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Jamaica has to stop borrowing to fund its annual budget deficits, Minister without Portfolio in the Ministry of Finance and the Public Service Senator the Hon. Don Wehby, told the Senate on Friday (May 15).
“We have reached a stage in our history, where the continuation of funding deficits by borrowing or printing money must stop. We must move to a position where our revenue and expenses are equal, meaning that we have to stop the borrowing,” Senator Wehby said.
He was piloting the Appropriation Bill, giving approval to the Government’s estimated expenditure of $555 billion for the financial year 2009/10.
Senator Wehby explained that the budget reflected an expenditure of $404.6 billion and amortisation (debt principal) payments of $150.3 billion.
He stated that, as in previous years, debt servicing accounted for the largest portion of the budget, with 55.7 percent included to service debt.
He also mentioned that the targeted fiscal deficit for the financial year 2009/10 is 5.5 percent of Gross Domestic Product (GDP), or $65.3 billion which, given the programmed expenditure, requires revenue and grants of $339.2 billion.
“In terms of the recurrent expenditure, the overall recurrent expenditure increased from $310.15 in fiscal year 2008/09, to $363.7 billion in fiscal year 2009/10, representing an increase of $53.6 billion, or 17.2 percent,” Senator Wehby said.
He also noted that public debt interest payments are expected to move from $125.3 billion to $159 billion this fiscal year, while non debt recurrent expenditure has also moved from $184.4 billion to $204.7 billion.
Parliamentary Secretary in the Ministry of Youth, Sports and Culture, Senator Warren Newby, also noted that the Government could not continue to borrow to service the country’s debt. He said that the budget, as presented, provided some amount of stimulus for the local economy, particularly in the construction industry.
“This is so, because the cess on petroleum products, a portion of it, will be going towards road construction. The money from the Tourism Enhancement Fund (TEF) is going towards housing construction for tourist workers, and the National Housing Trust (NHT) is undertaking a significant building programme,” Senator Newby said.
He added that there is a large pool of unskilled labour in Jamaica that could be absorbed by the housing and agricultural sectors. He, however, warned that in order for the country to emerge from the current financial crisis, it has to improve its fiscal prudence and discipline.
“We cannot underestimate the position that a balanced budget plays in creating a macro economic framework for us to move forward, and we have started the process,” Senator Newby said.
An Appropriation Bill authorises the Government to spend public resources. It follows the passage of the Budget in the House of Representatives.