report no. 14387-jm jamaica public expenditure review

Report No. 14387-JM

JamaicaPublic Expenditure ReviewApril 30, 1996

Caribbean DivisionCountry Department IIILatin America and the Caribbean

Document of the World Bank

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Currency EquivalentsJamaica adopted a market determined exchange rate in September 1991.

At the end of January 1996, US$1.00 = J$39.00.

Fiscal YearApril 1 - March 31

PrefaceImproving decisions on public spending in a democratic country like Jamaica

requires improved information for decision makers and their constituencies. Spendingdecisions emerge from a repeated democratic process which can be made more transparentby improved data and analysis. The transparency must come from within; and consequentlythe Financial Secretary proposed that the Ministry of Finance work with the World Bank toproduce the Public Expenditure Review (PER). This version of the report is from theWorld Bank. It was discussed with the Government in February 1996. Some updates havebeen made to reflect changes and reforms since the earlier draft, but there may be additionalareas where new measures have addressed the issues raised in this report.

The exercise has aimed not only to gather appropriate data and analysis but, moreimportantly, to start building up the capacity to produce them and the interest in using themwithin the Government. Overviews of public spending and the analysis of its effectivenessshould become a regular part of the annual budget process.

As the period of programs supported by the IMF draws to a close, the Ministry ofFinance is strengthening its own capacity for macroeconomic monitoring and improving theinformation base for government decisions on the allocation of these resources acrossministries and other agencies. The PER contributed to the preparation of the Public SectorModernization Project, which the Bank intends to support with an investment loan. Inaddition to the overview of the resource allocation across sectors, the report investigatessome priority sectors in more detail-education, health, roads, and agriculture. Thesereports were annexes to earlier drafts and are available now upon request.

As the report was prepared in collaboration with the Ministry of Finance, it wasshared in draft at all stages with them, the Planning Institute, and the Cabinet Secretary.The latter is our main counterpart for the Public Sector Modernization Project, to thepresentation of which this review contributed. The individual sector reports were discussedwith the corresponding ministries in February 1995, and the draft of the overview andprojections was discussed with the Ministry of Finance and Planning Institute. The formaldiscussion of the Green Cover draft took place in February 1996. The discussionsconcerned both the substantive findings and recommendations of the report, and theGovernment's plans to have annual follow up reviews prior to the budget call.

Contributors to the report include Sarah Adam (education), Jill Armstrong (health),Will Bateson (budget database and overview), John Cracknell (transport), Richard Moore(personnel), Winsome Leslie (sector overview), Beryl Miller (FMIS), Michael Prescod(budget institutions), Suzanne Raswant (agriculture), Steven Webb (task manager), andEliza Winters (fiscal projections). The peer reviewer is Vinaya Swaroop. Zhicheng Liprepared the charts and the tables. Hazel Vargas, Melissa Williams and Deborah Trent didthe desktop publishing.

The Department Director was Yoshiaki Abe during preparation of the reportand is now Paul Isenman, the Division Chief of Caribbean Country Operations isPhilippe Nouvel, and the Lead Economist is Norman Hicks.

ContentsPREFACE .......................................... ;LIST OF ABBREVIATIONS ......................................... VEXECUTIVE SUMMARY ........................................... Vii

1 OVERVIEW OF PUBLIC SECTOR RESOURCE ALLOCATION ......................................... 1Trends in overall spending and debt service .............................................. ISpending by function .............................................. 4Spending by budget category and object .............................................. 6Personnel .............................................. 7Conclusions .............................................. 8

2 MACROECONOMIC FRAMEWORK ......................................... 9Long-term trends and short-term hitches .............................................. 9Projections .............................................. I 1

3 PUBLIC EXPENDITURE IN KEY SECTORS ......................................... 13Education .............................................. 13

Total expenditure for education .............................................. 14Distribution of MOEC expenditures .............................................. 15

Recormnendations .............................................. 17Health .............................................. 18

MOH expenditures .............................................. 19Recommendations .............................................. 20Transport-roads .............................................. 21

Total expenditure for transport .............................................. 22Recommendations .............................................. 24Agriculture .............................................. 24

Distribution of agriculture sector expenditures .............................................. 25Recommendations .............................................. 27Financing for key sectors .............................................. 27

4 INSTITUTIONS AND THE PUBLIC EXPENDITURE PROCESS ......................................... 29Formulating the budget .............................................. 29Implementing the budget .............................................. 30Monitoring implementation of the budget .............................................. 33The public service .............................................. 34Recommendations .............................................. 36

APPENDIX TABLES ......................................... 39MAP OF JAMAICA

iii

List of AbbreviationsARP Administrative Reform ProgrammeBOJ Bank of JamaicaFMIS Financial Management Information SystemFPMU Fiscal Policy Management UnitGDP Gross Domestic ProductHRMIS Human Resource Management Information SystemIDB Inter-American Development BankJPS Jamaica Public Service Company Ltd.LRS locally registered stockMLG Ministry of Local GovernmentMNLGW Ministry of Local Government and WorksMOA Ministry of AgricultureMOC Ministry of ConstructionMOEC Ministry of Education and CultureMOF Ministry of FinanceMOH Ministry of HealthMPS Ministry of Public ServiceMWT Ministry of Water and TransportNCS National Computer ServiceNGO Non-governmental OrganizationNHT National Housing TrustNIC National Irrigation CommissionNWC National Water CommissionOPM Office of the Prime MinisterPER Public Expenditure ReviewPIOJ Planning Institute of JamaicaPSBR Public Sector Borrowing RequirementPSIP Public Sector Investment ProgramRADA Rural Agricultural Development AuthoritySPEs Selected Public EnterprisesUDC Urban Development CorporationUHWI University Hospital of the West IndiesWDR World Development Report, World Bank

v

Executive Summaryi. The Government of Jamaica in its Medium Term Policy Framework of 1994made clear its commitment to allowing the private sector to lead economic growth.This implies that the public sector will shrink as a share of the economy and that it willdecline or exit from some areas, to allow necessary expansion in a few priority areas. Italso implies that the role of the public sector will change, continuing to move awayfrom directly productive activities and strengthening its capacity to regulate the privatesector as needed. The Policy Framework identified priority areas of public spending toachieve the objectives of sustainable growth and poverty reduction, but these objectiveshave only begun to translate into reallocation of public resources. The Government isalso concerned to assure that the public receives value for expenditure.

