Densil A Williams, Professor of International Business, UWI, and executive director of the Mona School of Business and Management, says that the budget for fiscal year 2017-18 as outlined reveals a shortfall in funding which is likely to be made up either from new taxes or another drawdown from the National Housing Trust.

The professor also indicates that the gap between revenue and expenditure could be as big as $32 billion.

He adds that while the growth agenda tops the government’s objectives, expenditure as outlined leaves little room for this to actually happen.

Williams wants a greater focus and higher levels of investment in innovation and entrepreneurship. He commented, “While there is a strong agenda for growth, the budget does not offer much in this area, as the capital expenditure is a mere $53 billion compared to the $42 billion in 2016-17. Significantly, Capital A, which is where most of the activities to drive growth will come from, is a mere $13 billion when the amortisation is removed.

“If the revenues do not turn out as projected, the first casualty will be the CAPEX, so it means the growth agenda is still very tenuous at best,” he asserts.

SPENDING PLAN

In its new budget, the GOJ will be spending approximately $710 billion. Of this amount, $310 billion will be used to pay interest and amortisation (paying back the principal on the debt). Simply put, the Government will pay people who lent it money $137 billion in interest, and also pay them back the amount they lent (principal) to the tune of $172 billion.

The wage bill for the Government will be $193 billion. If Wages and Debt are added, the GOJ commitments in these two areas will be $503 billion, which means they will have only $207 billion to do everything else in the country — eg fix roads, repair schools, put beds and medication in the hospitals, maintain the bus system, buy fire trucks, among other things.

FILLING THE GAP

The Government plans to fund the $710 billion by collecting taxes, borrowing money and hopefully by receiving grants from its friends abroad. However, all of this will garner only $694 billion, so it will still be short by about $16 billion. More taxes will therefore have to be levied in order to finance this deficit.

Professor Williams notes: “For this budget there will be increases in taxes but the amount is not certain as yet, as the government could also draw down money from its profitable public bodies such as NHT to help to fund the shortfall of $16 billion.”

He states, “If the GOJ plans for the $69 billion in PAYE includes the tax break from the $1.5 million give- back, then the deficit would be[even] wider — in the range of $32 billion. It means the tax package could be much larger than $16 billion. This would pose a serious challenge to the credibility of the budget. The MOF needs to clarify this urgently.”

EXAMINING THE NUMBERS

Overall, the professor points out, the budget shows a 22 per cent increase over that of 2016-2017. However, this is due to the significant increase in repayment of loans that have matured. The amortisation figure increased by more than 120 per cent.

“If we were to take away the amortisation for debt, the overall increase in the budget would be a mere six per cent. When accounting for inflation, it would be a real increase of 1-2 per cent if inflation falls at 4-5 per cent as predicted.

“Overall, therefore, what the budget calls for is an urgency to do serious reform of the public sector to drive greater levels of efficiency and productivity, as the wage bill and debt are still the major ‘hangs’ on the ability to drive sustainable growth in Jamaica. After debt and wages are accounted for, the GOJ does not have… more resources left to drive innovation and growth in any serious way.”

NEED FOR INNOVATION

In conclusion, Williams observes, “Science and technology, which is where the innovation to drive growth should be coming from, shows a mere one per cent of the overall budget at only $3 billion. This is woefully inadequate to drive growth where it is required most: innovation.

“The budget needed to show a stronger focus on doing something new, and not the traditional way of doing things as the numbers are suggesting. I would have loved to see stronger priority in areas for innovation and entrepreneurship.”