Gov't struggling to pay its bills
published: Friday | November 28, 2003
By Andrew Green, Staff Reporter
A DESPERATE scramble forcash is now under way in the public sector.
To maintain its credibility in financial markets, the government has to strive especially hard to attain its financial targets for this budget year, says Jamaica Money Market Brokers research analyst Jason Moore. With projected revenues running behind expectation, something has to give.
"The government doesn't have the cash flow to do all the things it wants," Mr. Moore said. "Efficiency is being forced on the public services."
Back in May, the Ministry of Finance and the Auditor-General's Department proposed a study to determine why the government agencies were so short of cash because of the massive debts they were racking up. For several institutions, the situation has deteriorated.
The Ministry of Health says it needs $11 billion annually to carry out its operations, said Audley Shaw, chairman of the Public Accounts Committee (PAC). But it only got $9.2 billion, leading to a shortfall by $1.8 billion. Already starting with a $3 billion debt, it is likely to end the year with a $3 billion shortfall.
OWES $526 MILLION
TO THE POLICE
The National Works Agency owes $1 billion to contractors while the Ministry of National Security owes $526 million to the police, military and correctional services.
The Ministry of Education was also late in supplying foodstuffs to schools for the school feeding programme.
The big problem for the government is that wages and salaries, along with interest payments are running higher than projected, Mr. Morris said. Revenues are on target, apart form the exceptional month of August, when the revenue outcome was below expectation.
Grace Allen-Young, Permanent Secretary in the Health Ministry, recently told the PAC that a major source of the Ministry's problems came from the increase in its wage bill from 57 per cent two years ago to 85 per cent now. Partially as a result of the increase, she said, shortfalls were created and the Ministry was forced to hold off on making payments to several of its creditors.
The state investment promotion company, JAMPRO, announced staff cuts in October because its budget had been cut. Its president, Mrs. Patricia Francis, said then that 'even the approved budget allocation is not being given to you."
FAILURE TO MEET
FISCAL TARGETS
The real challenge for the government is that it lost credibility in financial markets because of its failure to meet its fiscal targets last year.
"We have a target to balance budget by 2005/06," Mr. Morris said. To achieve this, a lot of effort has to go into meeting the fiscal deficit of 5 per cent to 6 per cent of gross domestic product this year.
"We have to continue holding the line on expenditure," the analyst said.
But Mr. Shaw said a substantial block of funds is committed for goods and services already consumed by the government. This is owed but not paid for.
The government only counts expenditure and records expenditure only when the cheque is drawn, the PAC chairman said. So the arrears are not measured in the official figures.
When the arrears are taken into account, it shows that the expenditure side of the fiscal accounts is being understated.
"The fiscal deficit for this year will likely be firmly in double digits, instead of the 5 per cent to 6 per cent which was projected," if the arrears are taken into account, Mr. Shaw said.
