PROPER fiscal management will be key to navigating the choppy financial seas facing Jamaica this year, states Senator Don Wehby, who, in the debate on the Appropriations Bill on March 25, noted headwinds which “must be carefully managed.”

Wehby also called for the island’s import bill to be cut and import substitution strategies to be pursued in dealing with challenges ahead.

He was participating in the Senate debate about the Appropriations Bill, 2022 on Friday, which was crafted for approval of the estimates of Heads of Expenditure in the 2022/2023 budget.

Total expenditure for the 2022/2023 fiscal year is set at $912 billion, a 9.1 per cent increase relative to the prior fiscal year. Total income estimates of $906.4 billion, a 12.3 per cent rise compared to FY2021/22.

A budget deficit of $5.6 billion will be funded by cash reserves from prior years’ budget surpluses.

Wehby, in the debate on the Bill, said, “One of the main headwinds that in my opinion is a risk to reaching full pre-pandemic levels of growth is the increase in inflation globally and the uncertainty around the duration of global inflationary pressures.”

Noting that the Bank of Jamaica (BOJ) has been doing a good job, he said Jamaica’s situation was not dissimilar to developed economies such as the United States.

The cost of living increase, he said, must be placed in the context of commodity prices.

Weby stated, “Global inflation is the highest it has ever been. United States’ inflation reached a 40-year high at 7.5 per cent. The Russia/Ukraine war also has a significant impact on commodity prices.”

Citing data compiled from Business Insider and the World Bank, year over year 2020/2021 commodity price increases included a maximum 57 per cent increase in corn prices; 92 per cent hike in natural gas; 43 per cent increase in soybeans, 73 per cent in WTI crude oil, 67 per cent increase in Brent crude and a 24 per cent movement upwards in wheat.

These increases, he said, also worsened in 2022, noting also that Russia and Ukraine are suppliers of about one third (1/3) of the global demand for wheat which has resulted in an increase in the cost of food items such as bread.

Citing proposals from the Opposition, Wehby said analytics and empirical data were missing and stating that the Opposition’s proposal would cost two per cent of gross domestic product (GDP) or $40 billion.

Wehby said, “The question that I must ask is: how it is going to be financed? I would suggest that the only way to do so is to raise taxes or increase our debt stock which would spiral us into a bigger problem. Either way the most vulnerable will suffer the most.”

The senator said, “We need to strategically focus our efforts on production to improve food security, raise productivity and create sustainable value-added food products.

“We need to set ourselves a target to cut our import bill from US$1 billion to US$500 million by 2030. This is how we are going to cushion the effects of the rise in global food prices. We need to invest significantly more in agriculture, both for local consumption and export.

Debt to GDP Ratio

Raising the issue about increasing the stock of debt, Senator Wehby commented, “We cannot spend more than we earn and borrow our way to economic recovery. The future is too uncertain to take on more debt. We cannot afford another Jamaica Debt Exchange (JDX) or National Debt Exchange (NDX) restructuring. Our peers have debt to GDP ratios that are still 10, 20, 30 and some even as high as 60 percentage points higher than their pre-COVID levels.”

Wehby noted that the Second Supplementary Estimates tabled and passed in the House of Representatives in January 2022 which shows that estimated tax revenues for 2021/22 is approximately $606 billion. Tax revenues, he outlined, are expected to grow by only $65 billion.

Wehby commented, “The strong fiscal management performance of the government has resulted in the fifth year in a row that there will be no new taxes.”

The senator stated that the Government’s budget presentation, under the theme ‘Recovery, Reform and Restoration’, “was supported by empirical data and deep analysis of the issues.”