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As in the previous year, the Budget for FY2002/03 reflects ongoing efforts at fiscal consolidation and fiscal prudence, in keeping with the Government’s medium-term macro-economic policy framework. The budget of $210.1bn is allocated between recurrent expenditure amounting to $125.2bn or 59.6% of the total amount and capital expenditure of $84.9bn or 40.4%, inclusive of amortization. The 2002/03 Budget represents an increase of $24.7bn over the 2001/02 Approved Budget, but a decrease of $9.7bn over the Revised Budget for 2001/02. The major areas of expenditure are debt servicing, education, security services, health services and tourism. The salient features of the Budget are presented below.
Debt servicing expenditure in this financial year amounts to $134.6bn or 64% of the total Budget. This compares with $147.7bn or 67.2% of the revised 2001/02 Budget. Of this amount, total amortization accounts for $75bn, a reduction of 8.2% when compared with $81.7bn in FY2001/02. The allocation for interest payments during 2002/03 is $59.6bn, as compared with $51.5bn in 2001/02; an increase of $8.1bn or 15.7%. Domestic interest costs amount to $42.7bn, while external interest costs amount to $16.9bn. Domestic debt amortization is projected at $42.4bn, while external debt amortization is projected at $32.6bn. The programmed amortization for 2002/03 ($42bn) represents a 48.1% reduction over FY2001/02. This is as a result of the fact that amortization expenditure for FY2001/02 of $81.7bn included a provision for prepayment on debts previously held by FINSAC, as well as unprogrammed payments in relation to the Sugar Company of Jamaica and JPSCo. In 2002/03 the repayment of LRS issued in respect of FINSAC will be reduced by approximately 92% to $1.8bn. The provision for 2002/03 is based on the maturity profile of debt raised up to April 2002, as well as an estimate for Contingent Payment on Domestic Guaranteed Loans. The budgetary provision of $42.7bn for domestic interest payments for FY2002/03 is approximately 6.1% more than that for the previous year. The increase in the provision for interest on US$ Bond Issues is as a consequence of foreign exchange rate adjustment and increase in the stock of US$ denominated securities. It is anticipated that domestic interest costs will continue to be reduced on the basis of a stable macroeconomic environment as well as benefits from more competitive pricing through the auction system. With a greater portion of debt issues being made on a fixed rate basis, the portfolio will be less affected by interest rate volatility. Regarding external debt, the more than 100% increase in interest to multilateral and international bodies represents the estimated cost of servicing disbursed amounts of the Financial Sector Restructuring, Emergency Rehabilitation and the Social Safety Net Adjustment Loans from the international financial institutions; and the expected disbursement of the remaining amounts of the financial sector restructuring and the social safety net loans.
The function Education Affairs and Services has been allocated $21.1bn to undertake recurrent and capital projects. This represents 10% of the total Budget or 28% of the total non-debt Budget. This means that outside of debt servicing, the education function, through the Ministry of Education, Youth & Culture has been allocated the largest portion of the 2002/03 Budget.
Recurrent An amount of $20.1bn of the Education Services budget has been provided for recurrent expenses. The bulk of this expenditure is allocated as under:
Capital A (Government of Jamaica Funded Projects) The allocation of $400mn for 2002/03 will allow the ministry to continue to undertake maintenance of buildings and provide furniture to selected schools. The largest portion of the allocation under this Head ($247.9mn) has been made to primary education. This will include $33.6mn to provide furniture and equipment for upgrading the laboratories of selected newly upgraded primary and junior high schools. Additionally, an amount of $155mn is allocated to carry out maintenance of selected primary schools and purchase lands for the construction of new primary schools under the Primary Education Support Programme. During 2002/03, the ministry will also continue the implementation of the Distance Education Programme, which provides scholarships for teachers to read for the Batchelor in Education Programme at the UWI.
