A sum of Euro17 million (J$2.2 billion) is to be injected into the Consolidated Fund early in the new fiscal year, to provide budgetary support, as a result of the fall-out in the bauxite/alumina sector, that has severely impacted the economy.
The funds fall under the 2009 Fluctuation in Export (FLEX) Earnings agreement between the Government and the European Commission, which was signed today (February 23), by Minister of Finance and the Public Service, Hon. Audley Shaw, and Head of Delegation of the European Commission, Ambassador Marco Mazzochi- Alemanni.
The grant is part of the co-operation programme between Jamaica and the European Union, where annual applications are submitted for funding from the FLEX facility, to help mitigate the negative effects of instability in export earnings.
Addressing the signing ceremony at the Ministry’s Heroes Circle offices, Minister Shaw explained that the allocation would go directly to the Consolidated Fund, and not specifically to the energy sector.
“We have had a significant fall-out in earnings, led primarily by the bauxite and alumina sector.in fact bauxite exports over the past four fiscal years have accounted for 57 per cent of all export of goods, and for 9.5 per cent of Gross Domestic Product (GDP). There has been a forecasted 69 per cent decrease in exports from the bauxite sector for fiscal year 2009/2010, and this translates into a reduction of 39 per cent of the value of all export of goods. This is a significant fall in our earnings,” the Minister said.
Mr. Shaw noted that for this fiscal year, the fall-out in the contribution of the sector to the budget is expected to be 90 per cent, compared to the previous fiscal year. “Last year, we had projected earnings of over $7 billion from the sector. the actual earnings ended up at about $4.4 billion. The actual earning this fiscal year, is projected in the region of $140 million, so by any standard of measurement, it is a catastrophic situation,” he pointed out.
The FLEX allocation is a fixed tranche to the existing Debt Reduction and Growth Enhancement Programme (DRGEP), which is a general budget programme, under which grant resources are released to the Consolidated Fund upon agreed conditions.
Meanwhile, Ambassador Alemanni noted that the funds will add to the Euro70 million that has already been allocated to Jamaica for the Debt Reduction and Growth Enhancement general budget support pogramme, bringing the total value of the programme to Euro87 million, or J$10 billion.
Ambassador Alemanni said the EU hoped, with the assistance of the Planning Institute of Jamaica (PIOJ), to allocate another Euro20 million next year, bringing its total budgetary support grant funding to Euro107 million, or US$150 million.
He also pledged the EU’s support for Jamaica’s energy sector, stressing that it is crucial that the country diversifies its energy sources. He lauded the Ministry of Energy and Mining’s efforts to source Liquified Natural Gas as the country seeks to move away from its dependence on fossil fuels.