1.9% jump due to rising local interest rates

Durrant Pate/Contributor

Jamaica’s treasury is feeling the pinch from rising interest rates locally with planned public debt expenditure for the current fiscal rising by 1.9 per cent to J$313.4 billion.

Financial Secretary Darlene Morrison said earlier this week that the increase in the national debt expenditure is mainly attributable to an increase of J$6.5 billion or 3.6 per cent in domestic debt expenditure, which is marginally offset by a J$0.5 billion (0.4%) reduction in external debt expenditure. The higher domestic debt servicing cost is mainly due to higher-than-anticipated interest rates.

The debt service schedule for the fiscal year is comprised of amortization payments of J$164.2 billion and interest costs of J$149.2 billion. Morrison briefed Parliament on Jamaica’s financial operations during the first quarter (April-July 2022) in which the country generated a fiscal deficit of J$0.3 billion, which is 98.7 per cent better than the programmed deficit of J$23.3 billion.

A fiscal deficit is the shortfall in a government’s income compared with its spending. The primary surplus, which is the excess of government revenues over non-interest came to J$44.7 billion, which is J$23.7 billion better than targeted.

Contributors to better than expected fiscal surplus

This favourable fiscal performance was driven, largely, by the strong performance of tax revenue. Revenue & Grants were ahead of budget by J$21.7 billion or 10.1 per cent. This positive performance was driven mainly by Tax Revenue which was J$18.7 billion better than target and J$42.2 billion above collections for the corresponding period of the 2021-22 fiscal year.

The main contributor to the above-programme performance was International Trade at J$9.9 billion higher-than-budget. Income and Profit taxes also performed well at J$6.5 billion and Production and Consumption taxes contributed J$2.3 billion to the over performance.

In giving testimony before a parliamentary financial committee, Morrison reported that Non-Tax Revenues at J$15.5 billion also contributed positively to the surplus with the receipts exceeding budget by $3.3 billion. Capital Revenue and Grants however were lower-than-budget while Bauxite Levy was essentially in line with budget.

Expenditure (net of amortization) totalled J$236.4 billion, which is 0.6 per cent less than programmed and comprised Recurrent Expenditure of J$220.0 billion and Capital Expenditure of J$16.4 billion. Recurrent Expenditure was J$0.6 billion (or 0.3%) lower than budgeted, reflecting lower than planned Programme spending (by 0.7%) and Compensation of Employees (by 0.8%).

Recovery in Self-Financing Public Bodies

Jamaica’s Self-Financing Public Bodies (SFPBs) continue to demonstrate recovery from the negative impact of the COVID-19 pandemic on their operations, realizing an overall balance surplus of J$16.7 billion for the April to June 2022 period. This was an improvement of J$13.3 billion relative to the target.

The main contributors to the over performance were National Insurance Fund (by J$4.0 billion); Jamaica Deposit Insurance Corporation, (by J$2.0 billion) and Petrojam Limited (by $1.7 billion.) For the 2022-23 financial year, the SFPBs are projected to achieve an overall balance surplus of J$11.7 billion which is in line with the original budget.

This is due to potential negative performances against budget by some entities countering the positive performance of others. The Financial Secretary also notified Parliament of other notable developments in the local financial circle.

These include the ongoing discussions regarding restructuring of public sector compensation. It is anticipated that these discussions will be concluded shortly facilitating implementation of a new compensation structure for the public sector. She also spoke about the pending Fiscal Commission.

A recruitment team was appointed to execute the process of interviewing and identifying Jamaica’s first Fiscal Commissioner. The post was advertised in August 2022 and shortlisted candidates have been interviewed. A recommendation for appointment is expected in the near future.