Capital B (Multilateral/Bilateral Programmes) During 2002/03, the Ministry will commence implementation of two new capital projects, as follows:
The Ministry will also continue the implementation of the GOJ/IBRD Primary Education Improvement Project to which $448mn (or approximately 75% of the Ministry’s Capital B budget) has been allocated. This is to allow the Ministry to, among other things, continue work on the state -of- the- art Education Management Information System and commence construction of the following Phase I schools:
Defence Affairs, Public Order and SAFETY SERVICES Combined, these functions have been allocated a net provision of $13.3bn in the 2002/03 Budget through the Ministries of National Security and Justice. This is 6.3% of the total budget and 17.6% of the non-debt Budget. Of this allocation, $12.2bn relates to recurrent programmes and $1.1bn has been allocated to effect capital projects under both Ministries.
Recurrent With respect to the Ministry of National Security, $10.9bn has been allocated to carry out the following services/sub-functions:
Defence (JDF) The Jamaica Defence Force has been allocated $1.99bn of the total recurrent budget for this Ministry.
Police The Police Sub-function has been allocated a total of $7.8bn, representing 71.5% of the recurrent budget for the National Security Ministry. This Department is undergoing a reform programme. Among the initiatives is the restructuring of its financial management activities. As of April 1,2002 the Police Department is responsible for preparing and managing its budget and accounts.
Correctional Services The allocation of $1.1bn for the Correctional Services Department includes $137mn for the maintenance of the Horizon Remand Centre. This Centre was opened in October 2001 and has been constructed to house over 1,000 remandees.
Ministry of Justice This Ministry was created in December 2001 as a result of the reassignment of portfolio responsibilities. Ministry of Justice and its departments have been allocated $1,306.7mn for recurrent expenditure in the 2002/03 Budget.
Capital A total of $1,080mn has been allocated under the capital budget for the functions of Defence, Public Order and Safety Services, largely for the procurement of essential equipment for the JDF and the Police, in keeping with the Ministry of National Security’s short and medium term initiatives in the fight against crime and violence. The major acquisitions for which provisions have been made are:
In addition, $142mn has been allocated in the 2002/03 Budget to meet the cost of constructing and improving police stations ($100mn) and courthouses ($42mn). In terms of police stations, those which are earmarked for repairs/renovation include Harman Barracks, Kingston; Bluefields, Westmoreland; May Pen, Clarendon; Lucea, Hanover; Stony Hill, St. Andrew; Old Harbour, St. Catherine; Wakefield, Trelawny; Highgate and Troja, St. Mary. The courthouses planned for renovation include - Morant Bay, Yallahs, St. Thomas; Ocho Rios, St. Ann; Ramble, Lucea, Hanover; Savanna-la-mar, Westmoreland; Port Antonio, Portland; Spanish Town, St. Catherine; Claremont, St. Ann; Half-Way-Tree, St. Andrew; Port Maria, St. Mary and Black River, St. Elizabeth.
Health Services The amount of $8.1bn or 4% of the overall Budget has been allocated to the Health Services for capital and recurrent programmes. In terms of non-debt expenditure, this allocation represents 11% of the total Budget, the same level as in the 2001/02 Budget. In keeping with the decentralization of the administration and delivery of Health Services, $6.133bn or 81% of the Ministry of Health’s recurrent budget has been allocated to the Regional Health Authorities. In addition, the Regional Health Authorities are expected to collect $885mn in fees, thereby increasing the amount available to the Ministry of Health to undertake recurrent expenditure from $7.56bn to $8.45bn. Of this amount, the largest portion ($2.553bn) has been allocated to the Southeast Regional Health Authority (SERHA) comprising the parishes of Kingston, St. Thomas and St. Catherine. The Western Regional Health Authority comprising the parishes of Westmoreland, Trelawny, Hanover and St. James has been allocated the second largest portion - $1.104bn. North East and Southern Regions have been provided with $772mn and $923mn, respectively. The 2002/03 provision also includes:
Capital Projects The major capital projects under the Ministry of Health are:
An allocation of $90mn is included under the Ministry of Health’s 2002/03 Capital Budget for a new project - The Jamaica HIV/AIDS Prevention and Control Project. This project is intended to support selected activities of Jamaica’s National HIV/AIDS strategic plan. The objectives of this project are to:
During 2002/03, the Ministry of Health will commence implementation of the National Health Fund which will provide:
The tourism function has been allocated $2.25bn or 1.1% of the total Budget, most of which ($1.96bn) relates to recurrent expenditure. On the recurrent side, the Jamaica Tourist Board has been allocated $1.705bn of which $962.5mn relates to overseas marketing. In addition, the Tourism Product Development Company (TPDCo) has been allocated $169mn. In terms of Capital projects, $290mn has been allocated to:
When combined, expenditures relating to the public debt, education services, national security, justice, health and tourism services constitute 85.4% of the total 2002/03 Budget.
