Infrastructural investment a prerequisite for growth — finance minister

BY HANNIFA PATTERSON
Contributor

Wednesday, June 19, 2019

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“We are in a period today that is characterised by the greatest levels of opportunity that we have had in Jamaica over a number of decades,” was the firm statement by Minister of Finance Dr Nigel Clarke, when he addressed the recently concluded Development Bank of Jamaica 2019 Conference.

In his presentation, Clarke several times highlighted the fact that infrastructural growth is the bedrock of future development in any country.

“Infrastructure has been associated with dynamism in growth and development ever since the dawn of development in the world, both in the east and the west.

“Infrastructural investment is a prerequisite for growth and development, and the more infrastructure investments that we have, is the more the corridors of growth and investment can be fed,” the finance minister stated.

Clarke then explained but yet cautioned that Jamaica's debt load and budget execution still prove to be challenges.

“Our decades-long experience with debt means that the fiscal space that would have otherwise been available for investment in infrastructure would have been compromised by the need of debt service.

“Jamaica's debt service cost as a percentage of gross domestic product (GDP) went as high as 17% of GDP and higher. If you were to consider the principal repayment, actually it was much higher than that. And in the context of an economy which you can make 26% of GDP in terms of revenue, you see here, precious little for your recurrent expenditures, let alone putting aside money to invest for the long term.”

He then informed that this latter situation has been reversed in recent years, and capital expenditure has more than doubled.

“In 2015 capital expenditure was approximately 30 billion Jamaican dollars, and in the 2019-2020 we are projecting a capital expenditure of 72 billion Jamaican dollars almost 2.5 times in just four years,” Clarke said.

The finance minister then offered that poor budget execution is another challenge to capital expenditure, as it is often affected by unrealistic revenue predictions.

“…Capital expenditure is set at a particular level but it is set on the basis of over-optimistic revenue forecast, and when revenue forecast are not met the first thing that suffers is capital expenditure,” he explained.

But according to Clarke this situation has been changed.

“In most recent times, in the last three years, we have been able to reverse this, and our budget execution as far as capital expenditure is concerned has been getting better. In the last financial year we have increased the capital expenditure twice, in a supplementary in September, and also again in January. Capital expenditure is taking centre stage.”

Notwithstanding these changes to accomplish national development, Clarke shared that it will require more funding, and hence public-private partnerships will be needed.

One example he gave was the re-laying of the pipeline through Spanish Town Road into Kingston, a $5-billion project that the Government still has to allocate funding for.

“When you look at what is required in the next four years, it is very difficult for government revenues alone to finance infrastructure investment required for water alone let alone, roads, highways, courts and ports, airports and other forms of infrastructure,” he explained.

“If we are to achieve what we need to achieve, there is no doubt that we have to broaden the financing to include private sector sources in all areas of infrastructure,” he continued.

He cited the Norman Manley International Airport deal and the Kingston Terminal divestment as two examples of public-private partnerships benefiting both government and the private investors mutually.

Managing director of Development Bank of Jamaica Milverton Reynolds lauded the 2019 conference as an overwhelming success.

'Conference 2019' for the DBJ was not only massive, it was without doubt a major success, as it brought to the conference floor all the key players, the stakeholders of infrastructural development plus others mainly investors, — to look at what the Government is doing and what private-public partnerships can be forged. Of course, the necessary after conference follow-ups by the DBJ are going to take place.

“I must thank all our sponsors, as without them Conference 2019 would not have been possible,” a smiling and well-pleased Reynolds offered to the Business Observer.


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