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Editorial | What’s the Budget telling us?

Published:Monday | February 18, 2019 | 12:00 AM

There hasn’t been sufficient time for a deconstruction, and deep analysis, of the Budget Finance Minister Dr Nigel Clarke tabled in Parliament on Thursday, to clearly determine the philosophy that underpins its numbers and what, if any, role it might play in inducing growth beyond the meagre amounts of recent years.

However, Dr Clarke may be on potentially good grounds in arguing that the focus should not be only on how much is to be spent in the new fiscal year, but to where the money is allocated.In nominal terms, the J$803.2 billion the Government projects to spend in 2019-20 represents an increase of less than one per cent, compared to the previous fiscal year.

But with inflation – notwithstanding that prices have moved slowly – likely to be under three per cent for the fiscal year, Dr Clarke’s Budget, in real terms, is in negative territory.In such a circumstance, especially in a situation where debt servicing accounts for the more than a third of public expenditure, and with public sector consuming nearly 70 per cent of the Budget, the Government has little room to manoeuvre.

Any cutback in expenditure, whether in real or nominal terms, has a real effect.So, the concern, in this case, would be that the Government would be forced to spend less on the kinds of things, such infrastructure, which help to induce growth.

Except that Dr Clarke told legislators that last year’s Budget contained around J$13 billion of one-off expenditures that don’t recur in this fiscal year’s estimates.For instance, the administration cleared J$7.1 billion in arrears to the light and power provider, Jamaica Public Service Company, as well as J$1 billion owed to the National Health Fund.Another J$2.5 billion went to compensation to induce public-sector employees to early retirement, as part of a reform project, one of whose objectives is to lower the wage bill to at least nine per cent of gross domestic product (GDP). It is now above 10 per cent. A further J$2.6 billion went towards clearing miscellaneous arrears.The implication, therefore, is that this J$13 billion would have been allocated to other areas of expenditure.

Theoretically, the additional J$7.5 billion in capital spending allocated to the police and military, to help enhance the country’s security and crime-fighting capacities, could have been afforded because of the absence of those one-off payments from last year.In the same vein, the remaining five and a half billion dollars could have been shared across ministries, accounting, say, for the additional two-and a half billion dollars that went for spending on education.

Still have questions

There are a number of issues that have not been adequately explained, which ought to be addressed by Dr Clarke, and other ministers, before we can be sanguine about the sustainability of the tact we assume the finance minister has taken in this Budget.First, the minister must say whether last year’s one-off payments represented a full clearance of all government arrears, including tax refunds owed to firms and individuals, warrants to suppliers, as well as sums outstanding to the National Housing Trust on behalf of public-sector employees.The point is that the public doesn’t want to be blind-sided by other so-called one-off payments in the next fiscal year, and in supplementary estimates during this one, while these debts remain hidden because of the Government’s accounting system of cash accrual.Further, it is imperative that the administration declare the reasons for the J$11 billion or 38 per cent slash in proposed capital spending by the Ministry of Economic Growth and Job Creation, the ministry agency created by Prime Minister Andrew Holness to be the fulcrum of his Government’s drive for GDP expansion.That cut represents roughly 85 per cent of the value of the one-off payments of fiscal year 2018 – and in what we assumed to be a very critical agency.