BUSINESS MONDAY: Government targeting 3% primary surplus
WITH the island’s vital tourism sector already experiencing serious fallout due to the COVID-19 virus, Prime Minister Mia Amor Mottley said maintaining a six per cent primary surplus was no longer possible.
Therefore, Government has entered into “an initial understanding” with the International Monetary Fund (IMF), where it would move from the target of running a six per cent primary surplus to that of three per cent of GDP in the case of a “moderate” scenario of a 50 per cent reduction in tourism arrivals.
However, in the severe case where there was an 80 per cent reduction, which Mottley admitted was the closer possibility, two per cent of GDP would be the aim.
“But it is too early for us to talk about that. We are going to work in the next three to six months on the basis of the moderate scenario until the data comes in,” she said, insisting Government was hoping for the best, but preparing for the worst.
She stated therefore Government would have additional fiscal space “that even if we lose $240 million in tax revenue, we are hoping to be able still to spend about $150 million over the course of the next six to nine months and longer because some of the capital projects will go longer than that, to be able to stabilise and create opportunities for our people”.
In addition, the PM said revenue loss was expected to be between $157 million and $240 million regarding the accommodation, travel, health, and garbage and sewage levies, while spend was expected to be $150 million.
“Against this background, we also indicated to the IMF that we would welcome the augmentation of our Enhanced Fund Facility by another $200 million,” she said.
The impact of the weakening tourism sector was expected to hit real growth by between 4.2 per cent and 8.3 per cent, depending on whether the tourism scenario was moderate or severe, and according to the Finance Minister, would also have an impact on total imports of between one and two per cent of GDP – $110 million-$220 million.
“The job of this Government is to help people keep their head above water. Nobody is expecting breaststroke, backstroke, freestyle and not even a good dog paddle. We are expecting people just to tread and keep their head above water,” Mottley insisted. (JMB)