Editorial | More from the capital budget

As this newspaper has done, the Independent Fiscal Commission (IFC) has told the Government to get its procurement and project execution houses in order, lest infrastructure projects run into snags and the failure to deliver the growth that is expected of them.

Put another way, the danger, if these things are not done, is the Government’s capital budget remaining a big number on paper that isn’t spent, or spent so badly that taxpayers get little or no value for their money. The capital budget for 2025-26 is J$62.5 billion.

It is an issue that worried the former finance minister, Nigel Clarke, and should now receive serious attention from his successor, Fayval Williams.

The IFC is a commission of Parliament, officially launched in January, that has taken over the job of assessing the Government’s fiscal policies to determine whether they are line requirements of the Financial Administration and Audit Act, if they are sustainable and can deliver on the goal of lowering the country’s debt-to-GDP ratio to 60 per cent by the 2027-28 fiscal year.

The commission recently released its first such analysis – of the administration’s Fiscal Policy Paper (FPP) for the fiscal year beginning on April 1. It concluded that, generally, and based on the available data, the Government’s programme is credible.

NUMBER OF CONCERNS

The IFC, however, pointed to a number of concerns about the budget process, as well as raised some red flags about policy implementation that could be humbugs to economic growth, which, ultimately, could undermine fiscal projections. Shortfalls in capital expenditure is one of them.

For instance, over the first nine of the current fiscal year April 2024 to December 2024, the Government spent $36.7 billion on its capital projects, a shortfall of $9.5 billion, or 20.5 per cent, on the budgeted amount.

“The FPP reported that this shortfall was due to a slower-than-programmed pace of execution of several planned public-sector investment projects,” the commission noted.

The expectation was that by the time the fiscal year ends on March 31, capital expenditure will climb to J$61.7. But that will still be J$18.3 billion, or 22.8 per cent, less than the allocated amount.

“The IFC suggests that going forward, the Government should take steps to alleviate the impediments, including capacity constraints within ministries, departments and agencies, to secure full utilisation of the capital budget allocation in a fiscal year, given its potential contribution to economic growth,” the commission said in its report sent to Parliament.

The IFC also underlined the potential for similar downside risks in its analysis of the activities of the self-financing public bodies (SFPBs), which are not part of the central government’s expenditure budget, but whose activities can have a significant impact on GDP expansion – or the lack of it.

Combined, these agencies are projected in the Fiscal Policy Paper to return a surplus of $50.9 billion in the current fiscal year. That would be J$16.5 billion or 48 per cent, above what was projected at the start of the fiscal year, which, on its face, is good.

BETTER PERFORMANCE

However, while the “higher-than-anticipated balance is mainly due to a $49.6-billion reduction in current expenses by the group relative to the original budget”, most of the increased net gain, the commission noted, would come from presumed better performance of four public bodies – the National Housing Trust (NHT), the Urban Development Corporation, Petrojam Limited and the National Water Commission.

Added the commission: “The IFC notes that the improvement in the NHT’s projected surplus was due to slower-than-planned execution of its housing projects and an improvement in the collection of mortgage repayments, with delays in construction activities contributing to a $15.3 billion in underspend, stemming predominantly from delays in the execution of its guaranteed purchase programme.

“The IFC is concerned about the adverse implications for growth from the delayed activities by the NHT in 2024-25 but welcomes the NHT’s intention to significantly scale up construction in the coming years.

“At the same time, the IFC cautions against over-ambition amid local capacity constraints. In this vein, the approximately 50 per cent increase in NHT’s planned capital expenditure for 2025-26 – about 75 per cent of the central government capital budget – appears ambitious.”

It is concerns such as these to which The Gleaner alluded last June when we urged the Government to accelerate its efforts at professionalising its procurement and project oversight arrangements.

We support the 2015 legislative establishment of the Public Procurement Commission (PPC) and the PPC’s Contractor and Consultant Performance Evaluation Programme, aimed at ensuring that the most competent people for the job are hired in the first place.

The electronic procurement system that manages tender, bid submissions, evaluations, and contract management is also a positive development.

But those are only foundations upon which to build. In that regard, we repeat our suggestions that:

• These systems are continuously refined and updated to align with best practices and to address emerging challenges;

• There be stringent compliance and enforcement mechanisms to prevent fraud and corruption; and

• The Government is firmly committed to transparency and accountability as a means of building public trust in the procurement process. This must include for the private sector, community and civil society stakeholders to have a voice in ensuring appropriate feedback in the choices of projections and in their evaluation.