Tweet
Sunday Herald
By Durrant Pate
Senior Staff Reporter
The continued jump in interest rates and the weakening Jamaican dollar have left a hole of up to $3 billion in the budget.
Finance Minister, Audley Shaw, last week announced a raft of initiatives to plug the $15.4 billion in non-discretionary expenditure which, he said, the Jamaica Labour Party (JLP) administration inherited from the former People’s National Party (PNP) government.
However, no mention was made of plugging the hole in the budget stemming from the increased expenditure needed as a result of the increase in interest rates and the devaluation of the local currency.
This latest revelation further compounds the Bruce Goldiing-led administration’s fiscal programme, which will suffer another strain when the estimates come in of the damage caused by the recent flood rains.
Interest rates have increased by over 200 bases points over the past four weeks, moving from 12 to just over 14.34 last week, while the US dollar has been slipping from $67.37 in January this year, to $70.76 up to Friday.
The local dollar suffered the biggest devaluation with the Canadian dollar, which went up from $68.86 on Friday, coming from $55.31 at the beginning of the year.
These movements are expected to add an incremental one per cent to the country’s debt serving cost, which has increased slightly, having declined last year.
Jamaica’s debt servicing costs was reduced from $219.6 billion to $203.6 billion last year, but is set to rise to $210 billion with the increased interest and devaluation cost, along with the additional expenditure from hurricane and flood damage this year.
The final cost implication on the budget will be known when the revised Estimates of Expenditure is placed before Parliament in December.
Former Finance Minister and now Opposition Spokesman on Finance Dr. Omar Davies last week contended that there was now a reversal in the financial gains made by the PNP government in reducing interest rates to 12 per cent. He pointed to the two per cent rise in interest rate in one Government of Jamaica Debenture issue recently jumping back to a coupon rate of 14 per cent.
“If the interest rate remains at 14 per cent and a strong positive assumption is that it will remain that way, we are talking about a minimum two to three billion dollars that have to be found, which was never ever programmed,” Dr. Davies asserted.
He quipped that the JLP’s cannot blame the PNP for the increases associated with the spike in interest rate and devaluation of the Jamaican dollar, as they have been with the $15.4 billion in non-discretionary expenditure, which Minister Shaw claimed to have found in the Finance Ministry but not on the budget.
By Durrant Pate
Senior Staff Reporter
The continued jump in interest rates and the weakening Jamaican dollar have left a hole of up to $3 billion in the budget.
Finance Minister, Audley Shaw, last week announced a raft of initiatives to plug the $15.4 billion in non-discretionary expenditure which, he said, the Jamaica Labour Party (JLP) administration inherited from the former People’s National Party (PNP) government.
However, no mention was made of plugging the hole in the budget stemming from the increased expenditure needed as a result of the increase in interest rates and the devaluation of the local currency.
This latest revelation further compounds the Bruce Goldiing-led administration’s fiscal programme, which will suffer another strain when the estimates come in of the damage caused by the recent flood rains.
Interest rates have increased by over 200 bases points over the past four weeks, moving from 12 to just over 14.34 last week, while the US dollar has been slipping from $67.37 in January this year, to $70.76 up to Friday.
The local dollar suffered the biggest devaluation with the Canadian dollar, which went up from $68.86 on Friday, coming from $55.31 at the beginning of the year.
These movements are expected to add an incremental one per cent to the country’s debt serving cost, which has increased slightly, having declined last year.
Jamaica’s debt servicing costs was reduced from $219.6 billion to $203.6 billion last year, but is set to rise to $210 billion with the increased interest and devaluation cost, along with the additional expenditure from hurricane and flood damage this year.
The final cost implication on the budget will be known when the revised Estimates of Expenditure is placed before Parliament in December.
Former Finance Minister and now Opposition Spokesman on Finance Dr. Omar Davies last week contended that there was now a reversal in the financial gains made by the PNP government in reducing interest rates to 12 per cent. He pointed to the two per cent rise in interest rate in one Government of Jamaica Debenture issue recently jumping back to a coupon rate of 14 per cent.
“If the interest rate remains at 14 per cent and a strong positive assumption is that it will remain that way, we are talking about a minimum two to three billion dollars that have to be found, which was never ever programmed,” Dr. Davies asserted.
He quipped that the JLP’s cannot blame the PNP for the increases associated with the spike in interest rate and devaluation of the Jamaican dollar, as they have been with the $15.4 billion in non-discretionary expenditure, which Minister Shaw claimed to have found in the Finance Ministry but not on the budget.
Comment