On Tuesday, Jamaica’s Finance Minister, Dr. Nigel Clarke, announced that the Government would impose no new taxes on Jamaicans during this fiscal year. Clarke told the news as he opened the 2022/23 Budget Debate, which he tabled in the House on February 10. The budget for the new fiscal year is J$912 billion or just under U.S.$6 billion.
In a wide-ranging presentation, he pointed to the conflict between Russia and Ukraine, stating that Jamaica has started to feel the impact of the unrest, and the Government is closely monitoring the developments and the reaction of the market.
“Jamaica has joined with most countries around the world in condemning Russia for violating the sovereignty of Ukraine…. The Ukraine war represents the most significant conflict and the largest exodus of people since World War Two. I would like to commend the Prime Minister and Minister of Foreign Affairs, Kamina Johnson-Smith, in assuring that the Jamaicans in Ukraine were safely evacuated out of the country. We are all grateful that they made it out safely.”
“The outcome of both the military assault and the subsequent economic sanctions are uncertain. However, the negative effects on the world, including Jamaica, are already beginning to manifest themselves and could get worse.”
He said there are three economic channels through which the crisis can impact Jamaica, including increased prices for energy and other commodities, including wheat and other grains. Clarke noted that higher commodity prices mean that inflation for the upcoming fiscal year could be higher than previously anticipated.
He said inflationary pressures could exacerbate recent supply chain disruptions, potentially negatively impacting the COVID-19 rebound by reducing the prospect for global economic growth that could slow because of the Ukraine crisis.
The other potential impact source is the adverse financial flows as global investors seek safer assets.
“We are closely monitoring the developments – Jamaica has the wherewithal to withstand this, and we will weather this storm.”
The new financial year brings new banknotes for Jamaica.
The finance minister also noted that this year, Jamaica marks 60 years of independence, and the Government will be revamping the country’s banknotes. Doing so will restore all the images of the seven national heroes and four deceased prime ministers on the notes.
In addition to the existing six banknotes, Jamaicans will also get a new J$2,000 note.
Because there will be only seven notes and 11 images, however, six of the notes will carry two images each, the lone exception being that of National Hero Marcus Garvey, whose image will appear alone on the J$50 note.
The finance minister added that the quality of the paper used to make the monetary notes would get an upgrade so they last longer.
“The color of each denomination will be more distinct in order to avoid confusion, and features more amenable to recognition by the blind will be added,” he said.
Financial support for vulnerable Jamaicans
Clarke also announced that the Government had allocated J$200 million to assist the most vulnerable Jamaicans starting in March. This support will help cushion the effects of rising inflation, which has pushed up commodity prices.
“Even in challenging times, we have to maintain prudency but resolve to act and protect the most vulnerable and those at risk,” Clarke said.
Concerning the Program of Advancement Through Health and Education (PATH) grant, he said during March, the Ministry of Labour and Social Security plans to expand its reach to include needy families who do not receive the grant.
He said through the Labour Ministry, the Government is partnering with the Jamaica Red Cross, Food for the Poor, the Council of Voluntary Social Services, Adventist Relief Association, and several other non-governmental organizations to identify people in need who are not on the PATH program.
“We’re putting J$200 million behind that initiative, in the month of March, to be spent over the next three weeks, in response to what is being experienced,” said Clarke. He said qualified families would receive a one-off grant of J$10,000 to cover food expenses.
The intervention will continue in April with a further J$250 million in support of care packages for Jamaica’s most vulnerable.
“This amount will be distributed through the Constituency Development Fund, which will see the 63 Members of Parliament being allocated J$3 million each. The remainder will be distributed by the Ministry of Local Government through the municipal corporations.”
“We have made provisions to be in a position to follow up with another J$250 million later in the year, depending on how the situation evolves,” Clarke said.
COVID-19 and its impact on Jamaica’s economy
In pointing to the impact of COVID-19, Clarke said Jamaica’s debt ratio is almost back down to pre-COVID-19 levels after shooting up during the pandemic.
Before the pandemic in 2020, Jamaica had managed to get the debt to gross domestic product (GDP) ratio below 100 percent, down from 145 percent in 2013.
However, it again rose above 100 percent during the pandemic.
Minister Clarke said the debt to GDP ratio should hit 96 percent this month.
“And with God’s help, barring any major surprises and massive exogenous setbacks, by the end of the upcoming fiscal year, we could see this ratio below 90 percent, which would be the first time in 23 years – an entire generation.”
The finance minister also announced that the Government is working towards getting more Jamaicans within the formal banking system and offering to deposit J$2,500 into the accounts of people who open certain bank accounts.
He said an amendment to the Proceeds of Crime Act allows the Bank of Jamaica to permit the creation of accounts with low risk and fewer stringent requirements for opening them.
The accounts are also free of bank fees.
Clarke said the money would be paid to as many as 100,000 people who open these accounts after April 1.
Taxes, fees, and JamDEX
He acknowledged that the Government had played a role in the high fees by maintaining the asset tax and promised that the tax would be revised as soon as the Government could afford it.
He also said the Government would issue more retail banking licenses and spread its business across institutions to encourage competition.
But the minister made it clear that the Government will not seek to regulate banking fees.
“We do not believe in telling banks what they must charge for a package of services. It doesn’t solve the problem; it would only make matters worse. We don’t believe in telling the market vendor what she should charge for mangoes or the sky juice vendor what he should charge for bag juice.”
“There’s a lot of history of failure with policies of price-fixing. History has taught us that when you fix prices, the quantity inevitably declines, and the quality suffers. The reason is simple: If you fix a price and it is unprofitable to provide the service at the fixed price, the provider will simply choose not to provide the service, and then we have a real problem,” he insisted.
During his presentation, the finance minister also demonstrated the country’s new digital currency – the Jamaica Digital Exchange (JamDEX).
The finance minister took time to electronically transfer to his barber J$500, marking the first public JamDEX transfer.
The Budget Debate will end on March 22.
During the debate, selected government members and the Opposition will make presentations.
The opposition People’s National Party’s spokesman on Finance and the Public Service, Julian Robinson, is expected to make his presentation on Thursday, while Opposition Leader, Mark Golding, will speak next Tuesday, March 15, and Prime Minister Andrew Holness will make his presentation on Thursday, March 17.
