Mon | Oct 25, 2021

Densil Williams | Budget 2021 and the recovery: will it be sufficient?

Published:Sunday | March 7, 2021 | 12:19 AM

Finance Minister Dr Nigel Clarke tabling the third Supplementary Estimates of Expenditure last year October. All eyes will be set on 
Dr Clarke on what  plans and programmes will be rolled out to kick-start the Jamaican economy post-COVID-19.
Finance Minister Dr Nigel Clarke tabling the third Supplementary Estimates of Expenditure last year October. All eyes will be set on Dr Clarke on what plans and programmes will be rolled out to kick-start the Jamaican economy post-COVID-19.
Densil Williams
Densil Williams

When Dr Nigel Clarke takes the podium this month to deliver Jamaica’s 2021-2022 Budget, that ritualistic activity that will guide the Government’s priority for the fiscal year, all eyes will be set on what plans and programmes will be rolled out to kick-start the economy post-COVID-19. The most-watched area will be job creation and restoration of confidence around economic growth.

While economic growth is an important outcome, the last thing we will want is jobless growth at this critical time in the country’s recovery. Indeed, before the COVID-19 onset in March 2020, unemployment was at a low of circa seven per cent, that is, roughly about 100,000 persons could not find a job. While the numbers could be lower, it is still an achievement coming from early 2013 when more than 15 per cent of the labour force could not find jobs and gain a meaningful income to take care of their basic needs in life.

COVID-19 pushed back many persons in that dreadful situation of not having a job and, as such, cannot afford to pay basic bills, provide food and decent shelter for their families. The number one priority of Budget 2021, therefore, is to restore hope that joblessness will not be long-lived and that there are tangible initiatives in place to reverse the COVID-19 curse.


The fiscal policy paper for the 2021-2022 provides some insights as to what will be on the table to reverse the COVID-19 curse. The Government is overly optimistic in predicting growth in real GDP of 4.1 per cent for 2021-2022 fiscal year. Despite the low base from which it will measure growth in 2021, the idea that there will be revenge spending that will stimulate aggregate demand seems quite optimistic.

With unemployment numbers in double digit and people still uncertain about their future, it is more than likely that persons will use 2021 as a year of watch and see instead of splurging their cash. So, the exuberance to spend, that is expected, will not be realised until maybe the last quarter of 2021, by which time it will not be sufficient to generate a 4.1 per cent growth in GDP. I would not bet on this outlook for 2021-2022.

Further, the Government intends to run a primary surplus of 6.1 per cent of GDP in 2021-2022 and a fiscal surplus of 0.3 per cent of GDP during the fiscal year. By any stretch of the imagination, this is very ambitious. In fact, it can be argued that this strategy is too procyclical for a country that is expected to see an 11.6 per cent reduction in GDP for 2020-2021.

While the need to ensure macroeconomic stability, for which the debt management strategy is key, is understandable, one has to be careful not to try to balance the books in a hurry, while people go hungry. What is needed is a clear set of stimulus that will put cash in the hands of the most vulnerable, save businesses and generate employment, if the recovery is to take place and benefit ordinary people.

A primary surplus target of 6.1 per cent is genuinely too high for this first year of the recovery. The need to balance the books and build reputation in the capital markets is important, but it must be taken within the broader global context where markets are seeing global adjustments across all economies in order to preserve life and stop hunger and starvation post the pandemic. So, Jamaica will not be punished in any way if it is to slow the pace of balancing the books in order to generate employment and ensure that lives are secured so that the long-term economic benefits can be had, post the pandemic.


In fact, of the J$830 billion Budget for 2021-2022: programmes are expected to account for circa, J$247 billion, Interest on Debt and Amortization will account for circa, J$272 billion, Wages and Salaries will account for circa, J$239 billion, Capital projects will account for circa, J$54billion, and Loans to public bodies including recapitalisation of Bank of Jamaica (BOJ) account for circa, J$17 billion.

Of all these line items, programmes and capital expenditure are most critical to watch in 2021-2022. For, this is where the activities that are expected to stimulate jobs and growth of the economy will come from, not paying down of debt and interest on those debts. For, the holders of these debts will not always reinvest in their firms and retool to create more jobs in the local economy. They sometimes will invest outside of Jamaica, and so the direct benefits of job creation will not be felt in the domestic economy in the short term. But, the balance sheet of these debt holders will look attractive.

So, programmes and domestic capital investments will be critical to stimulate the domestic economy for the recovery in 2021. Of the amounts in the programme’s budget, the Ministry of Health, as expected in a pandemic, gets a large share of circa, J$8.7 billion. Unfortunately, however, agriculture, which has the strongest proclivity to generate mass employment post the pandemic, only gets J$1 billion of programme expenditure. This is inadequate. Rural agriculture alone will need more than that to bring back jobs in those areas in the shortest possible time. More thought needs to be given to this area.


It appears that the Government of Jamaica will drive the recovery through what it dubs the SERVE programme, that is, Social and Economic Recovery and Vaccine Programme. This J$60-billion programme, facilitated by a drawdown of J$33 billion from the BOJ, will be allocated as follows: J$10 billion towards the Ministry of Health to deal with vaccines, PPEs and other items to recover from the pandemic; a J$17-billion infrastructure programme for roads, highways, etc, to drive jobs; a J$5-billion grant programme for SMEs; a J$1.8-billion for ICT infrastructure; a J$1.7-billion for farm roads; and a J$8-billion care-type grant for the most vulnerable group.

This programme of activities is a step in the right direction for the recovery. However, the priorities are not sufficiently robust to deliver jobs and growth in the shortest possible time. The digital space, for example, is where a lot of activities will be taking place post the pandemic. A $1.8 billion allocation will not be sufficient to drive growth in this area. Broadband connectivity is woefully inadequate. A lot more needs to be spent to get efficient connectivity across the country. It will require closer to J$6 billion to get close to decent connectivity.

Similarly, for the most vulnerable who might not be seeing employment for the rest of 2021, $8 billion is inadequate to provide sufficient protection. These persons will need sustained support for at least six months. If we just try to reach the almost 200,000 unemployed and most vulnerable, this is merely J$40,000 per head. This can only provide decent living for more than one month, maximum two. It will need at least J$24 billion to provide any meaningful intervention. Further, $5 billion for SMEs will not be sufficient to cover the majority of the more than 10,000 MSMEs that have fallen on hard times and their enterprises are about to close.

What the SERVE programme shows is that, if Budget 2021 is to make any significant dent in the progress towards recovery, the strategy of economic conservatism and running high primary surplus will not be the best choice at this time. Instead, the primary surplus targets should be reduced in order to send more resources to some of the same elements in the SERVE programme in order to have the desired effect of generating more jobs and position the economy for longer and more sustained growth over the medium term. Further, SERVE cannot be a one-year programme if it is to be effective. It has to be a medium-term programme for at least the next three to four years.

- Densil Williams is professor of International Business at the University of the West Indies. Send feedback to