Gov’t of Jamaica Focused on Maintaining Fiscal Discipline

• Fiscal discipline will continue to play a critical role in Jamaica’s economic strength and future prosperity. That was the commitment from the Minister of Finance and the Public Service, Hon. Fayval Williams, as she opened the Budget Debate for fiscal year 2025/26 in the House of Representatives on Tuesday, March 11, 2025.
• Jamaica’s debt-to-GDP ratio is projected to decline to 68.7% by the end of FY2024/25, marking its lowest level in nearly 30 years. Minister Williams also acknowledged the Independent Fiscal Commission’s assessment that Jamaica’s fiscal position and policies are sustainable and that the legislated debt-to-GDP target of 60% or lower by FY2027/28 is on track to be achieved.
• The Minister, however, cautioned against calls to deplete the net international reserves (NIR) for short-term gains, emphasising its crucial role as a financial safety net against external shocks. The NIR stood strong at US$5,583.7Mn as at December 31, 2024.
• In terms of planned commitments for the upcoming fiscal year, the Government will be increasing the personal income tax threshold (PIT) to J$2Mn over three years, commencing April 1, 2025; reducing the bond on duties paid by new-car dealers from 100% to 20%; reducing the rate of dividend withholding tax (DWT) for dividends paid to non-residents (whether individuals or companies) to 15%; reducing electricity tax to 7% from 15%; increasing the annual turnover threshold for General Consumption Tax (GCT) registration from J$10Mn to J$15Mn and exploring the creation of a Micro Market segment on the Jamaica Stock Exchange for Micro, Small, and Medium Enterprises (MSME’s).
• Other initiatives include changes to the capital allowance regime to incentivise taxpayers to undertake investments and upgrades in production equipment, factories and other commercial buildings; increasing the repayment tenor for students who benefit from the Student Loan Bureau to 10 years; and imposing a J$1Bn subsidy to assist the first 20,000 customers who sign up with Jamaica Public Service Company for prepaid electricity.
• These initiatives are set to facilitate overall economic growth through various economic agents. The positives include encouraging households in targeted communities to formalise electricity consumption to more equitably spread the cost for the service; enable investors from around the world to invest directly in Jamaica at a more competitive and effective rate of income tax; and stimulate investment by manufacturers, producers and other commercial enterprises as they invest in and retool their business in 2025 and 2026. That said, the increase in the PIT threshold is a popular but expensive measure; it remains to be seen how this PIT threshold increase will be funded over the next three years.
• Overall, the government is set to execute these promises whilst maintaining a small fiscal surplus despite having the ability to run a deficit equivalent to “no more than 0.3% of GDP” based on fiscal rules. The fiscal year 2025/26 budget will be funded with J$949.5Bn of tax revenues, J$139.8Bn of non-tax revenues, J$812Mn of bauxite levy, and J$5.96Bn of grants. A total national expenditure budget of J$1.26Tn.

(Sources: JIS, PWC & NCBCM Research)