JAMAICA’s fiscal watchdog is questioning whether the Government’s new budget is built on realistic numbers, warning that overly optimistic economic assumptions could mean the country ends up with less money than expected — and more debt than it is letting on.

The Independent Fiscal Commission, in a report released last month, took issue with the Government’s projection that the economy will grow by 9.2 per cent in value terms in the coming financial year. To reach that figure, prices across the economy would need to rise by nearly 10 per cent. But inflation was running at just 3.9 per cent as recently as January, making that assumption hard to justify, the commission said.

The concern is not just technical. If the economy turns out to be smaller than the Government is projecting, tax revenues will likely fall short of target, and the country’s debt — measured as a share of the economy — will look worse than the budget suggests. The commission warned that this could make it harder for Jamaica to meet its legal obligation to bring public debt below 60 per cent of the size of the economy, a target that has already been pushed back by two years following Hurricane Melissa.

Even on the Government’s own numbers, the commission said, that target is unlikely to be met by the new FY2029/30 deadline.

Jamaica’s debt had fallen to 60.3 per cent of gross domestic product (GDP) as recently as September last year and appeared on course to hit the target ahead of schedule. Then Hurricane Melissa struck on October 28, causing damage the Planning Institute of Jamaica (PIOJ) now puts at $1.95 trillion — more than half the country’s entire annual economic output, according to PIOJ Director General Dr Wayne Henry. That is significantly higher than the $1.5-trillion estimate that was used when the budget was put together in February.

A related problem, the commission said, is that the body set up to manage the rebuilding effort — the National Reconstruction and Resilience Authority — has not yet produced a plan. There are no project lists, no cost estimates, and no timelines. That matters because the Government’s budget assumes a strong economic rebound driven largely by reconstruction spending. Without knowing what will actually be built, when, and at what cost, the commission said it cannot properly assess whether those assumptions hold up.

That concern is reinforced by Jamaica’s track record on public investment. Between April and December last year the Government spent 37.2 per cent less on capital projects than it had budgeted. Yet the new budget projects a near doubling of such spending across the public sector.

The commission also raised a concern that goes beyond the hurricane. The public sector wage bill has grown sharply in recent years, climbing from 8.8 per cent of the economy in FY2020/21 to an estimated 13.8 per cent this year. It now takes up 56 cents of every dollar collected in taxes, compared with 36 cents four years ago. The commission is calling on the Government to reintroduce a rule that ties wage increases to economic performance, warning that without one salary costs will keep squeezing out money that could otherwise go towards roads, schools, and other infrastructure.

“Jamaica risks eating its seed corn — prioritising wages today at the expense of the capital investments required for tomorrow’s growth and climate resilience,” Fiscal Commissioner Courtney Williams said.

The commission’s assessment was not entirely negative. It said the country’s fiscal rules worked as they were designed to, allowing the Government to temporarily suspend its debt targets after the hurricane in order to spend on relief and recovery. Emergency financing arrangements also delivered about US$1 billion in immediate funds after the storm, with up to US$5.7 billion more available from international lenders, if needed.

New tax measures announced alongside the budget — including a tax on digital services and higher duties on alcohol, tobacco and sugary drinks — should bring in an additional $18 billion next financial year, the commission said, provided they are put in place on schedule.

The commission said it would revisit its assessment once the reconstruction authority publishes a detailed plan and updated damage figures are folded into the Government’s medium-term projections.

Minister of Finance and the Public Service Fayval Williams is expected to open the Budget Debate this week.

Finance Minister Fayval Williams (left) and Prime Minister Andrew Holness (right) during Budget proceedings in Parliament last week. (Photo: Garfield Robinson)