Changes to the budget and reporting rules

Inside Parliament

With Balford Henry

Tuesday, February 19, 2019

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THE 2019/20 annual Estimates of Expenditure, or the budget, was tabled in the House of Representatives last Thursday, February 14, showing a gross budget for $835.9 billion.

However, $32.6 billion in appropriations-in-aid (government earnings) and transfers from the Consolidated Fund reduced the estimates to a net of $803.2 billion, which is to be reviewed by the House's Standing Finance Committee between March 4 and 5 before it entertains the annual budget debate, which begins on March 7 with Minister of Finance and the Public Service Dr Nigel Clarke opening.

A summary of the budget shows recurrent (housekeeping) estimates of $761.6 billion, which nets at $731.1 billion, after a deduction of $32.6 billion in appropriations-in-aid (Government earnings) and transfers from the Consolidated Fund, and $72.1 billion in capital estimates, leaving a net budget figure of $803.240 billion

The Public Sector Consolidated Estimates of Expenditure, which was one of several books tabled with the budget, showed that adding the expenditure of government-owned public bodies would create a total Consolidated Public Expenditure picture of $1.2 trillion, covering the expenditure of public companies like Jamaica Urban Transit Company, Petrojam, National Water Commission, the Port Authority of Jamaica, National Housing Trust, Urban Development Corporation, and the Development Bank of Jamaica.

But, the net budget of $803.2 billion, which is now before the House of Representatives, is what is required to be passed prior to March 31, 2019.

There are several views on the budget this year, with the most optic being the fact that this year's budget is only approximately $700 million more than last year's, which should raise some concerns about inflation. However, with inflation often being even lower than expected at several points last year, the minister should be well prepared to deal with that issue.

Clarke, however, insists that the tightness reflected in the minor addition to last year's spending reflects the fact that last year's budget had benefited not only from an increased flow of tax revenues, as well as a $21-billion windfall from obtained from the PetroCaribe Fund, the recall by the Government of the US$100-million loan for Petrojam upgrade.

He noted the funds were spent on one-off payments to reduce the country's arrears to several entities, including the Jamaica Public Service Company Limited, the National Water Commission and small and medium sized business suppliers who had been waiting for payment for goods delivered to public ministries, departments and agencies.

It has also been explained that there has been no massive increase in repaying the debt. However, with changes to the format of the budget reports the payment of interests and principal on outstanding debt has been added to the Ministry of Finance and the Public Service's recurrent expenditure figure. The figure now shows up optically under the ministry's recurrent budget which, with the transferred amortisation figures, showed the ministry's recurrent budget jumping from last year's $244.6 billion to $385.6 billion.

The Jamaica Observer had reported a huge jump in debt payments by the Ministry of Finance, ultimately aimed at reducing the debt to GDP ratio. However, the $140-billion increase in the ministry's recurrent budget has been attributed to transfer of the amortisation payments to the ministry's recurrent budget.

There have also been questions about increase in funding for national security, while the recurrent expenditure showed a mere $1.6-billion increase in its allocation. However, the capital budget of the Ministry of National Security has jumped from $12.6 billion last year, to $20.2 billion this year, an approximately $7.6- billion increase in its projected spending on security this year.

Although the capital budget has now been lumped together, it must be recognised that some spending are from the Government's coffers, while others engage multilateral and bilateral partners.

In recognition of the implications for communicating the changes to the fiscal format, the Government, in Fiscal Policy Paper 2019/20 in a section titled 'Fiscal Reporting', dealt with the enhanced fiscal rules under the Fiscal Responsibility Framework Regulations 2012, which refers to the need for a fiscal responsibility statement as well as a fiscal risk statement evaluating the contingent liabilities and other risks that may affect the fiscal accounts.

It also noted that, starting this year, the Ministry of Finance and the Public Service will launch what is known as the Citizens Guide to the Budget. This is an innovation which the ministry says is designed to present the budget in “simple, non-technical terms” for the benefit of all segments of the Jamaican population.


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