Fiscal Commission tells agencies to clear procurement backlog as reconstruction spending stalls

Jamaica's Independent Fiscal Commission wants government agencies to clear the procurement and capacity hurdles holding back their capital budgets, which ran $17.5 billion or 38.5 per cent below target in the April to June quarter.

Public bodies accounted for three-quarters of the underspending; central government accounted for the balance.

"The commission cautions that capital under-execution does not amount to true fiscal savings, and urges government agencies to resolve procurement and capacity hurdles to accelerate post-hurricane reconstruction," it said in its statement on fiscal performance for the quarter, released on Monday.

The commission blamed the lag on global supply chain bottlenecks, procurement delays and capacity constraints.

Headed by Fiscal Commissioner Courtney Williams, the commission became operational on January 1, 2025 as the guardian and interpreter of Jamaica's fiscal rules, which steer public sector debt back towards the 60 per cent of GDP anchor.

Debt stood at 65.6 per cent at the end of March.

The underspend is the main reason the headline fiscal numbers look better than expected. The specified public sector — central government together with public bodies — ran a deficit of $8.4 billion against a budgeted $13.0 billion.

Strip out the capital lag, however, and the picture reverses. The central government deficit reached $23.8 billion against a target of $14.5 billion, offset by a $15.4 billion surplus at self-financing public bodies.

Economy still shrinking, but more slowly

Real GDP contracted 2.9 per cent in the June quarter, a third straight quarterly decline since Hurricane Melissa.

The pace eased from contractions of 7.1 per cent and 4.1 per cent in the two preceding quarters, and beat both the budget projection and the revised post-hurricane forecast.

Inflation moved the other way.

Headline inflation hit 6.7 per cent in June and 7.5 per cent in July, above the Bank of Jamaica's 4.0 to 6.0 per cent target range.

The commission pointed to imported cost pressures worsened by Middle East tensions affecting the Strait of Hormuz, weather-related agricultural supply disruption, and increases in public transport fares and the minimum wage. The central bank held its policy rate at 5.5 per cent in August.

External buffers held. Net international reserves stood at US$6.5 billion at the end of June, covering 26.6 weeks of imports, even as reconstruction imports widened the trade deficit.

Wage deal and the return of fiscal rules

The government has concluded a three-year wage agreement with the Jamaica Confederation of Trade Unions covering the 2025/26 to 2027/28 financial years.

The commission welcomed the government's stated intent to reintroduce a fiscal rule for public sector wages and repeated its call to settle wage talks before the Budget is presented. Fiscal rules remain suspended until March 2027 to accommodate hurricane recovery.

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