Jamaica’s ratio of outstanding public debt to gross domestic product (GDP) fell to 120.2% in March this year, better than the 125.1% forecast under the program. economic support with the International Monetary Fund (IMF), according to data from the Ministry of Finance and Civil Service.
This is also a considerable improvement from 136.6% at the end of March 2015, reported Friday Richard Byles, co-chair of the Economic Program Oversight Committee (EPOC).
“So that puts us in a pretty strong position to continue reducing the debt-to-GDP ratio in the future,” Byles said during a press briefing at Sagicor Life, New Kingston, where he issued the 39th release. the non-public sectoral members of EPOC.
The March 2016 debt-to-GDP ratio result was negatively influenced by the depreciation of the Jamaican dollar against the US dollar, which had an impact on debt as 75% is denominated in foreign currencies, a t -he declares.
It was also negatively influenced by an inflation rate of -1.3% in the January-March quarter, which would have reduced the size of nominal GDP, the EPOC co-chair said.
Byles said the positive side outweighed the negative influences was the PetroCaribe transaction, which reduced the debt-to-GDP ratio by about 10 percent.
However, “we cannot become complacent about this debt-to-GDP ratio target” because “120%, as improved as it is for us in Jamaica, is double the level that economists say countries should not overshoot, ”he said. added.
Byles also reported that for the quarter through June, government spending was $ 122.7 billion, 8.1 percent lower than expected.
Recurring spending was $ 7.2 billion or 8.1 percent below budget, while capital spending was $ 3.7 billion or 27.5 percent below budget.
Combined with tax revenues, which stood at $ 108.3 billion against a target of $ 100.5 billion, it produced a primary surplus of $ 26.8 billion, or 15.8 billion more than the target of $ 11 billion.
However, Byles noted that, as was the case in the two months leading up to June, the under-spending was largely due to the late approval of the 2016/17 budget, but “I expect that. that during the year we were catching up with the budget on the expenditure side.
On the other hand, according to the statement, the tax package announced by the government has been implemented and when the data for July is released, “we expect to see the impact of the increase in the tax threshold on the income of natural persons on PAYE (pay-as -you-earn) taxes. “
Byles said there would likely be a decrease of $ 1.3 billion per month in PAYE collections due to the tax threshold adjustment.
Net international reserves at the end of the quarter stood at US $ 2.28 billion, against an IMF target of US $ 1.81 billion.
Data released by the Jamaica Institute of Statistics shows inflation for June was 0.9%, “the highest we’ve had since July of last year,” Byles said.
Inflation was largely driven by electricity, up 4%, and transportation, up 2.1%.
He said the upward movement in electricity and transportation was mainly due to global oil prices which increased during the quarter, the special consumption tax (SCT) which was imposed on heavy fuel oil. intended for the Jamaican utility and CTS of $ 7 per liter that was put on fuel.
“That’s a pretty high number,” Byles said of the inflation rate, noting that the inflation rate since the start of the calendar year is 0.6% negative and the 12-month rolling rate. 2.5%.
Preliminary balance of payments data from the Bank of Jamaica shows that the current account deficit recorded a surplus of US $ 44.5 million for the quarter ended March 2016.
The result reflects a significant improvement of US $ 104.7 million over the corresponding quarter of 2015 and is largely attributable to a higher US $ 55.8 million surplus from tourism. In the goods sub-account, the deficit narrowed by US $ 30.9 million, largely due to lower imports, reflecting lower spending on fuel and some consumer goods.
Byles said that despite the stable fundamentals of the economy, Jamaica still faces challenges.
Among these is the need to embark on this aspect of the public sector transformation agenda in order to reduce the current ratio of wages to GDP from 10.3% to 9% by 2018/19.
Byles said it would result in annual savings of $ 20 billion, which is absolutely necessary for infrastructure investments.
Another challenge is to finance the further reduction of the personal income tax threshold, which is expected to cost the government an additional $ 16 billion as of April 2017, “without disrupting the generation of primary balance surpluses and without introducing draconian tax measures that harm business confidence. or impact too much on consumer confidence and purchasing power, ”he said.