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TABLE OF CONTENTS Introduction .........................................................................................................................................3

Addressing Inaccuracies from the Opposition................................................................................4

Accelerating Debt Repayment & Primary Balance Reduction ......................................................4

Broadening Ownership - Bottom Up Distribution ..........................................................................8

The COVID-19 Context .......................................................................................................................14

The Last Two Weeks: March 10 – 24, 2020 .................................................................................15

What we know ..............................................................................................................................24

Uncertainties Persist .....................................................................................................................26

FISCAL STIMULUS .............................................................................................................................27

Principles that will guide Fiscal Stimulus ......................................................................................27

The CARE Programme .......................................................................................................................29

BEST Cash ...................................................................................................................................30

SET Cash .....................................................................................................................................31

COVID-19 Grants for marginally self employed and informally employed ...................................32

COVID-19 PATH Grants ...............................................................................................................33

COVID-19 Small Business Grant .................................................................................................34

COVID-19 Tourism Grant ..............................................................................................................35

COVID-19 Compassionate Grants ...............................................................................................36

GCT Reduction .............................................................................................................................37

Timing ...........................................................................................................................................38

Other .............................................................................................................................................39

Jamaica Has Options .........................................................................................................................40

Looking Forward ................................................................................................................................42

Concluding Remarks..........................................................................................................................43

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June 12, 2021


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INTRODUCTION Mr. Speaker, I again extend gratitude to the staff at the Ministry of Finance and Public the Service and to the board, management, and staff of the public bodies within my portfolio. Thanks to Prime Minister, the Leader of Opposition, and the Opposition Spokesperson on Finance for their contributions to the 2019/20 Budget Debate.

Mr. Speaker, I am closing this budget debate under highly unusual circumstances in Jamaica and the world facing a health threat of alarming proportions. The focus of my presentation has to be on the Government’s fiscal and economic response. Mr. Speaker, normally this would be an opportunity to respond to the inaccuracies, shallow arguments, and hollow claims made by the Opposition, to consider any constructive suggestions, and to update and finalise the Government’s proposals and to close the debate. While I would like to continue in that tradition, as both the Opposition Spokesperson and the Opposition Leader have supplied me with ample opportunity for an overwhelming response, Mr. Speaker, I will, for the most part, resist the urge. However, I must respond to one thing from the Opposition Leader and another from the Opposition Spokesman to set the record straight. I will let the plenty other inaccuracies and shallow claims go this time. Even they deserve a COVID-19 break.

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June 12, 2021


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ADDRESSING INACCURACIES FROM THE OPPOSITION

Accelerating Debt Repayment & Primary Balance Reduction Mr. Speaker as I said earlier, there is much the Opposition Leader said that I could respond to. The traditional debate has been superseded by the urgency and threat of the COVID-19 pandemic and its effects. However, there is a thread put forward by the Opposition Leader to which I must respond. Mr. Speaker, the one-sidedness of the Opposition Leader seeking to take credit for the GCT rate cut, having never credibly postulated how it could be afforded in a tight fiscal environment, while pounding the table on fiscal responsibility, is rather amusing. Recall that Dr. Phillips proposed a 2% reduction in the rate of GCT, which would have cost $20 billion, but it is difficult to recall any proposal from him to credibly explain how it could be sustainably financed. That, Mr. Speaker, was not responsible. It is therefore ironic that they could believe that he is in any position to provide a critique when, in fact, it was thoughtful, strategic, and coordinated action over two years, by this Government, that provided the resources for an unprecedented debt repayment of $73 billion or 3.3% of GDP as the route to sustainably achieve a fiscal stimulus that includes a 1.5% reduction in the GCT rate, and more. Take note that his speech makes no reference to the “$73 billion repayment of debt” specifically as the counterbalancing measure for the “primary balance reduction”. This is the first sign of a biased account constructed to launch the kind of attack and misinformation campaign that many now see as their unfortunate trademark.

If you read or listened to his speech you would think that the only thing done was a reduction of the primary surplus from 6.5% to 5.4%. It is a superficial, biased, and frankly disappointing approach from a former Minister of Finance to omit substantial and relevant information.

