Fiscal Unruliness: Checking the Usual Suspects for Jamaica's Debt Buildup

Feb 2014
Jamaica's fiscal and debt position has long been recognized as a major issue for the country, and the country has made several attempts to resolve this challenge by increasing revenue or reducing expenditures. Despite these adjustments, Jamaica has systematically failed to achieve its budget targets. This analysis shows that the major weakness in the budget planning execution is revenue projection, which influences planned expenditures. In contrast, the limitation in reducing rigid recurrent expenditures -mostly interest and wage salary payments- has led to the introduction of measures aimed at meeting appropriate revenue targets. In addition, capital expenditure has systematically underperformed relative to the budget, possibly to compensate for these weaknesses. However, fiscal targets have still underperformed relative to budget projections. These repeated, lower-than-expected revenues combined with rigid expenditures led to continuous debt buildup, reaching a level that needs deep institutional reforms.