Given the pre-event rhetoric, many people would have been surprised by the revised Budget that Finance Minister Audley Shaw presented to Parliament on Tuesday.

We had been led to believe, although it was never explicitly stated, that there would be big cuts in expenditure, given the global recession and the resulting fallout in the Jamaican economy.

Indeed, Prime Minister Golding very publicly instructed permanent secretaries to slash by 20 per cent the allocation for programmes in their ministries, which would mean reducing planned spending by nearly $17 billion. At the same time, though, Mr Golding did declare some things sacrosanct, including his commitment to maintaining public sector jobs, free health care and high school tuition.

Little room

The administration, therefore, had little room within which to manoeuvre, especially when faced with a $16.2-billion increase in interest costs on the country's $1.2 trillion debt. So, even after much juggling of the numbers, the Government ended with a revised Budget that is $6 billion higher than the initial outlay of $555 billion.

A one-per cent hike in projected expenditure is minuscule. But not in the context of Jamaica's fiscal situation and the pressure it imposes on Mr Shaw to pay bills while ensuring macroeconomic stability.

Indeed, when Mr Shaw tabled his original Budget, he projected a fiscal deficit of 5.5 per cent of GDP, but even then there was a sense of unrealism about the numbers. The global financial meltdown had taken place and the crisis was deepening. The collapse of Jamaica's bauxite/alumina business, too, was well in train. The impact of this is reflected in the Government's accounts.

Even as the Government spent less than budgeted, the decline in revenue was faster than its capacity to be fiscally prudent. The effect: a larger than-programmed deficit at this point of the fiscal year.

Based on the latest numbers, the deficit will be closer to eight per cent of GDP than the projected five and half per cent - at a time that the Government is negotiating with the International Monetary Fund (IMF) for US$1.2 billion in credit and is under pressure to put its fiscal house in order.

In the circumstances, Mr Shaw may plead with the IMF to give Jamaica a pass, promising to fix things over the medium term. The specifics of any such undertaking will be laid out in a letter of intent now being negotiated with the fund. The Government, in this scenario, would borrow more to close the gap.

Remain hopeful

That is one option, if Mr Shaw is accommodated. In the meantime, the Government would hope that things remain relatively stable and interest rates continue to edge down.

Mr Shaw also has the option - which we support - of taking a hard look at the many wasteful and unnecessary government agencies and slash away at the fat. Some could be closed. The minister can't be shy in these tough times to bring an additional tax package to help close the gap.

He and Mr Golding must, by now, be convinced that the size of the public sector is unsustainable, demanding cold, tough action. Difficult times demand courageous leadership. The bottom line is that there is still much work to be done on the revised Budget.

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