MORE THAN $2 billion was cut from the Government spending budget in the three months to the end of September as it struggles to contain its costs and reduce the fiscal deficit, it emerged yesterday.
Further cuts are expected and legislation to broaden the local General Consumption Tax (GCT) base is "pending".
The latest Planning Institute of Jamaica (PIOJ) quarterly economic update and outlook for the three months to the end of September said spending cuts "in both recurrent and capital expenditure were $1.2 billion and $1.1 billion respectively, below budget".
The cuts in housekeeping and one-off spending along with a huge jump in revenue, largely tax on interest payments on Government paper, were the primary reasons for the first second quarter surplus in more than five years.
"A fiscal deficit (difference between revenue and spending) of $1.5 billion was programmed for the review quarter and so the $123 million surplus recorded represents a significant achievement relative to what was programmed."
In the post quarter developments section of the report, the PIOJ said: "With respect to the fiscal accounts, the pattern of expenditure and revenue observed in the past quarter is expected to continue for the remainder of the fiscal year".
It added: "However, if revenue targets continue to fall short of budget, the achievement of the deficit target of 1 per cent of Gross Domestic Product (GDP) will be dependent on careful management of expenditures on programmes and capital expenditure."
PIOJ head Dr. Wesley Hughes said a tight deficit target had been set, a fact the Government had always maintained.
He also said the institution had opted not to give an estimate of current GDP growth after consultation within the body. Instead, the regular GDP forecast was replaced with a broader statement: "The combined sectoral performances are likely to be reflected in a positive, but very modest change in overall real GDP relative to the similar nine-month period of 1999.
On the revenue side, tax on interest rose 31 per cent ahead of budget in the second quarter to $2.9 billion. But lower than projected receipts from local GCT "was largely due to the fact that legislation, which was expected to be affected in the first quarter of FY 2000/01 to increase collections in this item, is still pending."
Earlier this year Finance Minister Dr. Omar Davies told the International Monetary Fund (IMF) in a memorandum to support a multilateral backed US$325 million loan programme that the Government was prepared to raise more money from taxes if the need arose.
The overall surplus of $1.8 billion, up from a $4.1 billion deficit a year ago, was also ahead of expectations, largely as a result of increased borrowing. There was an 11 per cent rise in loans to Government to $37.4 billion in the first half of the fiscal year to the end of March 2001.
And the positive quarterly performance appears part of a wider crackdown on Government spending, which has been partly offset in areas such as the Ministry of Transport, which has used innovative deferred financing deals to get projects off the ground.
Despite the strong second quarter showing, the fiscal deficit for the first six months of the fiscal year to the end of September, was almost $3.8 billion. Total revenue in the first half rose 22 per cent to $49.25 billion but spending jumped five per cent to $53 billion.
Dr. Davies said in April that it plans to spend $167 billion this fiscal year, approximately $10 billion more than last year, with debt-servicing accounting for $97.5 billion or 59 per cent.
About $95.2 billion will be spent on wages, interest payments and other housekeeping or recurrent spending, while it expected to spend $71.5 billion, a 4 per cent increase, on one-off and special capital projects and loan repayments.
The Government said tax revenues would generate $85.7 billion, non-tax revenue including the sale of cellular licences to yield $7.8 billion, the bauxite levy to yield $3.6 billion; grants from organisations such as the European Union and other capital revenue to raise $4.1 billion; new taxes to raise $3.2 billion and divestment another $7.2 billion.
