Primary balance teeters in August
Published:Friday | October 11, 2013 | 12:00 AM
A reduction in revenue collections during August led to a marginal one per cent or J$260 million shortfall in the primary balance of the central government, the Economic Programme Oversight Committee (EPOC) reported on Tuesday.
At the same time, members have concluded that the International Monetary Fund (IMF) programme continue to be well managed despite short-term challenges that need to be addressed.
In the monthly communiqué issued by non-public sector members on Tuesday following its meeting last Friday, EPOC said there were no intra-quarter quantitative performance criteria to be reported on under the IMF programme.
An assessment of the Government's budget outcomes for August indicates that the primary balance rose by only J$62.7 million to J$25.1 billion, leaving it one per cent or J$261 million short of the target.
The small improvement over July was partially due to a reduction in collections of special consumption tax and general consumption tax, particularly on imports.
additional payments
In addition, EPOC said, there was increased expenditure of J$2.6 billion on capital programmes and J$1 billion on wages and salaries, the latter arising from a planned one-time payment to public-sector workers.
"Of significance, too, was the monthend falling on a weekend and cutting off a day of tax collection," the communiqué said.
The Government collected J$132 billion of taxes fiscal year to August, which was close to J$6 billion shy of the target.
The fiscal deficit at J$17.8 billion was better than budgeted by J$4.9 billion, reflecting the "continued tight management of expenses in the public sector," the committee said.
The end-September target for the net international reserves (NIR) exceeded the budgeted US$761 million by US$149 million.
The Bank of Jamaica reports that the end-September NIR stands at US$910.14 million.
As for the primary surplus: "We await the September numbers which, we are advised, will put us on track to achieve the IMF targeted primary surplus of J$38.2 billion," EPOC said.
The IMF agreement requires Jamaica to hit a 7.5 per cent primary balance annually, which critics have said is too onerous a condition.
structural benchmarks
For the September quarter, the programme required that the Government achieve three structural benchmarks - presenting to IMF staff a conceptual proposal for the design of a fiscal rule, and the tabling of the charities bill and the omnibus tax bill in Parliament.
The Government met those requirements except for the tabling of the bill called the Fiscal Incentives Act (previously referred to as the Omnibus Tax Incentives Act) based on an agreement with the IMF that the tabling would occur in October. The December 2013 date for passage of this bill remains unchanged.
A primary challenge, the EPOC said, is the very tight Jamaican dollar liquidity in the financial sector, which is contributing to a rise in interest rates and restraining banks from extending credit as they would like.
"The expansion of credit to the private sector, particularly to medium and small businesses, is a key component of the economic recovery process," the committee said.
Access to credit, along with a more competitive exchange rate that encourages exports and import-replacement production is expected to generate employment and dampen the negative effects of the programme - lay-offs and inflation - being felt by the ordinary Jamaican, the communiqué said.
EPOC urged the Bank of Jamaica to continue to look at measures to ease the tightness without doing harm to the overall monetary policy.
EPOC is co-chaired by Sagicor Jamaica President Richard Byles and central bank governor Brian Wynter.