Gov't cuts budget closer to the bone than predicted
THE Government is cutting the 2013/14 budget by $21 billion, carving out a huge and unexpected slice of its recurrent estimates in addition to the cuts in capital expenditure that had been predicted.
Financial analysts and other economic experts had predicted that the Government would have cut $12 billion - $16 billion from the budget — focusing primarily on cuts in capital expenditure, especially Capital B estimates that are financed by bilateral and multilateral arrangements — to close a $11 million - $12 million gap created by under-performing tax revenues.
But, the estimates tabled by Finance and Planning Minister Dr Peter Phillips in the House of Representatives yesterday cut much closer to the bone, carving as much $12 billion from the recurrent or housekeeping expenses. This will severely limit spending by its ministries, departments and agencies, at least until the current financial year ends on March 31, while capital expenditure was cut by $9 billion,
Reacting to yesterday's outcome, the Opposition Jamaica Labour Party said that the figures confirmed the extent to which the Government has boxed itself into a corner, by failing to focus on growth and pursuing contractionary policies with little option but to drastically slash expenditure.
Opposition spokesman on finance Audley Shaw said it was clear that, in a desperate attempt to compensate for the significant underperformance of revenues, the Government had moved to drastically slash expenditure across the board.
"This supplemental budget merely confirms the validity of the concerns the Opposition raised as early as last April during the budget debate, where we cautioned the Government against overly contracting the economy," Shaw said in a release.
He added that the Government has been focusing on taxation instead of growth, making unrealistic revenue projections and racking up significant arrears to its creditors.
However, the biggest cuts in the supplementary estimates were in Phillips' own finance and planning ministry where, for example, $10 billion was cut from interest payments on outstanding Government bonds. There was also a $1.8-billion cut in the allocation for pension payments in the public sector.
Recurrent expenditure in both the Ministry of Education and the Ministry of Health was protected with increases in housekeeping allocations of $8 billion and $4 billion respectively.
The estimates will be reviewed by the Public Administration and Appropriations Committee tomorrow after which they will be sent to the House of Representatives for approval next week.