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The Government has tabled a National Budget of $830 billion for the upcoming 2021-2022 fiscal year, representing an expenditure cut of $20 billion off the current $850-billion expenditure budget.

However, Finance Minister Dr Nigel Clarke, who tabled the Budget in Parliament yesterday (February 18), is adamant that there is no budget cut but lower debt service costs and lower volume of loans to public bodies.

In breaking down the 2021-2022 National Budget, debt service cost has been booked at $272.2 billion with recurrent programme expenditure amounting to $247.8 billion, public sector wages of $239.2 billion, capital expenditure of $54.2 billion and loans to public bodies of $17.3 billion.

Public sector salaries and capital expenditure are all higher in allocations in the upcoming budget compared to the current budgeted amounts for 2020-2021. In outlining the budget details, Clarke pointed out that on the revenue side there is a one-off $33-billion dividend from the Bank of Jamaica, which the national treasury expects to receive in the first week of April.

Reaping dividends from profitable BOJ

“Rarely are the fruits of right and appropriate policy as powerfully evident, in as short a time period,” the finance minister boasted.

Clarke pointed out that after a long period of BOJ losses, low profits and high profit volatility, including a loss of $6.8 billion in 2017, the Central Bank made a profit of $9.1 billion in 2018, $15.8 billion in 2019 and $9.9 billion in 2020.

According to Clarke, “this reversal of fortunes of the BOJ resulted from the BOJ modernisation exercise and the deliberate shift in monetary policy towards inflation targeting, which began in earnest in 2018, and away from previous policy where exchange rate preoccupation biased policy towards excessive interventions, which ultimately have a hidden and non-transparent fiscal cost.”

He added: “This policy shift also paved the way for 10 consecutive reductions in the policy interest rate since 2018 all the way to 0.5 per cent or just above zero, and a large expansion in private sector credit since then.”

The SERVE Jamaica Programme

The one-off BOJ dividend of $33 billion will facilitate a $60-billion Social and Economic Recovery and Vaccine Programme for Jamaica (SERVE) The $60 billion SERVE Jamaica Programme will consist of the following elements:

• $10.5 billion in special resources for the Ministry of Health including $6 billion for vaccines.
• $1 billion for PPE’s.
• $1 billion for drugs and reagents.
• $2 billion for regional health authorities and
• $500 million for additional COVID-related expenditure – extra cleaning, catering, and security.

Based on current prices and supply, the finance minister advised Parliament that the Government is making provisions to be able to finance the procurement of, and completion of the coronavirus vaccination of two million Jamaicans (double dose or single dose depending on the specific vaccine requirements).

“Madam Speaker, the SERVE Jamaica Program will provide the foundation of our economic recovery beginning in the upcoming fiscal year,” Clarke said.

“It will finance the procurement of the vaccines required to keep us safe and healthy and that are essential to our social and economic recovery. It will finance record spend on infrastructure to drive jobs and economic activity, improve productivity and strengthen resilience.”

 $31.1-billion infrastructure programme to drive jobs and economic activity

The finance minister also spoke about a $31.1-billion infrastructure programme to drive jobs and economic activity, improve productivity and strengthen resilience consisting of:

• $17.7 billion South Coast Highway. The highway is linked to a loan.
• $8 billion special public investment infrastructure program to improve productivity and increase resilience with the installation of drains, widening and dualisation of major thoroughfares, construction of sidewalks etc.
• $3.7 billion in secondary roads, repairing roads across Jamaica.
• $1.2 billion for the Montego Bay Bypass.
• $0.5 billion for construction of new police divisional headquarters in Westmoreland and new forensic pathology suite. This will be the largest programmed allocation to physical infrastructure tabled by any government in the budget.

 This will be complemented by:

• $5 billion in targeted financing for businesses affected by the pandemic.
• $1.7 billion for rural farm roads and productivity incentives to boost agriculture.
• $1.8 billion to expand WiFi and broadband in schools and communities, in particular in rural areas.
• $8.1 billion in targeted social support above and beyond what is usually provided which will be targeted to the vulnerable and those who have fallen on hard times as a result of the Covid pandemic. Six billion dollars of this amount is captured under the Ministry of Finance and the Public Service.
• $0.7 billion to the UDC to complete construction of close Harbour beach park and other activities.
• $0.8 billion to other MDAs.