The Public Administration and Appropriations Committee (PAAC) of the House of Representatives is scheduled to start its review of the 2015/16 Fiscal Policy Paper (FPP) Interim Report when it meets today at 10 am at Gordon House.

The review will include the performance and projections of the Ministry of Finance and Planning, the Bank of Jamaica and the Planning Institute of Jamaica (PIOJ), among others. Opposition MP Edmund Bartlett, who chairs the committee, said yesterday that he is not overly concerned that the start of the review, scheduled for last Wednesday, was delayed by a week.

The committee was one of two which, as the Observer reported on Thursday, were unable to meet last week due to the lack of a quorum. Their agendas were postponed to this week.

However, Bartlett noted that finding a quorum for the committee to meet had not been a problem up to last week. He felt that last week’s poor attendance was primarily due to increased election campaigning.

He pointed out that the FPP interim report covers the first six months of the fiscal year 2015/16, and is not a condition precedent to anything happening in terms of the upcoming budget for 2016/17.

“But it is a requirement for us, so that we can report to Parliament on the performance of the ministry (of finance and planning) and of course the Extended Fund Facility (agreement with the IMF),” Bartlett explained. The interim report was tabled by Minister of Finance and Planning, Dr Peter Phillips, on September 29 in the House of Representatives.

Among the issues it addressed was the fact that, despite the noteworthy performance of fiscal operations thus far, there are emerging challenges, on both the revenue and expenditure fronts, that have to be addressed to ensure continuous progress in the economic programme.

It said that, on the revenue side, tax revenue will be impacted by (i) the later than anticipated implementation of transfer-pricing rules; (ii) lower than expected yields from major audit operations; and (iii) adjustment to the announced Environment Levy on domestic production and the six-month delay in its implementation.

As a result, tax revenue is projected to fall short of budget by $2 billion (0.5 per cent). In addition, sluggish performance by non-tax revenue over the first half of the year, coupled with lower aluminium prices negatively impacting revenue from the bauxite/alumina sector, are expected to contribute to the overall shortfall in revenue and grants of $5.1 billion (1.1 per cent).

With respect to expenditure, the main challenge arises from the 2015/17 wage settlements. New wage agreements The government has signed several Heads of Agreement with the trade unions in the public sector since August, and is seeking to complete negotiations for new wage agreements with the remaining public sector groups during this fiscal quarter.

In order to maintain the social consensus underpinning the reform programme of the country, foster industrial harmony with workers and ensure the continued efficient operation of the public service, the government says it adjusted its initial wage/benefit offer to public servants from three and two per cent, in years one and two, respectively, to four and three per cent on basic pay.

In addition, some allowances were adjusted above the rates on basic pay. Based on agreements signed thus far and offers that have been made, the government has stated that it will be required to find an additional $6.8 billion to fund the higher wage payments, as well as $2.5 billion to cover the agreed adjustment in travelling costs (motor vehicle upkeep, mileage and commuting allowances).

The expected additional expenses associated with the wage and benefit settlements (agreed and proposed) have been projected at $9.3 billion. The combination of the higher expenditure demands and the projected shortfall in revenue and grants will generate a shortfall in the projected Primary Surplus relative to target of $14.4 billion (0.9 per cent of GDP).

Current estimates for a lower than anticipated nominal GDP (both inflation and real growth being less than projected) will reduce the nominal Primary Surplus equivalent to 7.5 per cent of GDP by $1.720 billion, from $126.7 billion to $125 billion.

Consequently, the shortfall on attaining the 7.5 Primary Surplus has been reduced to $12.7 billion (0.8 per cent of GDP), the Interim Report stated.

Dr Phillips told the House of Representatives that the FPP also provides a summary report on several “profound” developments, covering: fiscal risks; tax reform; public financial management reform; public sector reform; financial sector reform; and growth enhancing reform.

He said that it is expected to facilitate parliamentarians’ active debate and participation in the management of the public finances of Jamaica, and the performance of the economy.