Minister of Finance and the Public Service, the Hon Audley Shaw, today kept his promise of “no new taxes”, but warned the nation that it is now “crunch time”, while predicting that his 2010/11 budget will trigger positive growth in the Jamaican economy by next March.
Mr. Shaw projected 0.5 percent growth in the economy by the end of 2010/11, increasing to two percent in each year of the period 2011/12 to 2013/14. This would compare with the estimated 2.7 percent decline in the economy during calendar 2009, and the 2.3 percent decline over the fiscal year 2009/10.
The Minister also projected a moderation in the cost of living, from the 16.8 percent of 2008 and 10.2 percent of 2009, to a 7.5 percent to 9.5 percent range this fiscal year, and a further reduction to a 6-7 percent range over the medium term.
In terms of jobs, he said that while unemployment increased from 10 percent in October 2008 to 11.6 percent in October 2009, due to the fallout from the global recession, the Government’s Economic Recovery Programme is expected to reverse the trend this year.
“It is now crunch time,” Mr. Shaw told the House of Representatives, as he opened the 2010/11 Budget Debate at Gordon House.
He noted that the 2010/11 Estimates of Expenditure, “crafted during one of the most challenging periods in recent years,” has budgeted expenditure of $503.9 billion, including $343.9 billion in recurrent expenditure, $63.2 billion in capital programmes and $96.8 billion in debt amortization.
Debt servicing will get the biggest slice, some $240 billion (47 percent), followed by: Education, $72 billion (14 percent); National Security, $38 billion (7.5 percent); and Health, $31.6 billion (6 percent).
Revenues and grants are projected at $326.3 billion, an increase of 8.5 percent over 2009/10, while tax revenue is budgeted to grow by 8 percent over 2009/10 collections. The Government proposes to borrow $176 billion, $118 billion locally, to cover the projected fiscal deficit of 6.5 percent and amortization payments. The rest will be borrowed from overseas sources.
“For too long, we have talked but not acted on the fact that we can no longer afford to live beyond our means,” the Minister reiterated, insisting that Jamaicans have the capacity to organize to build the foundation for a better life.
He recalled that 2009/10 was a difficult year, as Jamaicans felt the full effects of the global recession, with domestic demand weakening as unemployment grew and real income and remittances declined. He also recalled that during the fiscal year, the Government’s revenue base weakened, with the massive fall out in bauxite/alumina exports, forcing significant adjustments to enhance revenue and cut expenditure.
“The adjustment measures were difficult, but could not be avoided. No Government likes to impose new taxes or cut wages. The truth is, if we could have avoided it, we would have,” Mr. Shaw explained.
However, he said that the Government’s willingness to take tough measures, which were unpopular but necessary, have given confidence to its development partners.
He suggested that this is a “historic moment” in the economic life of the country, which is now on “an unprecedented path of bold initiative and firm commitment to secure sustained growth and development.”
The Budget Debate continues on Tuesday (April 13), with the response from Opposition Spokesman on Finance, Dr. Omar Davies.