Year to July Fiscal Deficit Better than Budget

Provisional data for July indicate that the Central Government exceeded its fiscal deficit target by $2,380.7Mn, with an outturn of $9,463.0Mn versus the budget of $11,843.7Mn. While the revenue outturn compared favorably to budget, it was the significant shortfall in expenditure which tempered the deterioration in the fiscal account.

Revenues and grants amounted to $103,646Mn, being $354.6Mn higher than budget. Tax revenues were $762.6Mn ahead of forecast, helped by better than expected revenue collection in the categories “production and consumption” and “international trade”. Inflows from these categories completely offset the underperformance of tax dollars from “income and profits”. The recent increase in motor vehicle licensing fees positively contributed to the performance of “production and consumption” category, while revenues from stamp duties and SCT also exceeded budget. Revenues from “international trade” were $561.4Mn more than anticipated, primarily as a result of inflows from the SCT on imports. However a shortfall of $78.7Mn was reported from “income and profits” primarily as a result of the $353.1Mn underperformance of revenues from PAYE, which continues to be indicative of the weakness in the job market and the record high levels of unemployment. 

The government continued to experience interest savings from low borrowing costs and its limited involvement in the domestic market. Total expenditure amounted to $113,109Mn, which was $2,026.1Mn behind projections. With the implementation of the budgeted tax increase in June and July as well as the amnesty for traffic offenses, revenues could remain above target for another few months. However, given the weakness in overall demand, and expected falloff in company profits and higher unemployment levels, the decline in ‘income and profit’ could temper the revenue outturn. Further, in the coming months, the true fiscal picture when scheduled capital projects are undertaken.