The government will have an extra $4-billion to spend this fiscal year, and $8-billion next year.
That’s because the International Monetary Fund, IMF, has finally lowered the controversial primary surplus target under the Economic Reform Programme.
There have been calls for the 7.5 percent surplus to be lowered.
Under the IMF programme, Jamaica was required to save $126.7-billion this fiscal year.
That’s the amount of money collected from taxes and grants that the government should not spend. That’s known as the Primary Surplus target.
It acts as a sort of buffer as the government tries to bring down the debt to gross domestic product ratio.
Earlier this year, Co-Chair of the Economic Programme Oversight Committee, EPOC, Richard Byles, said the country had struggled to meet last year’s target, and would find it very difficult to meet it again this year.
Others argued that the government needed some of those funds to spend on capital projects and social programmes.
Many expected the IMF to ease the requirements after the Petrocaribe debt buyback in July, which resulted in a 10-percentage point reduction in the debt to GDP ratio.
Well, the IMF has now rewarded Jamaica, with a reduction in the target.
Now a reduction from 7.5 to 7.25 percent may not sound like much.
But in dollar terms, that’s an extra $4-billion that the government can spend this fiscal year.
Next year, when the target falls to 7-percent, that will free up an additional $8-billion.
It’s fantastic news for the Simpson-Miller administration which is now weighing whether it should call early general elections this year.
However, Finance Minister Dr. Peter Phillips says they’ll spend it wisely.
And the IMF has made it clear that the funds are to be used for growth inducing projects.
Meanwhile, the government is expected to pass its tenth consecutive IMF review.
The mission team recently completed its review and will recommend that the Board approves the next draw down of 39-million US dollars in December.