EPOC sees challenges ahead despite GOJ being on track to meet targets
Co-chair of the Economic Programme Oversight Committee (EPOC), Keith Duncan, believes the Government of Jamaica (GOJ) will face challenging times, despite being on track to meet the Quantitative Performance Targets for the GOJ’s Economic Reform Programme for end-June 2020, with the exception of the inflation target.
Inflation at the end of June stood at 6.3 per cent. This is out of the range of the Bank of Jamaica (BOJ) target, which was four to six per cent, but Duncan said this was on track to come in at 5.7 per cent at the end of July.
He said the coronavirus (COVID-19) pandemic played a significant role in hampering the government’s effort to implement the majority priority action to establish a timeline for the Economic Reform Programme.
“What I will say about these imperatives and these priority actions is that a lot of work has actually occurred in these areas and really and truly the focus has been switched by the Government of Jamaica, to dealing with the impact of the pandemic and, therefore, we can appreciate and understand why we would see some delay in these other priority actions,” Duncan said.
He stated that the year-over-year variances have revenues and grants down 40.3 billion or 20 per cent from $202 billion for the April to July period in 2019 to $161.7 billion this year, with tax revenues dropping by $35.9 billion, which is also 20 per cent.
Duncan, however, said that the targets are outperforming the first supplementary budget, which was tabled after COVID-19 started to impact the island.
According to Duncan, the year-over-year recurring expenditure of the government is $18 billion or 10 per cent above, with $197.1 billion to last year’s $179 billion.
Capital expenditure, Duncan said, which is a key indicator for Jamaica, was almost flat. He said the importance of the capital expenditure is that it shows what is left for debt servicing after the GOJ covers the recurring expenditure, which resulted in a debt reduction last year, because of primary balances.
Last year, the primary balances for April to July was $49.3 billion, which turned into a deficit of $10.8 billion for this year, This means that the debt serving costs have not been covered by the difference between the revenue and expenditure.
Duncan, however, said this was offset by the buffer of $70 billion that the GOJ carried over into the new fiscal year, which was due mainly to divestments and mergers and acquisitions. This, Duncan said, has been able to provide surplus cash for the year and allowed the island to keep the debt to GDP targets fairly on track.
He said the other indicators for the island were international reserves, with the net international reserves starting the year at $3.62 billion but dropping to $2.6 billion by the end of the period of inspection.
According to Duncan, the key assumptions driving the first supplementary budget is the gradual recovery of the GDP, which had a contraction of 5.1 per cent, inflation of 4.3 per cent and imports contraction of 32.6 per cent.
“So we saw imports coming in due to reducing economic activity locally and globally and also with tourism down we would have seen that impact because a significant amount of tourism input is from imports,” Duncan said.
The recast of the projections by the Planning Institute of Jamaica and the Bank of Jamaica means that the GOJ will have to revisit the budget, Duncan said, for the impact of the projected reduction in GDP on the overall macro and fiscal performance.
Duncan also credited the government for measures taken for COVID-19, which he said helped in increasing the ability to exceed some of the targets.