THE Government has announced plans to slash its annual spending by $126 billion, reducing the total budget to $1.26 trillion for the next fiscal year, even as the country grapples with a recession. Despite the sweeping cuts, critical funding for the upcoming general election and infrastructure projects, including major road and drainage improvements, remains intact.

The budget was presented as Fayval Williams, minister of finance and the public service, confirmed in the fiscal policy paper accompanying the estimates of expenditure that Jamaica’s economy has entered a recession, contracting by 3.5 per cent in the July-September quarter and an estimated 0.5 per cent in the October-December quarter, with full-year contraction now projected at 0.7 per cent for the fiscal year ending March 31, 2025. This marks a sharp reversal from last year’s growth forecast of 2 per cent.

The downturn is attributed to Hurricane Beryl, which hit sections of the island last July, weakened domestic and external demand, and tightened monetary policy. Despite this, the Government anticipates a recovery next fiscal year with projected growth of 2.2 per cent. Revenues and grants are expected to reach $1.096 trillion this year, though tax revenues are falling short of earlier estimates. However, tax collections are forecast to rebound by 5.9 per cent next year to $949.5 billion, while the dormant bauxite levy is set to contribute $812 million to government coffers.

The budget reflects the dual challenge of addressing the immediate economic fallout from the recession while laying the groundwork for recovery. Alongside measures to stabilise revenues and boost growth, the Government is prioritising its largest financial obligation — public sector compensation. It plans to allocate $496 billion in the next fiscal year, equivalent to 14.2 per cent of projected gross domestic product (GDP), to cover new pay rates for groups such as medical consultants, parish judges, and probation officers, as well as back pay owed to medical consultants and the judiciary. Additionally, $33 billion has been earmarked as a contingency for further adjustments once final calculations are completed across ministries, departments, and agencies.

The next biggest spending category for the Government is grouped under recurrent programmes for which $359.4 billion has been allocated. Included in that is $4.6 billion to pay for restoration and maintenance of major roads and gullies, while $1.96 billion has been set aside for the Electoral Office of Jamaica for the general election which is due within the fiscal year.

Other sums from the recurrent programmes budget have been allocated to support public bodies such as National Water Commission, Jamaica Urban Transit Company, Transport Authority, and Jamaica Agricultural Commodities Regulatory Authority. The Development Bank of Jamaica is also expected to get $2 billion as a loan for onlending to businesses.

Debt servicing — which, in years gone by, was the single biggest call on the budget, but is now the third largest — is expected to set the Government back by up to $340.3 billion in the next fiscal year. That is equivalent to a little over a third of the budgeted tax inflows, compared to a much higher 55.7 per cent in the current fiscal year that ends on March 31. Importantly, the debt, expressed as a percentage of GDP, is projected to fall to 63.7 per cent at the end of fiscal 2025/26. Just over a decade ago, it was closer to 150 per cent of GDP.

Spending on capital programmes is also projected to rise, though there are concerns that the Government has failed to spend this allocation in full in prior years. In the current fiscal year, capital programmes were budgeted at $80 billion, but with just six weeks left before the year ends, just over $61 billion is expected to be spent. In the fiscal year before that, $11 billion in funds set aside for capital projects were left unspent.

In the next fiscal year, though, $62 billion has been set aside for capital programmes, including $2.1 billion to fund new public investment projects to be approved during the fiscal year. Nearly half of the rest of the funds remaining will go to the Ministry of Economic Growth and Job Creation to address major infrastructure projects already under implementation. These include the Montego Bay Perimeter Road, which will get $14 billion; the Shared Prosperity through Accelerated Improvement to our Road Network (SPARK) programme, which will get $8 billion; the Southern Coastal Highway Improvement Project, which gets $2.5 billion; while a further $2.5 billion has been allocated to ongoing construction work on the Portmore Resilience Park.

Other areas getting significant allocations in the budget include the Ministry of Health and Wellness, which will get $10.2 billion, with $5 billion of that amount for ongoing work at Cornwall Regional Hospital, and $4.1 billion for the Inter-American Development Bank-supported programme for the prevention and care management of non-communicable diseases.

The Office of the Prime Minister is to get $4.6 billion of which $3 billion is for the national identification programme. The Ministry of Science, Energy, Telecommunications, and Transportation is to get an additional $4 billion with the majority — $3.2 billion — to be used for buying new buses for the Jamaica Urban Transit Company. Another $1.7 billion has been included to improve infrastructure in primary and secondary schools, as part of a $4.2 billion extra allocated to the Ministry of Education, Skills, Youth and Information.

The Essex Valley Irrigation Project is to get $1.7 billion as well, out of $3.7 billion in additional funds to the Ministry of Agriculture, Fisheries and Mining.