Dr. Omar Davies, Minister of Finance and Planning, making his contribution to the 2005/2006 Budget Debate in the House of Representatives in April this year. - RUDOLPH BROWN/CHIEF PHOTOGRAPHER
ATTAINING A balanced budget this fiscal year is going to be challenging, says Minister of Finance Dr. Omar Davies.
The main goal of this year's very tight budget announced in April was to balance income with spending. Deficits in the past have driven the country ever deeper into debt without spurring significant growth.
That target has now become "very challenging indeed," the Finance Minister said at a media briefing yesterday at the Gleaner Company's central Kingston offices. The problem is that revenues are running below target while spending has had to be boosted mainly as a result of natural disasters, the rising cost of oil on the world market and adjusted provisions under the public sector Memorandum of Understanding.
REDUCED REVENUE INFLOWS
Financial secretary Colin Bullock said a series of hurricanes had hammered the economy, affecting agriculture and tourism. These had resulted in reduced revenue inflows across several different tax categories.
Opposition to the implementation of increased taxes on tourism is one significant factor which had delayed the implementation, and thus hit revenues, Mr. Bullock said.
Despite this, a wage settlement with the police is likely to occur soon and this will have budgetary implications.
Apart from those in the tourism sector, consumers generally, gamblers and smokers all had to dig deeper into their pockets to support the balanced budget objective. But now, the $9.4 billion they were to have paid has proved not enough.
A supplementary budget is needed to outline the country's new financial path, but that is not possible until the storms subside and the estimates of the damage are in, Dr. Davies explained.
The good news is that some targets, such as the level of Net International Reserves (NIR) is likely to be met. The NIR target of US$1.93 billion will be attained, he said.
However, the inflation target of nine per cent will now almost certainly be breached. Growth originally projected to be 3.6 per cent, is also lagging with a 0.2 per cent increase in the second quarter following a more robust 2.1 per cent expansion in the first quarter.
