Fiscal reset under scrutiny

Opposition Spokesman on Finance Julian Robinson says the Government’s proposal to extend the suspension of the fiscal rules comes as no surprise and signals that Jamaica’s economic recovery from Hurricane Melissa is progressing more slowly than projected.

“This is evidenced by the performance for this fiscal year, which started on April 1, 2026. Government revenues are running $31 billion below projections and borrowing is $69 billion more than projected for the five-month period from April to September 2026,” Robinson told The Gleaner.

He noted that extending the suspension would allow the Government to borrow more and push back the target for reducing the debt-to-gross domestic product (GDP) ratio.

The fiscal rules, which cap deficits and set a timetable for reducing public debt, were suspended following Hurricane Melissa, which caused widespread damage across Jamaica in October last year, with the overall damaging effects estimated at US$12.2 billion.

Robinson said the economic pressure had been compounded by the imposition of new taxes while the economy was struggling to recover from the hurricane.

“The very slow pace of getting assistance to those most affected by the hurricane has made the economic recovery worse, as individuals and small businesses are yet to get back anywhere near to pre-Melissa levels of economic activity,” he said.

He pressed the Government to disclose the revised timeline being considered for the debt-to-GDP target and provide a credible roadmap for achieving it, stressing that Parliament was entitled to know.

Prime Minister Dr Andrew Holness said at a press conference on Tuesday, on the eve of the first anniversary of Hurricane Melissa, that his administration was likely to ask Parliament to approve a further temporary suspension of the fiscal rules into the 2027-2028 fiscal year to accommodate the scale of recovery and reconstruction.

Holness said the proposal was being considered in light of additional fiscal requirements to finance infrastructure development and targeted support for businesses and households. He emphasised that the Government would have to be more frugal and disciplined in its spending.

However, Fiscal Commissioner Courtney Williams told The Gleaner yesterday that the Government would have to make a formal request to the Office of the Fiscal Commissioner to extend the suspension.

Williams said the commissioner would have to validate the need for the suspension before an extension could take effect. He added that the minister of finance and the public service had not yet written to his office on the matter.

Last November, the finance minister wrote to the fiscal commissioner requesting the initial suspension of the fiscal rules.

The law provides for an initial suspension lasting one year, with the option of a subsequent extension.

ASSESS LINGERING EFFECTS

Williams said that before deciding whether to validate a further suspension, he would first have to determine whether Hurricane Melissa’s lingering effects were still disrupting economic activity and affecting government revenue.

He said government expenditure would also have to be considered.

“Based on the devastation, there is a certain amount of expenditure that the Government will have to undertake in the restoration specifically related to the impact of the hurricane. That would determine whether I validate the suspension for another year,” he said.

Meanwhile, economist Keenan Falconer agreed that the proposed extension was expected, saying it would allow the Government to engage in greater deficit spending without compromising debt sustainability.

“The law enables the Government to exercise the option of an additional year on top of the initial year of suspension. So, utilising it ought not to be seen adversely by international creditors regarding Jamaica’s debt-reduction trajectory, as this provision has been made in the legislation for such an event,” he said.

Falconer said the Government should use the temporary reprieve strategically by frontloading most reconstruction-related spending over the next 18 months, while the suspension was in effect.

Meanwhile, Jamaica Chamber of Commerce President Emile Leiba said the organisation supported the move, provided it addressed Jamaica’s immediate needs.

However, noting that the economy had been stabilised, he insisted that the suspension should remain in place only for as long as necessary.

“We would want to ensure that we don’t go back into the previous economic position,” he said.

editorial@gleanerjm.com