KINGSTON, Jamaica: The government will sign an agreement with the International Monetary Fund (IMF) later this month and is warning Jamaicans to brace themselves for new taxes to fill a significant gap in the national budget.
“We’re going to have to contain our expenditure, we’re going to have to increase our revenue, which will mean that we’ll have to find new taxes that can be collected, almost immediately,” Golding said in a one-hour program called, “A Conversation with the Prime Minister”, on Sunday night.
The program covered a range of issues that a government statement said is “pertinent to moving the country ahead despite global economic concerns”.
While he gave no indication as to what areas the new taxes would come from, Golding said up to the end of October, revenues were J$17.8 billion (US$201.6 million) below target and expenditure was J$7 billion (US$83.06 million) behind projection.
“You no longer have the facility, the ability to go to the market and say lend me an extra J$10 billion (US$118.6 million); we’re going to have to start closing that gap in this fiscal year. More taxes will have to come. We’ll have to look to see where our sources of taxes are,” said Golding.
New taxes will mean that the government will have announced taxes three times during the fiscal year, which began on April 1.
Golding said the deal with the IMF, which is for a US$1.2 billion Standby Agreement, would be signed later this month. He said that he has met with an IMF team which is now on the island to discuss critical areas.
“We’ve pretty much cleared all the major hurdles, and I hope we’ll be able to conclude it this week,” Golding said. “But I’ve learned from experience, you won’t get it out of me, for example, to say by Thursday of this week…but I indicated that we were optimistic to be able to conclude by Christmas.”
Last week, Golding warned Jamaicans that the IMF agreement would not be a solution for the island’s economic problems.
“When the IMF agreement is concluded, there are some people who make the mistake of believing that this is some panacea, that this will solve the problem, that there will be a lot of money flowing in. We are seeking to get US$1.2 billion, and it is not a panacea. That US$1.2 billion is going to stop at the Bank of Jamaica, not one penny of that is going to go to the Ministry of Finance, that’s the nature of IMF arrangements,” said Golding, noting that the money cannot be used for budgetary support.
He said the IMF support is critical to the day-to-day operations within the country, as it is filling the gap that has been left by the shortfall in foreign exchange earnings being experienced by the country.
“Those funds are being provided to enable us to pay for the oil that we import, to pay for the medicines that we import, to pay for the raw materials that our manufacturers need, because the funds that we normally use to pay for those things are no longer flowing in the way that they used to flow,” said Golding.
Golding identified bauxite and remittances as areas in which the country has lost over US$800 million in foreign exchange inflows.
The Prime Minister said the delay in signing the IMF agreement is due mainly to two factors – “the effort that we have had to make, the work that we have had to do to configure a program that satisfies that particular requirement and, secondly, the care that we have had to take to make sure that we are not signing an agreement simply to satisfy IMF conditionalities”.