August has proven the most difficult month for the stewards of Jamaica’s finances, going way back in time to when Omar Davies was the Minister in charge and during Audley Shaw’s tenor as well.

What we’re calling the ‘August curse’ is a familiar cycle for the tax inflows to the government coffers to look good up to July, and then Wham! It hits a brick wall in August, falling well below target and with not much improvement for the rest of the fiscal year. Historically, this usually happens when a major tax package is implemented.

True to the curse, the August 2013 out turn is not looking good. Revenues that were up half a billion dollars over budget to July is now down $5.1 billion at the end of August to $162.7 billion versus $172.7 billion projected.

Non tax revenues grew by $1.6 billion to $11 billion but tax revenues fell by $5.9 billion. Grants also increased, as it grew $830 million to $1.54 billion. The major fall in revenues was Payroll related taxes $2.7 billion, tax on interest $1.50 billion, tax on dividend $600 million, customs duty and SCT and GCT on imports were off by $4.3 billion but was offset by a big jump in travel tax which increased by $1.85 billion.

Expenditure to the end of August is also down by $10 billion with interest cost falling by $5.1 billion, wages down $1.2 billion and programmes $3.2 billion.

August Curse | For August overall revenues were down by $5.6 billion even as non-tax revenues increased by a billion to $2.3 billion. The shortfall came primarily from PAYE $850 million, tax on interest $2.7 billion, special consumption tax for local goods $600 million and $1.3 billion on imports, GCT on local goods and services $700 million and on imports $500 million and customs duty $400 million.

Expenditure was off by $4.6 billion aided by $1.8 billion cut in Programmes, a small drop in the wage bill and a big $3.7 billion fall in interest cost but capital expenditure climbed by $1.2 million.

Why shortfall? | The Financial Secretary Devon Rowe indicated that the revenue shortfall occurred based on a number of factors. These include lower withholding tax on interest due to the government paying out lower interest to bond holders. He further indicated that revenue of about $1.5 billion was collected in the last business day of August, which fell on a week end. Those funds have been recorded in August’s revenues. Petro Jam plant was shuttered for some time thus reducing SCT on fuel imports. He confirmed that August is usually a difficult month for collections based on the impact that back to school expenditure has on people’s disposable income.

Related posts | July surplus as Govt income jumps | Government may wipe out deficit

The inflation rate for August 2013 compared to July 2013 rose by 0.4 per cent as measured by the All Jamaica ‘All Divisions’ Consumer Price Index.

The index for the division ‘Transport’ recorded the highest movement of 0.9 per cent for the month, largely the result of a rise in the cost of airfares, motor vehicles and petrol and its related products. The most heavily weighted division ‘Foods & Non-Alcoholic Beverages’ recorded an upward movement of 0.2 per cent. In this division the highest movement of 2.0 per cent was recorded for the class” Fruit’.  This movement was however moderated by the decline of 1.0 per cent for ‘Vegetables and Starchy Foods’. The index of 2.2 per cent in “Water Supply and Miscellaneous Services Related to the Dwelling” which was tempered by a decline of 0.3 per cent in “Electricity, Gas and Other Fuels” the report from Statistical Institute of Jamaica disclosed.

The year–to-date inflation was 4.8 per cent, 1.5 percentage point above the 3.3 per cent that was recorded for the similar period in 2012.The point-to-point movement was 9.5 per cent.

All other divisions that make up the All Jamaica index recorded increases below 1.0 per cent. ‘Alcoholic Beverages and Tobacco’ rose by 0.4 per cent, ‘Clothing and Footwear,’ 0.4 per cent, ‘Furnishings Household Equipment’ and Routine Household Maintenance’, 0.2 per cent, ‘Health’, 0.3 per cent, ‘Recreation and Culture’, 0.7 per cent, ‘Restaurants and Accommodation Services’ 0.4 per cent, and ‘Miscellaneous Goods and Services’ 0.8 per cent. There was no movement recorded for both ‘Communication’ and ‘Education.’

There were increases in all three regions: Greater Kingston Metropolitan Area, 0.4 per cent, Other Urban Centres, 0.6 per cent and Rural areas, 0.2 per cent.

Jamaica imported goods valued at US$2.69 billion during the January to May 2013 period, while imports for the similar period in 2012 was US$2,735 billion, a decrease of US$42 million. Exports for the January to May 2013 period amounted to US$714.0 million, when compared to the US$720.0 million recorded in the comparable 2012 period a fall of US$6.0 million narrowing the trade deficit by US$36.1 million.

