The House of Representatives on Wednesday (May 27), approved amendments to the Financial Audit and Administration (FAA) Act to postpone Jamaica’s target of reducing debt to gross domestic product (GDP) to 60 per cent, by two years.
The legislation will facilitate the extension of the timeline from March 31, 2026 to March 31, 2028.
In his address, Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, noted that the coronavirus (COVID-19) pandemic has caused severe disruption to global and domestic economic activities.
He pointed out that arising from these disruptions, Jamaica’s real GDP for financial year 2020/21 is forecast to contract by 5.1 per cent, compared to an expansion of 1.1 per cent that informed the approved Estimates of Expenditure tabled in February.
“The fallout in real economic activity will adversely impact the public sector’s revenue stream, thereby necessitating sharp reorientation of public expenditure. At the same time, the Government must and has been responding swiftly and decisively to effectively mitigate the impact of the pandemic,” Dr. Clarke said.
He noted that within this context, expenditure is required in unprogrammed “areas that we hadn’t planned to spend on before”.
“COVID-19-related expenditure is estimated to be over $34 billion… that’s tabled in the Supplementary Estimates and that includes the COVID Allocation of Resources for Employees (CARE) Programme, health expenditures and other expenditures,” Dr. Clarke stated.
He noted that given the unprecedented fiscal burden posed by the pandemic, the Government will require more time to reduce the public debt to 60 per cent of GDP.
“This has received the endorsement of the International Monetary Fund, and within the context of that, we have decided to extend the target date by two years from March 31, 2026 to March 31, 2028,” the Minister said.
The legislation also amends the conditions under which the suspension of the fiscal rules can be achieved.
Currently, the law provides for the suspension of compliance under specified circumstances, such as a period of public disaster, a severe economic contraction, a public emergency, or financial sector crisis.
Dr. Clarke explained that given that the current situation has been triggered by a heath-related situation, a decision has been taken to include among the conditions that trigger suspension of the fiscal rules – a declaration of a disaster area or threatened area under section 26 of the Disaster Risk Management Act, and the making of an Order under section 16 of the Public Health Act.