Finance Minister Dr. Nigel Clarke has reported that the COVID-19 pandemic is expected to cost Jamaica $120 billion.

He revealed the number Wednesday afternoon in the House of Representatives as he presented a revised budget to accommodate the COVID-19 costs.

Dr. Clarke explained that the price tag for the epidemic is comprised of lost revenues to the government and increased costs.

He said it is projected that the country will lose $81 billion in tax revenues or 12.3 per cent less than the approved estimates as a result of reduced economic activity – this as preliminary estimates show that revenues for last month were already 18 per cent less than projected.

In addition, the COVID-19 pandemic would cost Jamaica new expenditure of $34 billion, including increased debt-servicing costs of $7.9 billion, as well as affect “other inflows” to the tune of $5 billion.

Rebalanced budget 

To rebalance the budget, the government is making cuts and reallocations of expenditure totalling $50 billion and using cash resources totalling $70.8 billion.

The government is now projecting to spend $838.1 billion.

The budget approved in March, was for $853.5 billion in government expenditure.

The government has also revised the target for the primary surplus balance from 5.4 per cent to 3.5 per cent.

It has also pushed back the date for achievement of a 60 per cent debt to Gross Domestic Product (GDP) ratio by two years to 2027/2028.

COVID-19 response 

Meanwhile, the government is now planning to spend $26.8 billion on its COVID-19 response.

Dr. Clarke said the Health Ministry will get $6 billion more from the increased budget.

Some $10 billion was initially allocated for the COVID-19 response, with the Health Ministry receiving $2.8 billion.

However, at the end of April, that ministry reported it had already spent $2.5 billion and was seeking further funds from the Finance Ministry.

The COVID Allocation of Resources for Employees (CARE) programme will increase to $17 billion and the productive sector should get $800 million.

Five self-financing public bodies will get a total of $3 billion.

Further changes likely?

Responding to Dr. Clarke, Opposition Spokesman on Finance Mark Golding said based on the economic shock caused by the COVID-19 pandemic it is likely that further changes will have to be made to the 2020/2021 budget.

He said the economic fallout is significant and therefore more funds will have to be allocated to assist vulnerable persons.

Growth forecast revised 

Meanwhile, the government has revised its growth forecast and is now projecting a 5.1 per cent contraction in the economy this fiscal year.

When the Finance Minister tabled the original budget in March, the government was predicting growth of 1.2 per cent in 2020/2021.

Dr. Clarke said if the impact of COVID-19 was severe, the government would project a lower growth scenario of 0.7 per cent for 2020/2021.

However, on Wednesday, he confirmed the situation is expected to be far worse.

The International Monetary Fund (IMF) has projected a 5.6 per cent contraction in the Jamaican economy for 2020.