Increase in Budget will ease burden next Fiscal Year – Phillips

Finance and Planning Minister, Hon.  Dr. Peter Phillips, said that the $11.2 billion added to the budget will allow for a pay down on arrears and ease the burden on the government of carrying over outstanding amounts to the next fiscal year.

He was explaining the need for a third Supplementary Estimates, reflecting the increased spending for the financial year, in the House of Representatives on March 21, just before members voted to approve the move.

Minister Phillips said that arising out of discussions with the International Monetary Fund (IMF) technical team, which was in the island recently, it was agreed that the government would address arrears on the accounts in this fiscal year, allowing the government to meet its obligations to not have a buildup of outstanding amounts beyond 90 days.

He said this would also allow for a clearer assessment of the state of public finances, and provide more “real” space during the next fiscal year, to take on new expenditure, rather than focusing on past due accounts.

 “The effect of all of this is that our fiscal outturn for this current budget is going to be less on the primary balance. Instead of 3.6 per cent, we are going to be having an outturn of about 3 per cent, which is approximately two per cent below what was programmed in the government’s medium-term programme,” he stated.

Overall, the primary surplus will be reduced by some 0.9 per cent of Gross Domestic Product (GDP). “Dealing with this situation now, gives the government room to manouvere as it takes the necessary steps to meet the primary target for fiscal year 2012/2013” Minister Phillips stated.

The new budget reflects total government expenditure of $536.4 billion for the rest of the fiscal year from the previous $525.2 billion, which was approved in the Second Supplementary Estimates on March 6.

The addition to the budget includes provision of US$58 million to clear arrears relating to Clarendon Alumina Partners (CAP), which the government jointly owns with Alcoa. The discussions relating to those arrears, Minister Phillips said, were not concluded in time to be included in the Second Supplementary Estimates.

There is also $505 million for Cricket World Cup 2007 arbitration award between Jamaica Cricket 2007 Limited and Ashtrom Building systems for the Sabina Park development;  some $1.9 billion  for the Jamaica Development Infrastructure Project (JDIP), which Dr. Phillips explains represents the balance of the government’s total obligations as of March 31, 2012.

“Addressing all of the outstanding financial issues surrounding JDIP in the supplementary estimates will enable more resources to be provided in fiscal year 2012/2013, and so allow for the projects to continue, but it will also mean that contractors will be in a position to restart their work more immediately and have the road repairs that were originally contemplated, get underway,” he outlined.

There is also a provision of $231 million to "recognise" an expenditure, which was disbursed by the Caribbean Development Bank to the Development Bank of Jamaica in 2009/2010, but for which no corresponding provision was made in the estimates of expenditure. This is for an agricultural support project, which provides loans to approved financial institutions for on-lending to small scale agricultural entrepreneurs. “No funds are being provided, because expenditure has already taken place,” he clarified.

A sum of $253.9 million has also been allocated to the Bogue Road Rehabilitation project, representing the balance due to the contractor based on works certified by the National Works Agency (NWA).

On the recurrent side, there is an additional $3.23 billion to cover electricity arrears ($1.9 billion), of which some $1.24 billion relates to street lights, and $673 million involves central government ministries, departments and agencies.

Dr. Phillips informed that the total payment due for street lights at the last billing in February was $1.57 billion, of which $329 million will be paid from funds reallocated from the Ministry’s contingency fund in the Second Supplementary Estimates, and the balance met from the provision in the Third Supplementary Estimates.

“The effect of this payment means that no arrears for street lights will be carried forward into financial year 2012/2013. This is a major accomplishment, when compared to what obtained in previous years,” he stated.

Other arrears include $297. 2 million for water, including $239.7 million to clear arrears for public water provided through standpipes. The remaining $57.5 million is for public health institutions.

There are also recurrent arrears of $41.04 billion, $400 million of which relates to the Jamaica Defence Force (JDF) for expenses such as petrol, training, drugs, food and drink, and janitorial services.  Some $350 million is for other suppliers of drugs and medical supplies, including medical gases provided by private suppliers, and $275 million for outstanding judgment debts.

A provision of $50 million for drought response has also been included in the Estimates. This will cover trucking costs to affected communities in the parish of

St. Mary, Hanover, Clarendon, Westmoreland, St. Thomas, and Trelawny. Of the sum, $40 million was reallocated from the balance remaining on the budget of the Jamaica Economical Housing project.

The Finance Minister said the government is committed to “allowing communities across the island to continue to benefit from government’s operations…we are committed to protecting the vulnerable and most disadvantaged even as we are committed to fiscal prudence”.

By Alphea Saunders, JIS Senior Reporter