Other noteworthy allocations in the Budget include:
Lift Up Jamaica An amount of $750mn has been allocated under the Office of the Prime Minister’s Capital Budget to this project. The programme has been in progress for 2 years and 23,572 persons have been employed. Under this programme, approximately 600 public works projects have been identified. In addition, 19 major towns have been upgraded.
Possibility Programme A new project, the Possibility Programme, has been included in this year’s Budget under the Office of the Prime Minister. An allocation of $7.1mn has been made to provide support for street children.
Social Safety Net Programme During 2002/03, the Ministry of Labour and Social Security will implement a new income transfer programme – The Social Safety Net – Programme for Advancement through Health and Education (PATH), for which $650mn has been provided under the Ministry’s Capital B Head of Estimates. This programme will replace the Food Stamp, Kerosene Stamp and Old Age and Incapacity Allowance Programmes. (The outdoor Poor Relief Programme under the Ministry of Local Government will also be incorporated). Initially, the programme will be funded jointly by the GOJ and the World Bank at a total cost of J$3.5bn over a four-year period, after which funding will be the full responsibility of the GOJ. The main objectives of the programme are to:
The main targets envisaged are:
Solid Waste Management A National Solid Waste Management Authority has been formed, with the Metropolitan Parks and Markets (MPM) being the main agent for administering the Programme. The other Parks and Markets are being merged under the guidance of an integral board. Funding for the National Solid Waste Management Authority will be met solely from the proceeds of the Parochial Revenue Fund. The Ministry of Local Government and Community Development expects an increase of approximately 150% in property tax revenue collections in 2002/03 consequent on the current revaluation exercise and a renewed emphasis on taxpayer compliance. An allocation of $40mn has been made under the Ministry of Local Government and Community Development’s Capital budget to procure solid waste equipment as well as to effect the rehabilitation and maintenance of public parks islandwide.
The 2002/03 expenditure budget of $210bn will be financed by $106.8bn in tax revenue; $5.9bn in non-tax revenue; $2.6bn in transfers from the Capital Development Fund (CDF); Capital revenue and grants of $9.8bn and loan resources of $84.9bn.
Capital Revenue and Grants Capital Revenue and Grants are expected to amount to $9.8bn. This includes expected proceeds from divestment. The assets which the Government contemplates divesting are minority shareholdings in certain institutions such as JPSCo., Finsac’s real estate assets and shares in Jamaica Grande.
Loan Receipts Loan receipts for this fiscal year are projected at $84.9bn. It is expected that $58.8bn will be borrowed from the domestic market, of which $42.4bn of this amount will be used to amortise domestic debt. The incremental borrowing will therefore be $16.4bn.
External Loans External loan receipts are projected at $26.1bn, compared to external amortization of $36.2bn. An amount of $6.5bn of the resources borrowed from the domestic market will therefore be utilized to amortise external debt. In 2002/03, total amortization for external debt is projected to be US$700mn. With respect to external borrowing, Government policy that borrowing in the external capital market should be at the level of external amortization will continue. In keeping with this policy, the international capital market will be approached for an additional US$500mn.
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