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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

June 12, 2021

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Cigarette affordability

Data source. The 2016 measure of cigarette affordability, originally developed by Blecher

and van Walbeek,[11, 12] was obtained from the WHO’s report on global tobacco epidemic 2017, Table 9.6.0 “Affordability of the most sold brand of cigarettes” (...
June 12, 2021

Page 101

Ministry of Finance and the Public Service Fiscal Policy Paper 2021 Page 101

Figure VII (d) Buoyancy of Total Tax Revenue Relative to Nominal GDP

Source: MOFPS

Figure VII (e) Impact of a Shock to Nominal GDP on Tax Revenue

Source: MOFPS

Developments in the global economy may also have impacts on growth prospects. The IMF’s World Economic Outlook projects global economic growth of 5.5% in 2021, a 0.3 percentage point increase over the previous projection. The growth projection is contingent on vaccine-led improvements in economic activity, as well as additional policy support for some industries. Downside risks to this outlook include: slower than expected vaccine rollouts, new waves and variants of the virus and the withdrawal of policy support as Governments face spending pressures. The United States (US), which is Jamaica’s main trading partner, is projected to grow by 5.1% in 2021. This revised outlook is 2.0 percentage points higher than previous estimates. The GOJ will continue to monitor developments in the global economy in an effort to gauge possible spill-over effects from trading partners. Inflation Inflation rates impact the GOJ expenditure budget as it relates to general housekeeping expenses as well as the cost for servicing inflation linked debt. At end-December 2020, inflation linked debt accounted for 2.6% of total Central Government debt, and increased in nominal terms by $2,217.2 million relative to end-March 2020. When the nominal value of these debt instruments increases, so do the associated debt service costs. While inflation might also increase revenue receipts as the general price level in the economy is higher, it is unclear if the revenue effect outweighs the expenditure effect or vice versa. At end-December 2020, the annual point-to-point inflation rate was 5.2%. This is expected to increase to 6.3% at end -FY 2020/21. Figure VII (f) highlights the variance between inflation projections and the actual outturns for FY 2016/17 to FY 2019/20 and the estimated outturn for FY 2020/21. For the first three years of analysis, inflation projections have exceeded outturns by as much as 1.4 percentage points. The converse is true for the past two fiscal years, with the actual outturn for FY2020/21 likely to exceed projection by 1.8 percentage points, falling outside of the targeted band of 4.0% - 6.0%.








Tax Buoyancy Average






2019/20 2020/21 2021/22 2022/23 2023/24

Baseline Shock Scenario

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Appendix II


The April 2016 FPP presented a detailed outline of the key fiscal risks being monitored by the

MOFPS/GOJ and the associated strategies for managing them. This report provides a brief

update on some of the risks identified.

Natural Disasters

The GOJ recognizes the country’s vulnerability to natural disasters and the potential financial and

economic pressures that could result. As such, for the 2016/17 policy year of the Caribbean

Catastrophe Risk Insurance Facility Segregated Portfolio Company (CCRIF SPC) programme, the

government has renewed the policy coverage for Jamaica for Tropical Cyclone (TC), Earthquake

(EQ) and Excess Rainfall (XSR) at a premium cost of US$4.9mn.


Tax Refund Arrears are being closely managed by the GOJ to ensure that the arrears decline as

programmed. The level of tax refund arrears is monitored under the EFF programme and this

quantitative target has been met under successive quarterly IMF reviews. During FY 2015/16, the

stock of tax refund arrears was reduced by $4.4bn and ended the fiscal year at $17.3bn. The stock

continues to be steadily reduced, declining to $14.8bn at end-July 2016, representing a $2.5bn

reduction since the start of the fiscal year.

Domestic Arrears represents a category of fiscal risk that includes amounts due to suppliers and

all recurrent and capital expenditure commitments. This category of arrears is closely managed

by the GOJ and is also monitored under the EFF programme. During FY 2015/16 the stock of

domestic arrears was reduced by $524.3mn to $21.0bn at end-March 2016. The GOJ has

continued to steadily reduce the stock of domestic arrears and at end-July 2016, a further

reduction of $128.7mn had been achieved.

