ECONOMISTS are warning that Jamaicans should brace for further cuts in government spending for the next financial year which starts April 1.

Speaking against the background of last week’s tabling of the first supplementary estimates in the House of Representatives, associate professor at Northern Caribbean University Kirkland Anderson, and financial analyst Dennis Chung agreed that Government had little choice but to cut the budget, and said the effect on Jamaicans will likely be dire.

The supplementary estimates showed a $9.896-billion reduction in the total budget for 2012/13 — from $612.4 billion to $602.5 billion.

Recurrent spending was cut by more than $7 billion, while capital expenditure fell by some $2.8 billion.

Education and social programmes were two of the areas targeted.

This, according to Anderson, has negative implications for the poor, especially given that unemployment figures have been increasing in the past few years.

“What this budget demonstrates is that there is likely to be two things: 1) They will have to make civil servant positions redundant, and 2) a lot of the social programmes that were designed to benefit the poor are likely to be shelved,” he told the Jamaica Observer.

“The budget also demonstrates that the economy is likely to decline even further, because we’re talking about a $7-billion cut in recurrent expenditure and another almost $3 billion in capital budgeting, which tells us we should look for even less growth or even a decline in the future,” Anderson added.

For his part, Chung referenced ongoing negotiations towards a wage freeze as an example of one of the strategies Government will employ in keeping spending at a minimum.

“In terms of the expenditure side, I think they are going to try and hold expenditure.

I know there are negotiations going on now for a wage freeze, but I don’t think any agreement has been reached yet and I know the unions are holding out,” he said.

Neither of them is surprised at the cuts, they said, given IMF stipulations.

“The revenue actually fell by little under $15 billion which means, of course, they will be having less revenue.

To be honest I’m not surprised really that this is happening because in a country that has grown so little over so many years, then any increase in taxes will only further worsen the situation,” said Anderson, who heads NCU’s College of Business and Hospitality Management.

“What bothers me, though,” said the associate professor, “is where the cuts took place.

Jamaica has suffered so long with reduced labour productivity, and one way in which we can increase our productivity is through education, and when you cut the education budget you are sending the wrong signal.” “I notice $25 million has been cut from the early childhood education and that is the foundation, so in another couple of years, the number of persons coming out of high school with the level of literacy that they ought to have is likely to be reduced,” Anderson lamented.

“Those are some of the reasons I think the budget is not credible and at a time like this, when you have increase in taxes and, at the same time, cuts in government spending, the only thing that comes from that is a contraction in the economy,” he said.

On the other hand, Chung, vice-president of the Institute of Chartered Accountants, believes the supplementary budget is credible.

“They cut knowing full well what the expenses are going to come out to be, so I think they’re going to hold to it.

Even if they haven’t spent the money, they know, with just a month to go, what the expenses are going to be so I think they are credible,” he told the Sunday Observer.

Come next financial year, he said, “on the capital expenditure side, I think you’re “Going to see more off-budget spending on things like JDIC, JDIP and that sort of thing, but I think they are going to try and hold strain on the capital expenditure side which is always a safe bet.” Going into the new budget, the Government had said there will be no new taxes, but I think there is going to be increases in fees, and one of the areas you might see significant increase is maybe traffic tickets.

I think that you’re going to see some more revenue measures, maybe not taxation per se, but revenue measures.

Outside of that, Chung added, no radical strategies will be employed.

“I don’t think there is anything they can do about the debt.

I think they’re gonna try and borrow less money than they did,” he said.

One thing that won’t happen, however, Chung said, is Government’s primary surplus increasing.

“If we do that, I think it is going to have a significant contractionary effect on the economy,” he said.