Bad timing

Discontinuing the controversial multibillion-dollar annual drawdown from the National Housing Trust (NHT) for budgetary support would not be in Jamaica’s best interest at this time, two economists have suggested.

Over the past two decades, successive governments have extracted a total of $126.7 billion from the NHT to shore up the public purse, according to data released by the state-owned entity.

That figure is projected to climb by $29 billion to $155 billion by March 2026 when the drawdowns, which are being made through a 2020 amendment to the legislation governing the NHT, are set to come to an end.

Finance Minister Dr Nigel Clarke piloted the amendments to allow for the Government to draw down $57 billion from the NHT over a five-year period to cushion the economic impact of the coronavirus outbreak.

The NHT, which is financed through mandatory employee contribution, was established in 1976 with a mandate to increase the stock of houses in Jamaica as well as to provide financial assistance to the most needy in the society.

The country’s two main political parties have traded criticisms and faced public backlash over the diversion of the NHT funds, which began with a $5-billion transfer to the Education Transformation Fund during the 2005-2006 fiscal year when the People’s National Party (PNP), led by former prime minister P.J. Patterson, formed the government.

The NHT commenced annual $11.4-billion disbursements to the Consolidated Fund in the 2013-2014 financial year when the PNP again formed the government, this time under then Prime Minister Portia Simpson Miller.

In the previous financial year, the NHT said a payment of $1 billion was made to the Government by way of a special distribution that was in keeping with a memorandum of understanding with the finance ministry.

Further, the NHT disclosed that it made a “special financial distribution” of $1 billion to the finance ministry during the 2016-2017 financial year in keeping with Section 5 of the Public Bodies Financial Distribution Regulations.

“The total disbursements under these arrangements as at September 2023 total $126.70 billion,” the state-owned entity said in a document tabled in the Upper House of the Jamaican Parliament last month in response to questions submitted by Opposition Senator Floyd Morris.

Economic improvement

Morris told The Gleaner yesterday that he sought answers because he thought it was now “a good opportunity” for the Andrew Holness-led Government to end the drawdowns, given the touted improvements in the country’s revenue streams and economic indicators.

“It has its usefulness, but I think that now that we have seen the improvements in the economy there needs to be some adjustments where that is concerned,” Morris said.

But economist Dr Adrian Stokes believes the reduction in the public debt and improvement in Jamaica’s credit rating are “clear signs” that the policy to divert funding from the NHT to the Consolidated Fund “has been a success”.

According to Stokes, “it is also not clear” that the mandate of the NHT has been adversely impacted by the reallocation of its resources.

“Jamaica’s fiscal account faces greater risks, given the material upward adjustment in public sector salaries over a short period of time. This has reduced the degrees of freedom the Government has to operate, notwithstanding the relatively good performance of tax revenues,” he said.

“As the Government looks to execute on national priorities like education reform and national security, it will be hard pressed to return the amount the NHT contributes to the national budget.”

Economist Keenan Falconer agreed, saying it was the “safe option” to keep the two remaining drawdowns in place.

“Based on projections of growth for the next couple of years, coupled with rising interest rates and inflation that is elevated currently, the economic situation is still very tenuous,” Falconer argued.

He said that, whereas revenues may have recovered to some point, there is always the potential for challenges on the economic front over the next two to three years, especially within the global context.

“So, to remove a sure source of revenue that has been in place for some time might not serve the best interest of the overall fiscal account.”

Morris has however fired back, asking what would happen after it stops.

“I can’t understand this argument.”

Seeking to explain the rationale for the PNP’s decision to draw down on NHT funds, Morris said the country’s finances were in “dire financial straits and a number of measures had to be put in place to fund the Budget”.

“Now we have seen a significant reduction in terms of the debt-to-GDP [gross domestic product] ratio; we are down to 67 per cent thereabout… and they are operating ahead of budget projections; I don’t see why you should continue that with the NHT,” he asserted.

The NHT noted that, despite the multibillion-dollar disbursements, it has been able to carry out its mandate while increasing annual housing expenditure.

As an example, the entity said its annual housing expenditure stood at $48 billion at the end of the 2022-2023 financial year, more than twice the $21.59 billion figure recorded at the end of the 2013-2014 financial year.

livern.barrett@gleanerjm.com