The State-run Jamaica Urban Transit Company (JUTC), which is already suffering billions in losses, is to face further haemorrhaging over a 24-month period as the Government is reducing bus fares, beginning in January next year.

However, the Administration says it is giving the company $1 billion to balance out its losses over the period of the intervention to be done in two phases.

Minister of Finance and the Public Service Dr Nigel Clarke told Parliament in a statement on Tuesday that this “temporary” reduction in fares is part of measures by the Government to “dampen the impact of the announced increases in public passenger vehicle (PPV) fares on the overall inflation rate”.

He said that beginning January 1, 2024, adult fares will decrease from $100 to $70; children’s fares will be reduced from $30 to $25; and pensioners’ fares will move from $40 to $30.

The finance minister noted as well that effective April 1, 2024, there will be a further reduction in the adult fare from $70 to $50; a further reduction in the fare for children from $25 to $20; while pensioners will see a reduction from $30 to $25.

“We anticipate that these temporary measures will have a mitigating effect on the impact of the private bus and taxi fare increases on the commuting public,” he said.

Dr Clarke explained that he was advised by the Bank of Jamaica (BOJ) that countervailing measures needed to be put in place in response to the inflationary impact of the 19 per cent increase in public passenger fares which came into effect in October. A further 16 per cent increase was also announced to take effect in April 2024.

“The BOJ has advised me that as a result of the adjustments in PPV fares, they are expecting a reversal of the downward trend in annual inflation starting in November 2023 unless there are countervailing measures. The October inflation numbers do not include the impact of the increase in PPV fares which will impact the November numbers,” Clarke said.

He said, given that the cost of transportation services comprises a notable portion of the Consumer Price Index (CPI) basket, the BOJ further advised that the announced increases in taxi fares, cumulatively, could add approximately two percentage points to inflation if not balanced by such measures.

Dr Clarke stressed that the Government is mindful of the impact of the PPV increase on the cost of living and also the need to support the BOJ in its efforts to return and keep inflation within the four per cent to six per cent range.

“We have had calculations from the central bank that indicate that the path of inflation over the next several months will be within or near to the target range, which is what motivates this policy update. I expect these measures to be temporary. We are giving ourselves up to 24 months, after which fares will need to be adjusted upwards and returned to existing levels,” he said, adding that next fiscal year the Government will add another 100 buses to the 200 new buses it had previously announced would be procured over two years.

In response to the announcement, Opposition Leader Mark Golding questioned how meaningful an impact the measure would have on inflation and what would be put in place to cushion the cost on commuters who use public transportation services outside of the JUTC passenger cohort.

“People already have had to absorb very high inflationary costs in relation to food and other consumer items and then the fare increase was awarded. I want to ask the minister: What will he be doing for the vast majority of users of public transportation services who are not taking JUTC buses, but are taking taxis and other buses in rural Jamaica and around the country, because they need to have some protection from the impact of the fares on them and the inflationary impact, which you have said is the reason for this additional subsidy to the loss-making and haemorrhaging JUTC, which is a huge charge on the fiscal budget every year nowadays,” he said.

Further drilling down on the impact of the measure, Member of Parliament (MP) for Manchester North Western and Opposition spokesman on transport Mikael Phillips questioned how soon the JUTC fleet will be increased to a “respectable number that will not continue the haemorrhaging at the JUTC” which, he said, is already being subsidised by $10 billion this fiscal year with a loss of approximately $11 billion.

In his arguments, St Andrew South Eastern MP and Opposition spokesman on finance Julian Robinson said that, while the Opposition welcomes the move, “practically, it will have little effect”.

He argued that the capacity of the JUTC is about 40 per cent of what it should be, and because of this the majority of the travelling public is forced to take private passenger vehicles.

“So, while every JUTC customer will welcome this, the reality is that many wait two, three hours for a bus on a daily basis, and because they have to get to work or school they are forced to take a private passenger vehicle… It is welcomed, but [will have] very little impact. We have to move quickly, Minister of Finance, to deal with the operations of the JUTC. There’s a need for more investment, there’s a need for better management so that you can increase the capacity of JUTC,” he said.

Dr Clarke, in response, said that while the Administration recognises that this intervention does not solve all problems associated with public transportation, it represents a concerted effort by the Government which will have a positive impact on inflation outcomes and on cost of living.