, 2015 | 2:25 PMMcPherse Thompson

The Jamaican Govern-ment's deal with Venezuela to buy back the debt owed for oil means that it has achieved the debt-to-GDP target of 127 per cent some 20 months ahead of schedule, under the International Monetary Fund agreement.

That is according to co-chairman of the Economic Programme Oversight Committee (EPOC), Richard Byles.

Having also met all the targets under the programme for the ninth consecutive quarter, an IMF mission now in Jamaica and local technocrats should now focus on how the programme can be adjusted to focus more on growth, Byles intimated.

He attributed a minimum 10 per cent reduction in Jamaica's debt stock at this time to the PetroCaribe deal, Jamaica having raised US$2 billion on the international financial markets, a portion of which will be used to retire US$3.25 billion of debt it owes Venezuela under the PetroCaribe arrangement.

"I think that the PetroCaribe transaction puts Jamaica very firmly on the path to achieve the 2020 target of 96 per cent debt-to-GDP ratio," Byles said at a press briefing on Thursday.

"While it was possible before, but we would have to really struggle to achieve it, I think that target of 96 per cent is today a lot more achievable having done the PetroCaribe transaction," he said.

The transaction will also help to improve the Government's ability to generate a primary surplus because the assets that the PetroCaribe Development Fund had backing the debt will now go to the Government, and the income from those assets will flow through central government accounts, he said.

Byles, who released the 27th communiquÈ of EPOC at the briefing, reported that Jamaica surpassed all the IMF targets for the quarter to June.

Tax revenues up

The Government recorded a primary surplus of $20.4 billon, $3.4 billion better than the target of $17 billion, while the net international reserves at the end of June was US$2.12 billion, against a target of US$1.34 billion.

Revenues and grants for the quarter were ahead of budget by one per cent as a result of tax revenues exceeding budget by $3.4 billion or 3.7 per cent.

Taxes that performed above budget were company taxes, up $1.5 billion; sales consumption tax, up $1.6 billion; general consumption tax increased by $1.1 billion; and tax on interest, up $1 billion.

Underperformers were tax on dividends, down $0.4 billion, while telephone call tax and customs duty were each down $0.6 billion.

Byles said that when compared with the same period last year, tax revenue was $13.5 billion or 16.5 per cent higher.

Expenditure was $113.1 billion or 3.8 per cent lower than budget, the main contributors being interest and capital expenditure.

The EPOC co-chairman said the balance of payments data published by the Bank of Jamaica for the period January to March 2015 showed a current account improvement of US$149.5 million over the same period last year.

The improvement produced a current account surplus of US$39.4 million, the first in 10 years and was largely a result of a decline of US$164.8 million in imports, mainly fuel and food.

He said the Jamaica Tourist Board published tourist arrivals statistics for June, showing a decrease of 2.5 per cent over the same period last year. That was mainly attributable to a lower-than-usual available room stock as more than 1,000 rooms were being refurbished during the period.

Stopover arrivals for the calendar year to June show an increase of 3.1 per cent, while cruise ship passengers were up 12.2 per cent for June and 11.6 per cent for the calendar year to date.

"I think that the transaction on PetroCaribe and the fact that we have met all the targets for the ninth consecutive quarter will allow the IMF team and the Jamaican technocrats to sit down and say, 'the country has effectively achieved the 2017 target of debt-to-GDP. How can we adjust the programme such that it focuses more on the issue of growth?'" Byles said.