Senator Don Wehby, the minister responsible for fiscal discipline and the debt. - File

Jamaica has held its two big-ticket spending items in check and has cut more than $3 billion off the central government's bill in the first fiscal quarter to June, according to the finance ministry's report on the treasury.

Wages charges were marginally off target by less than a percentage point at $24.5 billion, while debt servicing charges of $30.4 billion were close to two per cent below expectations.

Total spending reached $76 billion, but while this was $12 billion above spending in the comparative quarter of 2007, it was 4.2 per cent below forecast in the current period.

At the same time, tax collections beat expectations by about $700 million - trade taxes were flat, but income and corporate taxes rose - with the end result being a lower than budgeted fiscal deficit.

On par with last year

Instead of a $12.75 billion shortfall in what it collected versus what was spent by the government, Finance reported a $8.6 billion deficit or 32 per cent better than expected, but on par with the June 2007 period when the deficit was $8.8 billion.

Government is expected to stay within its 4.5 per cent deficit target this year, if it continues to restrain spending.

Its primary surplus, which ignores debt charges, was a healthy $21.8 billion, a near 20 per cent more than expected and $6 billion above last year's June outturn.

Within the same period, the national debt advanced to $1.033 trillion, with the ministry reporting heavy borrowings of $47 billion in the first three months of the year - 67 per cent or $18.9 billion more than it told Parliament would have been necessary to fund the first-quarter budget.

The $25.5 billion that was borrowed in foreign markets reflected proceeds of a US$350 million bond issued June 17 at 8.0 per cent and priced to yield 8.375 per cent.

The finance ministry at the time trumpeted the placement as fully subscribed within four hours on the market, at a time when foreign investors were wary of emerging market debt.

The uptake represented 58 per cent of the US$600 million the ministry plans to raise on international capital markets this fiscal year.

In its own market, the figures indicate that domestic investors were less enticed by the debt issues, which resulted in a near $5 billion shortfall in targeted borrowings by the ministry.

The market's retreat comes against increasing inflation, which is running at an annualised 23-24 per cent, some nine points above prevailing interest rates.

The six-month treasury bill, the benchmark for interest rates, yielded 14.9 per cent in July.

During the June quarter, finance also paid down $20.3 billion of principal debt.

business@gleanerjm.com