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Did Omar Davies 'run wid it' again? - Off-budget spending busts deficit target in four months
published: Wednesday | September 19, 2007
Keith Collister, Business Writer
Omar Davies, former Minister of Finance and Planning. -Rudolph Brown/Chief Photographer
Sources close to the Ministry of Finance say that the eventual central government budget overrun, meaning expenditures that were not included in Budget, could reach $18 billion or more.
It wasn't immediately clear how much of this figure reflects past arrears that are only now being accounted for.
But if correct, the additional spend for the first four months of the year is already roughly equivalent to the full deficit target for the entire fiscal year of just over $35 billion.
The ministry has officially reported a deficit to July of $16.6 billion. The additional $18 billion would push the total spend to $34.6 billion above income from taxes and other revenues.
The $16.62 billion deficit reported by the ministry ahead of the election would have been an impressive - if it had been true - since the figure was more than $3.24 billion less than the $19.86 billion deficit target for the April to July period.
Previous news reports have suggested that the true budget deficit was at least $15.5 billion higher, comprising $12.4 billion in recurrent expenditure (reflecting mainly additional wage, pension and other social expenditures such as health that were apparently not budgeted for in April) and $3 billion in capital expenditures of which less than $600 million or one fifth appears to be related to Hurricane Dean.
But as the administration takes office, sources additional off-budget spending is being unearthed.
The $18 billion fiscal overrun only reflects central government spending, and not the losses of the public bodies, such as the Sugar Corporation of Jamaica, Air Jamaica, and Jamaica Urban Transit Company.
The losses of the public bodies have in the past led to the overall government debt increasing significantly faster than the central government deficit.
As a point of comparison, the last fiscal year ending March 2007, the national debt increased by just under $76 billion from $847.3 billion to $923.1 billion.
The increase was twice the central government budget deficit of $37.5 billion, which was itself more than twice the originally budgeted fiscal deficit of $18.4 billion for 2006/2007.
At the end of June the total debt at $920 billion was slightly less than March's outturn of $923 billion. However, in the debt figures for July released only one month later on September 5, immediately after the September 3 election, the debt jumped to $969 billion, reflecting a $46 billion increase since March or nearly three times the official $16.62 billion deficit over the period.
Budget was on target
The July debt figure suggests that former Finance Minister Omar Davies' budget was on target to exceed the trillion dollar government debt mark much earlier than even the most pessimistic analysts had anticipated.
If current trends had continued, he would have blown through the 4.5 per cent of Gross Domestic Product (GDP) for an annual deficit figure of nearly 7.0 per cent, fast approaching the level of fiscal deficit as a percentage of GDP of around 8.0 per cent experienced in the so called "run wid it" budget of March 2003.
Based on current trends, 2007/08 is likely to be the third consecutive year that the fiscal deficit exceeded the previous year's shortfalls, reversing the progress made in reducing the fiscal deficit in both absolute terms and as a percentage of GDP between 2003/04 and 2005/06.
On the upside, tax revenues are slightly above target.
Asked to comment on the current fiscal situation, Minister Don Wehby said: "Macroeconomic stability is our number one priority at the Ministry of Finance, particularly the issue of fiscal discipline."
keithcollister@cwjamaica.com
published: Wednesday | September 19, 2007
Keith Collister, Business Writer
Omar Davies, former Minister of Finance and Planning. -Rudolph Brown/Chief Photographer
Sources close to the Ministry of Finance say that the eventual central government budget overrun, meaning expenditures that were not included in Budget, could reach $18 billion or more.
It wasn't immediately clear how much of this figure reflects past arrears that are only now being accounted for.
But if correct, the additional spend for the first four months of the year is already roughly equivalent to the full deficit target for the entire fiscal year of just over $35 billion.
The ministry has officially reported a deficit to July of $16.6 billion. The additional $18 billion would push the total spend to $34.6 billion above income from taxes and other revenues.
The $16.62 billion deficit reported by the ministry ahead of the election would have been an impressive - if it had been true - since the figure was more than $3.24 billion less than the $19.86 billion deficit target for the April to July period.
Previous news reports have suggested that the true budget deficit was at least $15.5 billion higher, comprising $12.4 billion in recurrent expenditure (reflecting mainly additional wage, pension and other social expenditures such as health that were apparently not budgeted for in April) and $3 billion in capital expenditures of which less than $600 million or one fifth appears to be related to Hurricane Dean.
But as the administration takes office, sources additional off-budget spending is being unearthed.
The $18 billion fiscal overrun only reflects central government spending, and not the losses of the public bodies, such as the Sugar Corporation of Jamaica, Air Jamaica, and Jamaica Urban Transit Company.
The losses of the public bodies have in the past led to the overall government debt increasing significantly faster than the central government deficit.
As a point of comparison, the last fiscal year ending March 2007, the national debt increased by just under $76 billion from $847.3 billion to $923.1 billion.
The increase was twice the central government budget deficit of $37.5 billion, which was itself more than twice the originally budgeted fiscal deficit of $18.4 billion for 2006/2007.
At the end of June the total debt at $920 billion was slightly less than March's outturn of $923 billion. However, in the debt figures for July released only one month later on September 5, immediately after the September 3 election, the debt jumped to $969 billion, reflecting a $46 billion increase since March or nearly three times the official $16.62 billion deficit over the period.
Budget was on target
The July debt figure suggests that former Finance Minister Omar Davies' budget was on target to exceed the trillion dollar government debt mark much earlier than even the most pessimistic analysts had anticipated.
If current trends had continued, he would have blown through the 4.5 per cent of Gross Domestic Product (GDP) for an annual deficit figure of nearly 7.0 per cent, fast approaching the level of fiscal deficit as a percentage of GDP of around 8.0 per cent experienced in the so called "run wid it" budget of March 2003.
Based on current trends, 2007/08 is likely to be the third consecutive year that the fiscal deficit exceeded the previous year's shortfalls, reversing the progress made in reducing the fiscal deficit in both absolute terms and as a percentage of GDP between 2003/04 and 2005/06.
On the upside, tax revenues are slightly above target.
Asked to comment on the current fiscal situation, Minister Don Wehby said: "Macroeconomic stability is our number one priority at the Ministry of Finance, particularly the issue of fiscal discipline."
keithcollister@cwjamaica.com
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