By Andrew Green, Staff Reporter 
Evans (left) and Gregory (right)
THE DAMAGE done to Jamaica's economic programme by Hurricane Ivan may be reparable, but it will come at a heavy price. Prime Minister P.J. Patterson said last month that Hurricane Ivan had caused $37 billion worth of damage to the economy, cut projected growth in half to 1.4 per cent, and boosted inflation.
With a budget already stripped down to essentials, experts say painful spending cuts are on the way.
"The hurricane has slowed the economy, but the Government is trying to meet its targets," said economist Errol Gregory. "Revenues have not performed to the level they would have liked."
Jamaica's fiscal deficit widened by $2 billion to $25.8 billion, compared with budget projections, for the first seven months of the fiscal year April to October 2004, Jamaica Money Market Brokers stated in an analysis of the fiscal outcome. The company stated that prior to Hurricane Ivan, the budget deficit was J$509 million better than budgeted through the end of August.
MACROECONOMIC PROGRAMME
The country's medium term macroeconomic programme calls for a maximum budget deficit of 4 per cent for this financial year, inflation of 7 per cent and growth of 3 per cent. This is the base from which the Government planned to achieve a balanced budget next year.
The first priority is dealing with the hurricane reconstruction costs, which the Office of National Reconstruction says requires an immediate expenditure of $3 billion. The supplementary budget with an additional $3.3 billion in spending placed before parliament this week is aimed at dealing with this issue.
"In order to spend $3 billion you have to carve somewhere else," said economist Omri Evans. "Without cuts, that increase might have been $5 billion."
CRITICAL AREAS
The problem with the spending cuts projected under the supplementary budget is that they take away funding from critical areas such as the fire service and fighting crime, Mr. Gregory said. "It is going to be a difficult balancing act."
Dr. Evans said the hurricane had damaged the country's economic infrastructure, with this plainly
visible in houses still without roofs and roads in poor repair. Thus, a substantial amount of economic activity now will consist of rebuilding efforts.
But the Government will have to keep spending under tight control, "Even if it means under-funding services and capital projects," Mr. Gregory said. "I am hoping the usual build-up of revenues in the last quarter of the financial year helps."
It is this critical budgetary situation which makes the decisions over the loss-making national airline, Air Jamaica, so difficult, Mr. Gregory said. "The cash crunch limits the options we have."
With more than US$560 million in accumulated losses and even more projected for the airline in the immediate future, "I don't see them going on with business as usual," Mr. Gregory said. "Resolving that problem has to be a top priority now."
