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Medium-Term Debt Management Strategy FY2020/21-FY2023/24 6 | P a g e

2.3 Public Debt Trajectory

Figure 1 highlights the net financing flows for the Central Government domestic and external

debt portfolios and the trajectory of the stock of total public debt from end-March 2019 to

end-December 2019. Financing activities of the GOJ over the review period reflected a

well- thought-out strategy to reduce net financing inflows. Amortization of a fixed-rate domestic

BIN in July 2019 of $40,523.5 million, a fixed-rate external BIN in June 2019 of

$11,586.8 million and net inflows of approximately $16,043.6 million from the re-opening of the

2045 JAMAN global bond in September 2019 were major contributors to net financing outflows

of $30,647.5 million for the period. Net outflows from the Central Government domestic and

external debt portfolios were $16,006.8 million and $14,640.6 million respectively.

Figure 1: Net Financing Flows and Trajectory of Public Debt

Notes: Financing flows and total public debt are in millions of Jamaica dollars.

Source: Ministry of Finance and the Public Service (MoFPS)

Throughout the review period, financing operations were consistent with GOJ’s objective to

reduce the debt-to-GDP. As highlighted in Figure 2, debt-to-GDP is expected to continue

trending downwards and is projected at 90.2 percent at end-FY2019/20, a reduction of

4.2 percentage points, compared to the 94.4 percent recorded at end-FY2018/19. With continued

commitment to strong fiscal discipline and prudent debt management, the GOJ is on track to

realize further reductions in the debt-to-GDP consistent with the legislated target of 60.0 percent

or less by FY2025/26.

Figure 2: Debt-to-GDP Trajectory

Source: Ministry of Finance and the Public Service (MoFPS).













Net Flows Domestic (LHS) Net Flows External (LHS) Total Public Debt (RHS)

133.1% 130.2% 122.5% 120.7%

101.0% 94.4% 90.2% 85.7% 79.9% 72.7% 66.3%

FY 2013/14 FY2014/15 FY2015/16 FY2016/17 FY2017/18 FY2018/19 FY2019/20 FY2020/21 FY2021/22 FY2022/23 FY2023/24

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Fiscal Outlook

Fiscal operations for the first five (5) months of FY2016/17 have been quite robust, particularly

Revenue and Grants which was ahead of budget by $12,910.2mn or 7.3%. Total expenditure (net

of amortization), on the other hand, has been less than programmed due to a number of factors,

including the late passage of the budget. Nonetheless, it is expected that in the coming months,

the various MDAs will increase their spending, particularly for capital programmes.

To this end, the expectation is that the expenditures will be essentially in line with the budget by

end-March 2017. With respect to revenue and grants the outlook is for collections to be broadly

in line with the budget, with a relatively modest excess over budget of 0.2%. This, alongside the

expectation for expenditure is estimated to generate a primary surplus of $122,962.6mn, or 0.7%

more than target.

Central Government Operations

Revenue & Grants – FY 2016/17

Revenue & Grants for FY 2016/17 is estimated at $486,877.7mn, a modest surplus of $836.6mn

or 0.2% over budget. This outturn is driven by the projected Tax Revenue estimate of

$447,383.4mn, which is forecast to be broadly in line with the budget, surpassing the target by

0.1%. Non-Tax Revenue and Grants are also expected to surpass their targets, while Bauxite

Levy and Capital Revenue on the other hand are forecast to fall short of budget. Within Tax

revenue, both Income and Profits and International Trade taxes are forecast to be broadly in line

with budget while Production and Consumption taxes is expected to be above budget by

$662.4mn or 0.5%.

Expenditure - FY 2016/17

Central Government expenditure (excluding amortization) for FY 2016/17 is projected to end the

FY at $501,290.0mn. At the end of August 2016, total expenditure (above the line) stood at

$209,917.0mn. It is anticipated that the lower spending relative to budget, recorded during the

first five months, will be eliminated by end March 2017 and any unexpected developments will

be managed through expenditure adjustments to meet the budget.

Due to the improved GDP recorded for FY 2015/16 as well as the growth performance to date for

FY 2016/17, the estimated GDP for 2016/17 has been revised upwards. As a result of this the

nominal primary balance budgeted is now equivalent to 6.9% of GDP. Given the Government’s

intent to pursue a successor programme to the EFF with the IMF, the country is required to adjust

the nominal target to be equivalent to 7.0% of the current GDP estimate. This adjustment means

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Ministry of Finance and the Public Service Fiscal Policy Paper 2017 64 | P a g e

 $5,400.0mn from the CAF;  Expected receipts for royalties of $675.2mn;

 Expected receipts of $407.1mn from a profit share agreement;  Dividend distribution from public bodies of $21,535.6mn; and

 Expected increases in pension contributions of $2,931.0mn arising from the new pensions system.

For FY 2017/18, there will be limited payments of the Bauxite Levy based on the new agreements with the owners of Alpart and Noranda. These agreements reflect a temporary change in taxation regime for the bauxite sector wherein the companies will make payments based on arrangements specific to each.

Capital Revenue is budgeted at $2,228.1mn, which is significantly above the projected receipts for FY 2016/17 due primarily to a loan repayment to the GOJ from a public entity while Grants are forecast at $4,352.1mn, a decline of 25.1% below receipts in FY 2016/17. There are no Budget Support flows from the European Union (EU) programmed for FY 2017/18.


