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Financial News

Sep 2009 Financial News

Budget shocker - Gov't plans to spend $6b more than initially projected

Sep 23, 2009

The Government has tacked on just over $6 billion to its spending plans for the fiscal year despite repeated pronouncements from Prime Minister Bruce Golding that a major shortfall in revenue would lead to a sharp cut in the Budget.

The first Supplementary Estimates tabled in Parliament yesterday, which disclosed that the Golding administration now plans to spend $561.4 billion this year instead of the $555 initially budgeted, was met with gasps of disbelief.

That is a reversal of the Government's position announced just over one month ago when the prime minister told the nation that he had instructed permanent secretaries to cut 20 per cent of the $84 billion which was allocated on the recurrent side of the initial Budget for programmes.

Golding later told journalists at a post-Cabinet media briefing that between 10 and 15 per cent would be cut from the capital Budget.

Those statements were given more weight when the finance ministry released figures for the first four months of the fiscal year, April-July, showing revenue of $9.6 billion or more than 10 per cent below projection.

But the document tabled yesterday showed the recurrent side of the Budget being increased by just over $12 billion or a little more than three per cent, while the capital side was cut by $6 billion.

On the recurrent side, the majority of the increase - $16.2 billion - was added for interest payment.

The Supplementary Estimates, which will be examined by the standing finance committee next week, noted that almost $12 billion of that amount was related to additional requirements. Those requirements, according to the estimates, are due to higher-than-projected issues of debenture/bonds, as well as higher-than-projected interest rates.

Interest on boj stock

A further $2.2 billion of the increase was tacked on because of higher-than-projected interest rates on special local registered stock issued to the Bank of Jamaica.

The Government projects to save a bundle because of a lower-than-projected exchange rate on the United States dollar but expects to pay more because the exchange rate on the euro is higher than anticipated.

The estimates also show the Government removing the $8 billion that it had allocated to the finance ministry for contingencies such as paying retroactive money to teachers.

Other major changes on the recurrent side include a further $908 million allocated to Local Government in the Office of the Prime Minister to pay for street lights and $450 million to pay salary arrears due to members of the Jamaica Defence Force.

However, the Jamaica Constabulary Force loses $600 million while most other government ministries and departments also see cuts in their money for housekeeping expenses.

The exceptions include the ministries of Education and Health.

The Andrew Holness-led education ministry gets just under $4 billion more to pay teachers' salaries and a further $600 million for the school-feeding programme while Rudyard Spencer, at the health ministry, will have $430 million to meet the 15 per cent increase in the salaries of nurses.

On the capital side, most ministries had their budgets cut as the Government reduced its planned spending by approximately three per cent.

The ministries of Education and Transport and Works were the big losers while others had smaller cuts and the finance ministry had its allocation almost unchanged.

Less for education

Education lost $921 million, which had been allocated for the transformation programme, and $155 million on the International Development Bank-funded primary-education support project.

The transport and works ministry lost $1.4 billion which was allocated for several projects but this is expected to be more than covered by the special consumption tax on fuel which should give Mike Henry and his team $1.8 billion for the fiscal year.

A number of international-funded programmes out of the transport and works ministry, including the CDB part-funded Tropical Storm Gustav rehabilitation work, will also be slowed down or otherwise delayed.

Arthur Hall, Senior Staff Reporter
Jamaica Gleaner
Wednesday September 23, 2009