"It looks as if they have not gone overboard in terms of too much spending," Burrell told The Sunday Gleaner.Provisions have been put forward for more spending on health, small-and medium-size businesses as well as on security and justice, he said. These are all areas on which there is consensus that more should be done. Despite this, he noted there has been a clear attempt to put restrictions on expenditure so as not to run up deficit to limit the amount of unfunded spending.
He noted, in addition, the public sector wage element in the budget where the provision appears to project a 13 per cent increase for this fiscal year, Mr. Burrell said. This could be followed by a seven -eight per cent increase in the second year. The proposal would amount to about 20 per cent over two years.
"I am not sure how the unions would take that (increase)," he said. One of the strengths Jamaica still has, however, is that there is some consensus in the society about the nature of its problems and what needs to be done to deal with the problems.
WAGE CATCH-UP
The public sector workers had signed an agreement with the government to accept limited wage increases over the last two years in exchange for job security. With double-digit inflation in both years, however, their real incomes have taken a beating.
"You knew some catch-up was going to have to occur on the wage front after two years of wage compression for the public sector workers," said financial analyst Keith Collister. He agreed that the overall budget plan appeared to be a reasonable one.
Jamaica had targeted a balanced budget for the last financial year but is expected instead to run a significant deficit. This was due to a drought in June, followed by two hurricanes and then torrential rains in October combined with record-high petroleum prices.
The country had a deficit of 4.8 per cent in 2004-05 and late last year the Finance Ministry lowered the balanced budget projection for 2005-06 to a two per cent deficit. The projection for the current financial year was shifted from a modest surplus to a one per cent deficit.
To understand the effective size of a deficit or surplus, the amount can be measured as a percentage figure against the country's yearly output of goods and services - gross domestic product (GDP). So the bigger the percentage deficit or surplus figure, the worse or better off the country's fiscal balance is.
FISCAL DEFICIT TARGET TO BE REVISED AGAIN
However, the fiscal deficit revisions last year may have had to be revised again.
"If the fiscal deficit for 2005-06 comes in at about three per cent of GDP or one per cent above the revised target, then it would be entirely possible that the deficit target for '06-07 of one per cent may have been revised up to two per cent," said financial analyst Keith Collister. "Of course, we won't be sure until we see the revenue side of the budget."
While the budget appears reasonable in view of the circumstances faced by the Ministry of Finance, "the big caveat is that this is probably an election year," Mr. Collister said. "Typically, there is substantial expenditure above budget in such years."
JMMB's Burrell said international investment banks also be-lieve it is possible there will be an election this year. "There appears to be some uncertainty and they are watching Jamaica closely."
He said bankers Bear, Stearns and Co. had effectively lowered their rating of Jamaica's international debt recently by shifting it from 'outperform' to 'market perform'.
"This is probably as a result of them recognising the fiscal risks of the current political situation," said Collister.
