2015/16 Budget Growth Inducing – Everton Mcfarlane

Chief Economist at the Ministry of Finance and Planning, Everton McFarlane, says the 2015/16 budget is a growth supporting budget.

Speaking on the Jamaica Information Service’s (JIS) Issues and Answers television programme on Sunday, February 22, Mr. McFarlane pointed to an increase in the capital expenditure as well as spending on social programmes in this year’s budget, as measures that will help to induce growth in the economy.

“Typically, a growth supporting budget (or a growth supporting fiscal adjustment), would tend to, over time, want to allocate relatively more resources to productive government expenditure,” Mr. McFarlane explained.

He said this can be seen in the shift this year to the maintenance of capital expenditures that support productivity and private investments, as well as expenditures that have greater impact over the long-term for growth and development.

Mr. McFarlane noted that when compared with previous years, the 2015/16 budget shows a reduction in allocation and expenditure on interest payments as a percentage of Gross Domestic Product (GDP) but not in nominal terms. Conversely, there is an increase in expenditure for critical programmes that directly impact the quality of public service delivery.

“Therefore, when you look at the budget, what you will see is an effort being made to ensure that the quality of the fiscal adjustment is as supportive of growth as is permitted within the general constraints of the debt,” Mr. McFarlane noted.

“So, we are paying relatively less for debt servicing and trying to allocate relatively more to those areas that are important,” he emphasised.

Mr. McFarlane said the successful completion of six International Monetary Fund (IMF) tests so far under the country’s economic reform programme, is not in vain, pointing to adjustments being made in the economy, which will mature into greater returns for the country in the long-term.

“The adjustments that have occurred, as modest as they have been, given the resource constraints, have actually shifted resources away from debt servicing and towards the social sector and capital spending,” he noted further.

He added that particular focus is being placed this year on areas that will seek to improve the quality of people’s lives, such as public and health services delivery, education and national security.

“Within the space that is created by this adjustment…, we want to be able to structure it in a way that has impact, not just in the short-term but these are areas that speak to long-term productivity” Mr. McFarlane said.

The chief economist also pointed to provisions for social programmes such as the Programme of Advancement Through Health and Education (PATH), the National School Feeding Programme and youth empowerment initiatives.

“And, there are a raft of them that have been specified in the budget from last year; expenditure on those have been maintained and have in fact increased,” Mr. McFarlane noted.

Last week the Minister of Finance and Planning, Dr. Peter Phillips, presented a $641.56 billion budget for fiscal year 2015/16, with $432.57 billion earmarked for recurrent (housekeeping) expenses and $208.98 billion for capital (development) spending.

This represents an increase of $102 billion over the revised Estimates for financial year 2014/15.