Public Private Partnership (PPP)

The GOJ recognizes that PPP projects have the potential to impose significant fiscal risks if not

appropriately designed and financed. Therefore, the risks associated with PPP’s are actively

monitored by the GOJ. The following provides an update on the status of PPPs since the FPP was

published in April.

Kingston Container Terminal – a 30 year Concession Agreement (CA) was executed on

April 7, 2015 with Kingston Freeport Terminal Limited (KFTL) to finance, expand,

operate, maintain, and transfer the Kingston Container Terminal (KCT). The

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Head 28 - Extraordinary Receipts

1 Immigrant Deposits 0 0 2 Agriculture Recovery Programme - Sale of Mechanical

Implements 0 0

3 Sale of unserviceable goods-Housing Dept and Supply Division Stores 0 0

4 Surplus on Sinking Fund 0 0 5 Proceeds from Foreshore Development 0 0 6 Grants from the European Union 2,769,859,233 4,234,000,000 1,581,465,818 1,304,033,000 (277,432,818) 7 Grants from Government of the Netherlands 0 0 8 Miscellaneous 853,003,479 - 6,063,275,924 14,539,200,000 8,475,924,076 9 Bauxite Alumina Trading Company 0 0

10 Other Grants 3,099,698,351 5,305,000,000 1,638,759,000 3,944,865,000 2,306,106,000 11 Proceeds from Divestment 0 0

Total Head 28 6,722,561,063 9,539,000,000 9,283,500,741 19,788,098,000 10,504,597,259

TOTAL CAPITAL REVENUE 8,059,782,420 10,477,800,000 9,884,209,757 20,457,926,178 21,009,194,518


Head 29 - Transfers to Current Account

(a) Transfers in lieu of Income Tax from Alumina Producers 0 0 0 0

(b) Other 4,779,700,000 0 2,818,194,200 2,818,194,200 Total Head 29 0 4,779,700,000 - 2,818,194,200 2,818,194,200

Head 30 - Transfers to Capital Account 0

Total Head 30 0 0 0 0 0

TOTAL - TRANSFERS FROM CAPITAL DEVELOPMENT FUND 0 4,779,700,000 0 2,818,194,200 2,818,194,200




Loans to be raised under Act 39 of 1964

1 World Bank Loans 26,964,189,336 18,005,611,000 2,823,858,764 11,049,300,000 8,225,441,236 2 Inter-American Development Bank 3,964,311,685 18,450,828,000 16,404,219,642 18,834,000,000 2,429,780,358 3 USAID 0 0 3 Caribbean Development Bank 4,111,168,767 1,589,300,000 1,449,225,982 626,928,000 (822,297,982) 4 European Union 0 0 5 World Bank/IDB 5,455,119,600 10,403,934,000 4,948,814,400 6 IFID 0 0 7 OECF/USAID 0 0 8 OPEC 152,454,000 570,310,000 417,856,000 9 OECF 0 0

10 IMF 1,667,703,000 0 0 11 Other 300,000,000 3,785,290,558 49,881,000 (3,735,409,558)

0 Bilateral 0

2,014,504,000 0 12 Government of China 4,013,987,000 2,504,894,000 5,881,015,000 3,376,121,000 13 Government of Germany 0 0 14 JBIC 0 0 15 Kuwait 0 47,332,000 47,332,000 16 Saudi 0 0 17 PL480 3,332,916,000 0 0 18 Other 3,100,000,000 (3,100,000,000)

0 Other Loans 0

0 19 Capital Market 89,385,564,960 30,232,500,000 234,147,055,104 0 (234,147,055,104) 20 Other 0 0 0

TOTAL EXTERNAL LOANS 131,440,357,747 72,592,226,000 269,822,117,650 47,462,700,000 (222,359,417,650)


1 Local Commercial Banking Sector 0 0 2 Benchmark Notes & Treasury Bills 14,108,057,762 14,000,000,000 28,933,379,449 41,921,700,000 12,988,320,551 3 Indexed Bonds & US$ Loans 0 0 0 4 Other 28,457,696,346 42,337,900,000 0 0

TOTAL DOMESTIC LOANS 42,565,754,109 56,337,900,000 28,933,379,449 41,921,700,000 12,988,320,551

TOTAL LOAN RECEIPTS 174,006,111,856 128,930,126,000 298,755,497,100 89,384,400,000 (209,371,097,100)


June 12, 2021