‘SERVE’ing a Recovery | Barita Insights | March 22, 2021

Over the last two weeks, Jamaica’s policymakers participated in our annual budget debates, where the direction of how the government’s spending will be allocated, and the amount is stated. This is a crucial debate as it sets the tone for fiscal policy in the upcoming year. In the context of Fiscal Year (FY) 2020/21 (ending March 2021), Jamaica experienced the worst economic crisis since its independence and yet we were able to weather this pandemic well on a relative basis. However, we are far from out of the woodworks, as this upcoming budget for the 2021/22 fiscal period will materially impact the quality of Jamaica’s recovery, and set the foundation for Jamaica’s future sustainable growth levels. This week, we will highlight key areas we extrapolated from the budget debate, with a broader view being in our ‘Jamaica 2021 Budget Review’ documentation.

Priorities for Recovery: The SERVE Programme
The government highlighted key pillars hat would underpin the recovery under the SERVE programme, namely:

1. Vaccination: Financing, Procurement, Storage, Distribution and Application of vaccines to reach herd immunity
2. Social Spending + Continued delivery of public goods and services
3. Financing Infrastructure
4. Support for small businesses
5. Preservation of Macroeconomic Stability

By examining the budgeted spending allocations under this programme, the government has prioritized supporting an ailing economy while simultaneously providing the necessary resources for the achievement of herd immunity.

Engineered Lockdown to Engineered Re-Start
The initial stage of the global pandemic was a health crisis, but to essentially protect the lives of individuals, an engineered lockdown was established by restricting the movements of people. This by effect had economic implications as economic productivity depends greatly on individual’s ability to consumer goods and services produced within the economy. A year later since it was recognized as a global pandemic, multiple fiscal and monetary policy was introduced, and vaccines were created and distribution underway. These measures are considered a concerted effort to essentially restart the economy and Jamaica has established a J$830 billion budget to achieve this restart in the form of Social Spending and Capital Expenditure.

Institutions and Policies
Under the Extended Fund Facility (EFF) with the International Monetary Fund (IMF), Jamaica was able to create a fiscal buffer that allowed for absorption of the impact of COVID-19. However, there were key measures under the fiscal framework that had to be amend over the Medium-Term. Such measures include:

1. Debt to GDP target of 60% to be obtained by March 2028
2. Central Government Primary Surplus (PS) of 6.1% of GDP for FY 2021/22, with a targeted average of 5.4% over the medium term.
3. Operations of the Central Government are projected to generate a Fiscal Surplus (FS) of 0.3% of GDP in FY 2021/22 and be maintained thereafter through to FY 2024/25

These policy changes give the government the necessary environment to achieve both fiscal stability and future economic growth on a sustainable basis. This however can only be achieved through fiscal prudence and the establishment of key institutions such as:
1. Modernization of the Central Bank
2. Independent Fiscal Commission
3. Public Investment Map
4. Open Government Partnership 5. Disaster Risk Financing

This only serves as a concise version of our more in-depth budget review. But these areas serve to provide the foundation for Jamaica’s recovery out of the worst economic shock on a global basis since World War II. This budget provides the necessary allocation of scarce resources and will enable the economic recovery to begin