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June 12, 2021


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We happened to know that some in the previous administration urged and advocated for you to divest Wigton Windfarm. You could have done it. You should have done it. But you did not do it. We did, Mr. Speaker, we did. We reintegrated and are reintegrating public bodies releasing resources. You could have done it. You should have done it. But you did not do it. We did, Mr. Speaker, we did. A more balanced critique would have been that “neither the $73 billion debt repayment nor the corresponding primary balance reduction” were included in the Fiscal Policy Paper (FPP) and this would have been worthy of coverage and a response. It is that more balanced observation to which I will provide a brief response here. Mr. Speaker, fiscal prudence requires that we remain on track to meet the 60 per cent debt target by March 2026 required under the amendments to the Fiscal Responsibility Law, which I worked to help pass in 2014 as an Opposition Senator. As Minister of Finance, I was not prepared to countenance the announcement of a $73 billion debt repayment, and the corresponding primary balance reduction, until a vast majority of the $73 billion in resources was on hand; this required waiting for the success of the J$14 billion Jamaica+Highway+IPO">TransJamaica Highway IPO and the related TransJamaica US$225 million (J$31 billion) international bond issue. Now, the Jamaica+IPO">TransJamaica IPO was, by a factor of almost 3x, the largest IPO in the history of Jamaica. No one had ever attempted to raise anything remotely close to $14 billion in equity on the Stock Exchange in an Initial Public Offering. The next closest was Wigton Windfarm where $5.5 billion was raised. Given the significance of this IPO to the overall debt repayment/primary surplus reduction policy, given the unprecedented size of the IPO, and given the unique nature of the asset, prudence required that I could not take its success for granted. My position would have been further buttressed by the complex nature of the TransJamaica series of transactions. The acquisition of TransJamaica by the Government was completed in December 2019 and its debt holders immediately paid off by the Government as was required by change of control provisions in the debt agreement. The acquisition of the shares and pay-off of the debt were achieved with the proceeds of a short-term loan to the Government that exceeded 1% of GDP in size. This loan needed to be repaid from the proceeds of the international bond issue and IPO, both of which occurred after the finalisation and approval of the FPP.

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June 12, 2021


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Showing a lower primary balance and announcing tax cuts in the FPP without the contemporaneous assurance of having a large majority of the “money in the bank” as the source of the required debt repayment offset would not qualify as responsible policymaking. Thus, neither the proposed $73 billion debt reduction nor the primary balance reduction were included in the FPP. By the time I opened the budget debate both the Jamaica">TransJamaica bond transaction and the Jamaica">TransJamaica IPO were successfully closed, and significantly oversubscribed, I might add. We now had the “resources on hand” that provided the assurance that we could make good on our policy of reducing Jamaica’s debt by $73 billion or 3.3% of GDP during 2020/21. Only then did I announce this and the corresponding primary balance reduction.

Contrary to the Opposition Leader’s contention based on an account that omits material information, and the drama of showing my signature in the FPP, no “rules” were undercut nor broken. The FPP was prepared based on the latest information available at that time. However, going beyond the pettiness from the Opposition, the experience does expose gaps in the process. Two important and complementary principles arise. The first is that economic policy cannot be frozen between finalisation and approval of the FPP in late January (for subsequent tabling) and the presentation by the Minister of Finance in early March. The second is that, ideally, we would want more periodic and structured opportunities for independent and technically informed commentary on the consistency of fiscal policy with the Fiscal Responsibility Law because policymaking is dynamic. These are gaps that I have given much thought to and which informed my proposal for a Fiscal Council which will require updates to our Fiscal Responsibility Framework. Rather than making a false and baseless attack, the Leader of Opposition could have provided constructive suggestions on what is essentially a structural issue. I will be tabling the draft Fiscal Council Bill, which, among other things seeks to entrench durable accountability of fiscal policy. In that bill, we seek to address this structural issue by proposing that the Fiscal Council not only reviews the FPP when tabled in February, and the interim FPP when published in September, but also comments in June and in December on budget outturns and as needed otherwise. This empowers the Fiscal Council to ensure that Government’s policy commitments, tabled at any time, are consistent with the Fiscal Responsibility Law.

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June 12, 2021


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