'Nicole' ups Budget by $7b

The International Monetary Fund (IMF) has given Finance Minister Audley Shaw the green light to add almost $7 billion to the Budget for this fiscal year.

The additional money is to deal with the repair of infrastructure damaged by flood rains associated with Tropical Storm Nicole.

The money will come from programmes which were slated to begin in the next fiscal year and will not force Shaw to increase taxes or go borrowing.

Shaw yesterday told journalists that half of the money will be from the Chinese loan used for the Jamaica Infrastructure Development Project (JDIP).

That will increase the spending under JDIP for this fiscal year from the US$60 million, which was initially projected, to US$100 million.

The finance minister will take the rest of the money from projects which were already approved for financing by the Inter-American Development Bank and the Caribbean Development Bank.

No borrowing

Shaw made the announcement yesterday after he returned from the United States where he held talks with officials of the IMF, the World Bank and other multilateral agencies.

"I want to make it absolutely clear that while in Washington I did not seek to borrow money to deal with Tropical Storm Nicole," Shaw told the weekly post-Cabinet media briefing.

The finance minister said what he sought from the IMF was an agreement to create the necessary fiscal space to allow for the expenditure.

"Because, as you know, there is a letter of intent with the IMF (which) speaks to a medium-term economic programme under which we are to stay within prudential limits with our deficit target. To the extent that we have had the devastation of the tropical storm, it would mean that we would have to have higher level of expenditure in order to deal with the emergency cases," said Shaw.

According to Shaw, the bulk of this money ($5.8 billion) is to be spent to repair roads, drains and gullies while the rest will be used to repair other infrastructure, including health facilities, water-treatment plants and assist the hard-hit agricultural sector.

The country should know, on November 2, details of the Government's new spending plan as Shaw is scheduled to table the Supplementary Estimates of Expenditure on that date.

The preliminary estimate of the cost of the damage from Tropical Storm Nicole is $16 billion, but Shaw pointed out that the almost $7 billion allocated represents the level of work which the country will be able to complete before next March when the fiscal year ends.

Shaw said the additional spending should increase the fiscal deficit by 0.28 per cent.