Debt target pushed back by dollar slideWednesday, April 24, 2013
JAMAICA'S public debt stood at $1.81 trillion (134.1 per cent of GDP) at the end of March.
It increased from $1.66 trillion (131.5 per cent of GDP) a year before, due largely to financing of the fiscal deficit, which totalled over $72 billion.
But 46 per cent of the increase in the debt was due to the depreciation of the Jamaica dollar.
What's more, the devaluation has thrown out projections that would see the debt to GDP ratio drop to 100 per cent within three years.
The Government now expects it to end the 2015/16 fiscal year at 112 per cent of GDP.
"The lower than anticipated growth rate has also contributed to the slower than programmed adjustment," said the Fiscal Policy Paper for 2013/14. "Given the likelihood that the Debt to GDP target of no more than 100 per cent by FY2015/16 may not be achieved, the GOJ will pay very close attention to fiscal and debt developments trhoughout FY 2013/14 and the medium term."
The Government also plans to seek an amendment to the FAA Act to revise the timeline to achieve the desired debt ceiling.
Controlling the public debt (through prudent fiscal management) is critical to 'crowding in' the private sector to spur economic growth and enable businesses to be more viable, through more affordable financing costs.
So the faster Government can get its debt down, the quicker Jamaica will be able to attain growth.
In the meantime, the Government still plans to balance its budget by 2016.
To achieve this, the Government has to see its revenue grow by 43 per cent over the next three years, while holding down growth in expenditure to 23 per cent over the three-year period.
Most of the revenue growth is expected this year, when the Government expects to earn 18 per cent more revenue than last year.
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