Newspaper reports this week in Jamaica indicated finance minister Audley Shaw saying Jamaica now had a fiscal surplus. I have not seen the actual data, but the report indicated that Jamaica’s primary surplus for the last fiscal year was J$136 billion, some 7.7 percent higher than programmed. Now, I have not seen a full table, so cannot be sure that the comments make sense in terms of the budget figures we normally see, but let’s put that technicality to one side, for the moment.

Now, there are several problems with this outcome. First, missing targets in an IMF program is not necessarily a good thing. Such programs are designed in a particular way; the elements have a certain coherence, so the level of the fiscal balance is meant to be consistent with the level of other variables, such as the stance of monetary policy, or the balance of payments position. Second, the nature of the miss is very important. In Jamaica’s case, were revenues higher than expected, spending lower than expected, or some combination? If tax policy was working as planned why would revenues be higher than expected? If government programmes were working as planned, why would spending be lower than expected. Were underlying economic conditions not as expected, or is something else going on that may be temporary or a new set of permanent circumstances are in play? Several months ago, minister of state in the ministry of finance, Fayval Williams, had spoken to the same fiscal surplus, but with more details: she indicated that capital spending had increased, but revenues had been higher than expected. Put differently, while the government was pushing money into the economy, it was drawing it out of the economy faster through taxation. Surely, this can’t be a strategy for accelerating growth!

Other implications of the country running a surplus instead of a deficit are important; a surplus clearly shows that the fiscal performance of the government is much tighter than program. Conventional economic theory suggests that a tighter fiscal program is more likely to have a negative impact on economic growth. So what Jamaica’s government is doing is working against fostering economic growth.

When I made my initial assessment of this year’s budget, I commented, as follows:

‘The Budget leaves the government still in the jaws of a dilemma: it does not convincingly push the needle towards the much vaunted growth target of 5 per cent growth within 4 years, the so-called ‘#5in4’.’

I also indicated that I thought the budget was going to be growth negative, meaning that growth would be less than it otherwise could be. The country running a fiscal surplus would seem to confirm that point: the government is drawing more resources out of the economy than intended. For the growth outcome to be as expected, then other sectors, namely private in ideals and corporations, need to be growing much faster than expected. Is that what is going on? Or, is the government’s growth strategy going badly off-struck by its own fiscal ‘success’?

On growth performance, the Planning Institute of Jamaica just told us that it was 0.3% in the quarter ended June, sluggish at best. It’s coming mainly from the impact of developments outside Jamaica, not domestic policy, PIOJ say. Weather (heavy rain) was also a negative factor–agriculture etc declined 8.5%–as it was positive, previously, but I keep saying weather isn’t a policy variable. Mining etc declined 10.5%; construction grew 1.5%, as did ‘industry’.

I see merely the tenderest of growing green shoots, if I look hard enough 🤔😩

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