National budget for 2020-2021 cut by $3.5 billion with many allocations pushed to 2021-2022 budget year

Finance Minister, Dr. Nigel Clarke has detailed the shifts in budgetary allocations, which have resulted in the national budget for 2020-2021 being cut by $3.5 billion from the programmed $853.83 billion to $850.24 billion.

The adjustments were announced in Parliament on Tuesday (January 19), as Clarke tabled the third Supplementary Estimates for 2020-2021 in Parliament.

He told Members of Parliament that the Third Supplementary Estimate proposes a net reduction in expenditure of $3.5 billion after providing for an increase in the budget to the Ministry of Health. He explained that the $3.5-billion reduction has been contained within the non debt expenditure budget with approximately $2.0 billion under recurrent [programmes and $1.5-billion under capital with no adjustments to the public debt expenditure.

According to the finance minister, “the adjustment on capital primarily relates to moving some payments due at the end of March 2021 to the new financial year, such as the next installment payment of $747 million on the 30 fire truck pumpers previously programmed for March 31, 2021. This along with the final payment of US$7.1 million due in May 2021, will now be reflected in the budget for FY 2021-22.”

He conceded that the COVID-19 pandemic has significantly curtailed the ability of some ministries, departments and agencies (MDAs) to complete some of the programmed activities including the recruitment of staff and the execution of project activities. 

Clarke added that the available space has either been redirected to other MDAs to meet critical areas of operations, for example in the Ministry of Health and Wellness and the police department.

Some programmes cut from budget

The finance minister acknowledged that some programme activities have been cut from the budget while other adjustments reflect the finalisation of subject assignments, which took place in September 2020. He told the House of Representatives that more details would be provided on the opening of the debate on the Third Supplementary Estimates next week.

“The Government remains committed to implementing the required adjustments over the next three years to ensure Jamaica gets back on track to achieve its legislated targets,” Clarke stated.

Based on the current forecast for gross domestic product (GDP), Clarke disclosed that it is estimated that Central Government revenue will be $8.6 billion lower than projected for the Second Supplementary Estimates.

Given this expectation and taking into account the critical expenditures that are still required, particularly in relation to elements of the Ministry of Health’s COVID-19 response, the Third Supplementary Estimates proposes a net reduction in expenditure of $3.5 billion after providing for an increase in the budget to the Ministry of Health.

COVID erases gains made in revenue collections

He stated that, for the seven months to October 2020, revenues were slightly ahead of budget.

“However, by the end of December that margin was erased, and with great effort by the revenue administration team, revenues were on target for the nine months period ending December 2020,” the Finance Minister said.

He pointed out that, after approval of the second supplementary budget in September 2020, the forecast of GDP contraction for fiscal year 2020-21 was revised from a decline of 7.9 per cent to a decline of 11.6 per cent. He said the expectation is that revenues for this last quarter will be affected, arguing that the significant contraction in the economy translated to lower revenue than estimated for the Second Supplementary Estimates. Clarke remarked that the COVID-19 pandemic continues to impact