Gov't expected to maintain fiscal discipline despite suspension of rules - IFC

 

Fiscal Commissioner Courtney Williams says the government is expected to maintain the careful management of public finances, despite the one-year suspension of the country's fiscal rules to give it room to spend on recovery and reconstruction efforts in the aftermath of Hurricane Melissa.

 

Following the Independent Fiscal Commission's validation of the government's decision, the House of Representatives on December 2, approved an Order permitting the temporary suspension of the fiscal rules to March 31, 2027.

 

At that time, Finance Minister Fayval Williams told the Parliament that if an extension is warranted, then the ministry would present the case to the IFC.

 

Speaking with Radio Jamaica News on Friday, after the release of a statement confirming the IFC's validation of the temporary suspension, the Fiscal Commissioner said fiscal discipline on the part of the government is still required.

 

"The Commission will continue to monitor the economy, to monitor the fiscal programme, to monitor the execution of the budget. So even though there are no fiscal rules during this period operating, but the government still has to set some targets within which it will operate. Because, bear in mind, the suspension is just for a period until March 2027," he noted.

 

"What we don't want to happen is that the situation we're in after the period of the suspension, we are so far behind that it would take some herculean effort to really get back on track. Hence, that monitoring will be important even during this period of suspension," insisted the Fiscal Commissioner.

 

The IFC said the suspension of the fiscal rules will allow the government to prioritise recovery, rehabilitation, and reconstruction efforts without breaching legislated fiscal targets, particularly the 60 per cent debt-to-GDP ceiling.

 

The debt-to-GDP ratio for the specified public sector is expected to increase to 68.2 per cent by the end of March 2026, up from 62.4 per cent in March 2025, and is projected to remain above the legislative target of 60 per cent at the end of March 2028.

 

Meanwhile, the Independent Fiscal Commission explained that under the Financial Administration and Audit Act, a natural disaster of Melissa's magnitude allows for temporary suspension of the fiscal rules once the fiscal impact reaches or exceeds 1.5 per cent of GDP.

 

The Fiscal Commissioner said after the official disaster declaration, the Finance Minister requested an assessment to determine whether the legal threshold had been met.

 

"Starting with the Planning Institute [of Jamaica], they would have done an assessment in terms of the economic impact, and then the Ministry of Finance would then do their fiscal forecast indicating how much Melissa is expected to impact the budget. But having done that, it requires an independent assessment, which is what the Independent Fiscal Commission does...to determine whether or not that threshold has been met for the suspension to be effective," he explained. 

 

Mr. Williams said based on information provided by the Planning Institute of Jamaica and the Ministry of Finance, the fiscal impact is estimated at 5.3 percent of GDP over Financial Year 2025/26 to Financial Year 2029/30 - well above the legislative threshold of 1.5 per cent to trigger suspension of the fiscal rules. 

 

He added that the information provided by the PIOJ and the Finance Ministry was not as comprehensive as desired – given that damage assessments are still underway.

 

Preliminary assessments conducted by the World Bank in collaboration with the Inter-American Development Bank estimate physical damage from the hurricane at US$8.8 billion, equivalent to approximately 41 per cent of the country's Gross Domestic Product.