Imports | The value of imports for commodity groups, showed a general downward trend. The primary commodity group imported during the period was “Mineral Fuels, etcetera” which amounted to US$960.8 million and accounted for 35.7 per cent of total imports.  Relative to the US$1,143.5 million imported for the January to May 2012 period, the value of “Mineral fuels, etcetera” decreased by US$182.7 million or 16.0 per cent. This decline was as a result of reduction of items such as ‘Coal, Coke and Briquettes’ and Gas, natural and manufactured. “Machinery and Transport Equipment” valued at US$374.6 million, declined marginally from US$378.6 million in the similar 2012 period. “Manufactured Goods” valued at US$230.6 million, fell by US$30.3 Million or 11.6 per cent.

Traditional Domestic Exports | During the five months of 2013, the contribution of major traditional domestic exports to the value of domestic exports decreased from 54.9 per cent in the 2012 review period to 50.9 per cent in the similar period in 2013. Traditional exports amounted to US$347.5 million in the period, down US$35.4 million from US$382.8 million in the 2012 period. The decline is in the “Mining and Quarrying” and “Manufacture” groups.

Non-traditional exports increased during the January to May 2013 period by US$20.7 million or 6.6 per cent to US$335.2 million.

Imports from CARICOM for the first five months of 2013 accounted for 13.5 per cent of total imports and was valued at US$362.3 million representing a decrease of US$91.8 million or 20.2 per cent when compared to the US$454.1 million recorded for the 2012. The value of the Non-fuel imports from CARICOM amounted to US$125.8 million, up from US$115.1 in the comparable 2012 period.

“Mineral Fuels, etcetera” decreased during the 2013 review period, by US$102.6 million or 30.0 per cent and was valued at US$236.5 million. Other notable commodity groups imported from the region included “Food”, valued at US$76 million, “Beverages and Tobacco” US$17.2 million, “Chemicals”, US$11.4 million, and “Manufactured Goods”, US$9.9 million.

The United States of America (USA) remained Jamaica’s main trading partner during the January to May 2013, with US$923.9 million or 34.3 per cent of imports originating from that country. Total exports to the United States amounted to US$368.2 million or 51.6 per cent. Jamaica incurred a trade deficit with the United States of US$555.7 million, down from US$667.3 million in the similar 2012 period.

Total exports to CARICOM for the January to May 2013 period was valued at US$26.7 million, representing a decline of US$2.2 million or 7.8 per cent. Domestic exports to CARICOM decreased to US$22.2 million and accounted for 3.3 per cent of the country’s domestic exports. Re-export for the period increased and was valued at US$4.5 million, in the current review period.

For the first five months of 2013 Jamaica incurred a trade deficit with her CARICOM partners of US$335.6 million when compared to the US$425.2 million recorded for the January to May 2012 period. The trade gap narrowed by US$89.6 million or 21.1 per cent.

Related posts | Non-traditional exports narrow trade deficit | Non-traditional exports climbs 18% | Non-traditional exports climbs 18%

The Peter Phillips lead Ministry of Finance delivered the highest revenue intake for the fiscal year to date with nearly $32 billion in intake bettering the original forecasted figure by $1.7 billion and also delivered the first surplus for the fiscal year.

The deficit for the month, projected at $1.7 billion ended at $330 million in surplus. Year to date, the deficit is $6 billion ahead of target at $5.7 billion flowing from $700 million better revenue intake and $5.4 billion less spending. Wages are down $1.3 billion, interest payments $1.5 billion and capital spend $1.7 billion.

For the month, tax on interest is up $830 million over projections, corporate taxes are up $500 million to $1.1 billion, PAYE underperformed by $550 million with inflows of $5 billion the same as in June, tax on dividends exceeded forecast for the first time this year coming in at $331 million versus $259 forecast. Telephone tax which underperformed in June, stepped up in July with a collection of $1 billion versus forecast of $459 million, only $64 million was collected in June against forecast of $474 million.

Overall taxes on production and consumption delivered $10.9 billion just up on the budgeted amount of $19.4 billion in July. Tax on international trade was slightly better that forecast at $11 billion compared to $10.7 billion budgeted with most of the individual items doing better or close to budget.

July’s expenditure | Payment for wages was down to $7.55 billion versus forecast of $8 billion, interest payment was down from $8.2 billion budgeted to $7.7 billion. Other recurrent expenditure payments were lower than forecast at $7.6 billion actually paid against $8 billion forecast.

So far the government is well on the way to wiping out the deficit this fiscal year if they continue on the present track and don’t expand expenditure dramatically later in the year as the fiscal numbers improve.

Related posts | Government may wipe out deficit | Gov’t raking in taxes

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