House Approves Supplementary Budget

The House of Representatives on March 6 approved the second Supplementary Estimates for the financial year 2011/12.

The new budget reflects total government expenditure of $525.2 billion for the remainder of the current fiscal year from the previous $546.7 billion with spending cut by approximately $22.4 billion

The estimates show a decrease in the recurrent (housekeeping) expenditure from $356.4 billion to $348.9 billion, with savings of $9.8 billion, and reduction in both Capital A and Capital B from a total of $190.3 billion to $176.2 billion reflecting $12.5 billion in savings.

Minister of Finance and Planning, Hon. Dr. Peter Phillips in his opening remarks, said there was a fiscal gap of some $10 billion, with tax revenues projected to be down by $14.6 billion. This is 6.6 per cent below the revised target in December with indications of a continuation of the shortfall through to March 2012.

“Accordingly, the current forecast is for a significant downward revision of revenue and grants to $324.5 billion, a reduction of $24.3 billion below the revised first supplementary budget. This projected shortfall in revenue and grants would have resulted in an estimated primary surplus of $40.7 billion or 3.1 per cent of Gross Domestic Product (GDP), compared to the target of $65 billion or 5 per cent of GDP,” Dr. Phillips said.

He added that the decline in revenue and grants are currently estimated to be some 7.2 per cent below the revised estimate, which reflects the impact of the collapse of the previous government’s relationship with the International Monetary Fund.

Regarding electricity arrears, Dr. Phillips said $329 million will be paid out in March to reduce arrears in street lights, which had increased to $1.3 billion at the end of January. Approximately $489 million was saved by confining expenditure mainly to arrears considered vital and inescapable.

Meanwhile, Dr. Phillips said the Jamaica Social Investment Fund (JSIF) with a reduction of $686 million has suffered from implementation delays during the financial year. However he noted that given the state of most of the sub projects, it is expected that implementation will commence early in the fiscal year 2012/13.

He also informed that the Social Protection Project, which was reduced by $271 million is funded by the World Bank and the Government of Jamaica and provides conditional cash transfers targeted at children 0-19 years and adults.    

The Finance Minister noted that approximately $171.099 million relates to savings due to low levels of compliance of registered beneficiaries. He added that another $100 million will not be utilized from the institutional strengthening component of the Project due to delays in procurement of goods and services.

In his remarks, Opposition Spokesperson on Finance, Audley Shaw noted his concerns with the cut in the JSIF budget.

“The Minister mentioned the JSIF which is being cut by $686 million. I think this is the largest cut of JSIF I have ever seen. Therefore the government will have to take a critical look at what are the issues as to why we can’t get the projects off the ground and we can’t expend the funds that are so well needed in communities,” Mr. Shaw said.

“I know among the issues that we are told from time to time by JSIF are procurement problems. I think it needs to be looked at carefully because a lot of the projects are being cut in Capital B,” he added.

Mr. Shaw also raised concerns about the cuts made in the Social Protection Project which was reduced by $271 million.

“A lot of the persons who are losing benefits as a result are some 10,000 persons that have lost benefits under the PATH Programme,” Mr. Shaw stated.

In his response, Dr. Phillips stated that there was a pattern of non- compliance among some families who are on PATH.

“The response is to not simply change the rules on compliance. I think the direction in which we need to go is more to understanding the factors behind the failure of some families to comply and identifying remedial steps,” Dr. Phillips said.

He also added that the World Bank will be carrying out a review of PATH.

“The issue is how we can improve the levels of compliance which mind you are generally very high. The purpose is not to give a handout; the purpose of the programme is to create an environment where people and families that are in a vulnerable situation can eventually overcome the poverty,” Dr. Phillips said.

Regarding the procurement issue, the Finance Minister said much of the problems faced by JSIF were due to procurement issues.  

He also recommended that a committee of parliament be formed to examine ways in which the procurement procedures can be reformed so as to get quicker and “more expeditious implementation (of projects).”

“That committee would consider what legislative amendments would have to be made, and what administrative changes that maybe needed,” Dr. Phillips said.