The Senate, on Thursday (June 4), approved the Fiscal Administration and Audit (Suspension of Fiscal Target Requirements) Order, 2020, to suspend Jamaica’s fiscal rules until March 31, 2021.
Members of the House of Representatives approved the measure during its sitting on Tuesday (June 2).
Suspension of the fiscal rules has become necessary due to the economic impact of the coronavirus (COVID-19) pandemic.
Currently, the law provides for suspension of the fiscal rules under specified circumstances, such as a period of public disaster, severe economic contraction, public emergency, financial sector crisis, or health and other disasters.
“The suspension can only be activated by independent verification that the fiscal impact of the event or the eventuality exceeds the threshold of 1.5 per cent of gross domestic product (GDP),” said Minister of Foreign Affairs and Foreign Trade, Senator the Hon. Kamina Johnson Smith.
“The COVID-19 pandemic is the event… that has led to the triggering and activation of the suspension in our fiscal responsibility framework,” she added.
She noted that the pandemic has led to the need to deploy significant additional fiscal resources, primarily through the COVID Allocation of Resources for Employees (CARE) Programme, and for new personal protective equipment and supplies, as well as additional capacity building and other critical expenditures totalling $34 billion. “Accommodation of these additional expenditures would not be possible unless the fiscal rules are suspended,” Senator Johnson Smith said.
She said that economic activity is expected to contract in the region of 5.1 per cent and revenues lowered by approximately $81 billion, and the loss of revenue, together with the increased requirements for expenditure, means that the Government will not be able to achieve the level of fiscal savings that the fiscal rules would otherwise require.
The suspension of the fiscal rules will allow the Government to target a lower primary surplus of three and one-half per cent of GDP this fiscal year, down from 5.4 per cent.