May 2012 Financial News

Budget cuts $10 Billion chopped — before inflation (Jamaica)

May 16, 2012

ASIDE from debt-related expenses, the Government plans to cut spending by $10 billion, or 3.5 per cent, this fiscal year.

Overall, spending on programmes, wages and capital projects are budgeted at $277.7 billion this fiscal year, down from the $287.7 billion the year before.
And that's before inflation takes a six to eight per cent bite out of Government spending plans.

But billions of dollars of expenditure on elections, support funds to divested entities, and an islandwide survey last year, none of which will be repeated, has given the state some wriggle room to meet its obligations this year.

During the fiscal year that ended March 31, elections cost $1.9 billion, while the population and housing census ran up a bill of $1.2 billion.

Another $12.7 billion was used to make final payments to Jamaica Cricket 2007, Air Jamaica, the Sugar Company of Jamaica and Clarendon Alumina Production.

Those expenditures, along with a $2.7 billion liquidity support programme, should have translated into an additional $8 billion for spending this year, even after the cut to non-debt expenditure.

But most of that fiscal space will be absorbed by commitments to public sector workers.

A major sticking point in negotiations between the Government and the IMF over a new deal has been this big ticket item.

Nevertheless, the budget for public sector pensions has been increased by $2.3 billion, or 10.5 per cent.

Also, $12.1 billion has been set aside to pay salary arrears to public sector workers, as well as to cover a possible teacher reclassification programme and security forces recruitment, if those programmes are pursued.

To accommodate those commitments, some key programme spending has been cut.

The most notable is the near-$2 billion reduction in health service delivery expenses, from $30.7 billion to $28.7 billion, which represents a 6.5 per cent cut.

The Government also aims to reduce its funding of the first and second regiments of the Jamaica Defence Force as well as the military's cost of operating and maintaining its vehicles, aircraft and ships, by $856 million, or 7.6 per cent.

All courts of justice experienced budget cuts as well. Combined, their budgets were reduced from $2.1 billion to $1.9 billion, or by approximately seven per cent.

Infrastructure and capital projects didn't appear to feel the axe.

Members of Parliament will have to make do with less, as the constituency development fund has been chopped by a quarter.

Each of the 63 MPs will be entitled to $15 million this year compared to the $20 million or more spent per constituency last year.


Source:
BY CAMILO THAME Business Co-ordinator thamec@jamaicaobserver.com
Jamaica Observer
Wednesday May 16, 2012

http://www.jamaicaobserver.com/business/Budget-cuts_11479885#ixzz1v2jqSZf0