SLB chop - $81b COVID revenue hole triggers Budget cuts
Published:Thursday | May 14, 2020 | 12:00 AM
The Students’ Loan Bureau (SLB) is one of the major casualties of the new-look Budget this fiscal year as the Government has proposed to cut the nearly $3 billion ($2.978 billion) it was allocated to provide loans for students attending tertiary institutions.
Finance Minister Dr Nigel Clarke, in tabling the First Supplementary Estimates for the 2020-2021 fiscal year, noted that the COVID-19 pandemic is having a devastating economic impact on the world economy. He said that despite the cut in the allocation to the SLB, the entity will still be in a position to fulfil its mandate this fiscal year.
“The Students’ Loan Bureau has $8 billion in investments that can be utilised to provide student loans for all applicants,” he said, adding that grants from central government to the SLB will resume in 2021-22.
Clarke said programmed central government expenses have been cut from $853.468 billion to $838.159 billion. The finance minister yesterday announced big cuts in the Budget on the back of a steep decline in revenues because of the coronavirus, which causes COVID-19. The largest overall cut was to the capital budget. It is being slashed by 38 per cent from $76.2 billion to $46.1 billion.
He said the Government is forecasting a decline in GDP by 5.1 per cent. Revenues are projected to decline 18 per cent for a total of $81 billion. This is the largest portion of the $120-billion COVID-19 shock to the Jamaican economy, according to Clarke. The rest of the huge bill comprises a total of $34 billion in COVID-19 non-debt and debt expenditure and a net $5 billion adverse adjustment in other flows, particularly debt servicing, Clarke reported.
Public bodies such as the National Water Commission (NWC), the Urban Development Corporation, the Port Security Corps, and the Bureau of Standards have been earmarked for $3 billion in new expenditure. Clarke said the entities have been severely impacted by the crisis. The NWC, for example, has experienced a large revenue decline, Clarke said.
The finance minister said, too, that debt-servicing cost is set to climb by $7.9 billion from changes in the exchange rate amid the coronavirus outbreak.
Meanwhile, the finance minister said that it is unlikely that the debt-to-GDP target of 60 per cent will be met by 2025-26. He said that the Government, therefore, intends to revise the target date to 2027-28.
“As a society, we have reckoned with the unsustainability of high debt and have resolved to reduce our debt. Indeed, we did the impossible in reducing our debt from 145 per cent of GDP and were forecast to achieve a debt-to-GDP ratio of approximately 84 per cent by March 2021 before this COVID pandemic by deploying our cash resources harvested from divestments and other public-policy measures.
“However, we have encountered the most threatening pandemic in 100 years and the most severe global economic recession in 90 years. It is for that reason, and that reason only, that this revision will be necessary,” Clarke said.