The borrowing requirement of the Central Government for FY 2017/18 amounts to $159,612.0mn. Of the budgeted Loan Receipts, $89,000.0mn is programmed to be raised domestically and $70,612.0mn is to be raised externally, inclusive of project/investment loans of $31,078.0mn. This borrowing requirement represents a 56.6% increase in total Loan Receipts when compared to FY 2016/17. The higher borrowing (year-over-year) requirement reflects the significantly higher Amortization costs for FY 2017/18.


Effective April 1, 2017, a new definition of Public Debt will become effective. Public Debt will be defined as the consolidated debt of the Specified Public Sector (SPS) net of the cross-holdings of debt, except that of the Bank of Jamaica. The SPS consists of the Public Sector, excluding any public body certified by the Auditor General as primarily carrying out functions that are of a commercial nature.


The Overall Balance of the group of Self-financing Public Bodies is projected at a surplus of $1,705.4mn for FY 2017/18. Net flows from Public Bodies to GOJ are projected at $33,511.6mn, resulting from $56,944.0mn Transfers to GOJ and Transfers from GOJ of $23,432.4mn. The flows from Public Bodies to GOJ include SCT from Petrojam, corporate taxes, grants to support special programmes as well as financial distributions (dividends). Public Bodies benefitting from GOJ transfers include NROCC and RMF - loan repayments, Students Loan Bureau (SLB) – support from Education Tax and JUTC for which the amount represents spare parts and fare subsidy.

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Ministry of Finance and the Public Service Fiscal Policy Paper 2021 Page 98

Table VII (a): Fiscal Risk Sources Risk Factor Implications for Fiscal Position Macroeconomic Risks Economic Growth Deviation of actual economic growth from forecast is expected to impact key

fiscal variables, including revenue. Slower than budgeted growth will likely lead to a shortfall in revenue.

Inflation Lower than programmed inflation can have a negative impact on revenue collection and nominal growth, thereby thwarting the achievement of fiscal and debt targets. Higher than programmed inflation could negatively impact the Government’s expenditure bill.

Interest Rates Increasing interest rates are a risk to debt service costs, based on the interest rate composition of the debt stock. That is, the higher the percentage of the portfolio that is contracted on a floating rate basis, the greater the risk from an increase in the interest rate.

Exchange Rates Jamaica dollar depreciation could contribute to the external debt stock, debt service, and imports increasing in J$ terms. However, a depreciation of the $J will have a positive revenue effect through increased earnings primarily from international trade taxes and external grant receipts (in J$ terms).

Commodity Prices Oil Prices - Oil prices directly impact both revenue and expenditure. Revenue is impacted through the SCT on petroleum and petroleum products, whereas expenditure is impacted through the Governments housekeeping expenses.

Contingent Liabilities Natural Disasters Jamaica is located in a multi-hazard zone, and is therefore susceptible to

natural disasters such as hurricanes, flooding, excess rainfall and earthquakes. Realisation of any of these disasters could lead to significant infrastructural damage, and the need for an increase in and/or adjustment of the GOJs expenditure, as well as lower revenue from economic disruption and fallout.

Public Bodies Public Entities may require support from the Central Government to cover operating costs or pay debt, adding pressure to the Governments budget.

Public Private Partnerships (PPPs)

PPP Projects have to be carefully designed, taking into account the probability of losses that may have to be assumed by the Government.

Judicial Awards Court judgements made against the GOJ pose a risk to fiscal targets, through increased unplanned expenditure.

Other Wage Settlements Uncertainty surrounding the final settlements, compounded by the protracted

nature of wage negotiations can lead to higher than planned costs to the budget.

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Medium-Term Debt Management Strategy FY2020/21-FY2023/24 10 | P a g e

3.1 Interest Cost

Table 2 depicts a weighted average interest cost of 5.9 percent for Central Government debt at

end-December 2019, which represented a 0.2 percentage point reduction when compared to

end-March 2019. The reduced interest cost was attributed to a 0.1 percentage point reduction in

both the domestic and external portfolios. This lower borrowing cost was driven by the

accommodative monetary policy stance of the Federal Reserve (FED) and the BOJ, as well as

high levels of domestic market liquidity and increased investor demand for GOJ securities during

the review period.

Domestic fixed-rate bonds were the most costly instruments with an average interest cost of

8.6 percent at end-December 2019. The average interest cost on domestic variable-rate bonds

was 6.5 percentage points lower than domestic fixed-rate bonds. Global fixed-rate bonds were

the second most expensive cost drivers for the debt portfolio with an average interest cost of

7.8 percent. Fixed-rate multilateral/bilateral loans were the least costly instruments in the

external portfolio with an average interest cost of 2.3 percent, approximately 0.4 percentage point

lower than variable-rate multilateral/bilateral loans (see Figure 3).

Figure 3: Weighted Average Implied Interest Costs by Instrument

Source: Ministry of Finance and the Public Service

3.2 Interest Rate Risk

Interest rate risk relates to changes in debt service costs resulting from variability in market

interest rates.3 A portfolio’s exposure to interest rate risk is usually determined by the share of

3 The 3-month T-bill rate and the US-Libor serve as reference rates for domestic and external debt, respectively.


2.1% 2.3% 2.7%



FR BINs VR BINs FR Official Creditors VR Official Creditors

JAMAN Global Bonds

Commercial Bank Loans

Domestic External

June 12, 2021