Mixed bag for Gov’t in fiscal assessment
Published:Thursday | October 2, 2025 | 12:13 AM
The Independent Fiscal Commission (IFC) has signalled that additional revenue efforts might be required to meet budgetary amounts this year as the $14.2-billion tax shortfall at the end of the 2024-2025 financial year overstated the base for the current fiscal year.
In its fiscal performance report, the IFC also flagged lower-than-programmed capital spending across the ‘specified public sector’, with only $20.1 billion spent in the first quarter of 2025-2026 fiscal year, compared with a budgeted amount of $40.5 billion. The IFC said this underspending, particularly on infrastructure projects, poses risks to much-needed economic growth.
At the same time, the IFC has reported that the country’s macroeconomic environment remained broadly stable in the 2024-2025 financial year, with relatively low inflation, a stable foreign exchange market, and a strong labour market.
Economist Keenan Falconer said revenue underperformance is an area of concern that necessitates fiscal readjustments during the current financial year, especially given current low inflation and the expectation that it will be below target in the medium term.
The ICF reports that inflation stood at 3.8 per cent in June 2025, below the Bank of Jamaica’s target range of between four per cent and six per cent.
Falconer indicated that the Government could run a fiscal deficit one year earlier than originally planned unless it decides to cut discretionary expenditure even further, which includes capital spending.
He noted that capital expenditure is usually one of the easiest areas to cut because it is considered completely discretionary, but added that this is not growth-enhancing.
“If you want to really minimise the fiscal risk that is facing the Government from revenue underperformance, then you have to look to enhance tax revenue generation through more robust economic growth, which conflicts with the imperative to increase capital expenditure,” Falconer said.
In its assessment of the Government’s achievement of the budget and fiscal targets at the end of June this year, the IFC said while Jamaica’s macroeconomic environment remained broadly stable in the last fiscal year, weather-related shocks constrained real economic activity and limited revenue growth.
RECORD-LOW UNEMPLOYMENT
The IFC said stability persisted into the first quarter of the current financial year, with unemployment declining to a record low of 3.3 per cent in April 2025. Real gross domestic product (GDP) was estimated to have grown by 1.4 per cent, though geopolitical headwinds threaten to slow recovery.
Another key development reported by the IFC was the Statistical Institute of Jamaica’s adoption of the 2008 System of National Accounts, which increased Jamaica’s nominal GDP by approximately eight per cent on average. This revision lowered the debt-to-GDP ratio to 62.4 per cent at March 2025, positioning Jamaica to achieve its legislated debt target of 60 per cent two years ahead of schedule.
According to the IFC, the central government primary surplus exceeded targets for fiscal year 2024-2025 and the April–June 2025 period, while the overall fiscal deficit of $12.6 billion for the specified public sector was significantly below projection.
The IFC acknowledged progress in areas such as updating the system of national accounts, reducing informality through digitalisation of services, and improving the Public Investment Management System.
However, the commission said gaps remain, particularly in relation to public-sector compensation negotiations and comprehensive reporting on the specified public sector, as required by law.