The budget process should be based on regular monitoring of performanceby government agencies, as well as on a more easily understandablepresentation of information on the allocation of resources.

ii. The Government increased taxes in the 1995/96 budget to sustain adequatefiscal surpluses in the face of increases in recently negotiated public salaries and in debtservice costs. But the Government's commitment to private sector-led growthsuggests that it should not repeat this and should reduce tax rates in the long term. Themacroeconomic envelope for total public expenditure will not expand until substantialgrowth occurs, but interest payments take over a third of the total now and reducingthem is probably the only way in the medium term to increase non-debt expenditures-those meeting the needs of people. Given the high interest rate on domestic debt, therewould be significant benefits from reducing that stock steadily in nominal as well realterms.

The Government should develop and implement a debt-managementstrategy that will (1) bring down the stock and interest cost of domesticdebt as quickly as possible and (2) use relatively low-interest foreignborrowing to smooth out the net repayment of foreign debt.

iii. Less than one-fifth of non-debt service expenditure by the Government goes forbasic education and roads-the two clearest priority areas for public resources topromote sustainable growth and poverty reduction. To make resources available to thepriority sectors, some other spending should be cut back.

The Government should focus more of its spending in basic educationand roads, and should turn more attention to improving the quality ofexpenditure in these subsectors by making the allocations more in linewith efficiency and equity objectives. Spending increases even inpriority areas would have to be limited in the near term to the extentof cuts elsewhere.

vii

Executive summary

iv. Personnel are the Government's greatest cost and its primary asset. The centralGovernment employs about 8 percent of the total work force, plus about half that manyin other public entities. Although the wage bill is over half of non-debt serviceexpenditures, salaries for technical and managerial posts are typically half or less of theprivate sector equivalent. With external support, the Government is planning reformsto address these issues.

Pay, working conditions, training opportunities, and career prospectsshould be improved to attract some of the best young professionals intothe civil service. To obtain resources for filling critical posts andimproving pay levels and working conditions in the priority programareas, the Government needs to eliminate many posts in the civilservice at non-professional, non-technical levels and in non-priorityprograms.

Key sectoral issues

v. The Expenditure Review this year examines in detail the issues in four criticalsectors: education, transport (roads), health, and agriculture. Subsequent reviewsshould revisit some of these and look in depth at others. In education and roads, thepublic sector is the dominant provider and its activity will expand, although with morereliance on user fees for higher education and on private contractors for road work. Inhealth and more so in agriculture, the private sector provides a large and growing shareof output, so the public sector roles need to be refocused.

vi. Primary and basic secondary education and career-oriented tertiary educationand training are priorities for economic development but are not adequately reflected inthe present allocation of expenditures. Almost half of the public spending goes to theuniversity and to upper secondary education (of those bound for university). Costrecovery is already considerable at the upper secondary level and more would beappropriate for the university, where it is still 15 percent or less, but both of these needto be accompanied by more scholarship and loan support for students from low-incomefamilies.

For both equity and growth objectives, the Government shouldincrease substantially the share of its resources for primary and basicsecondary education, and improve the efficiency of allocation becausethe poor depend disproportionately on these programs and because theshortage of workers with a good basic education is an importantconstraint to overall growth.

vii. In the transport sector, most public spending is for roads. This priority isappropriate, but the intra-sector allocation is inefficient in its neglect of maintenanceand is too low in any case to achieve the objective of a road system adequate tosupport strong economic growth.

The Government should consider a three-pronged strategy to(1) implement the existing plans for upgrading the trunk road system;

viii

Executive summary

(2) streamline contracting and funding procedures for maintenanceand rehabilitation so that it gets done more efficiently and makes moreeffective use of available external funding; and (3) update theinventory of the road system and, based on it, decide which roads torehabilitate and maintain, and develop a cost-effective plan to do so.

viii. Total real expenditure of the economy for health care has roughly doubled inthe past decade in Jamaica, as elsewhere in the world. The Government has almostsustained its expenditures as a share of GDP, but this cannot provide full-service healthcare to the entire population. The private health sector has expanded greatly inresponse to the demand-now providing 65 percent of total expenditures and 75percent of outpatient care. This generally positive development has led to inefficiencythrough duplication in health facilities, especially at the primary level. It also has leftsome gaps in the provision of care to the poor who cannot afford to buy health servicefrom the private sector, although non-governmental organizations (NGOs) help here.Priority access to public hospitals for non-emergency care is given to (those who canafford to be) private patients of physicians on the staff, although this practice is nowunder review.

The Government should complete its work to devise a new health carestrategy that takes account of the expanded role of the private sectorand of the major increase in total resources that the population iswilling to pay for health care. To focus on providing more efficientlywhat the private sector will not do and on financing of the basicpackage for the poor, the strategy should (1) define a basic minimumhealth care package to which the Government guarantee access for thepoor; (2) spell out a division of labor with the private sector; (3) reducepublic financing for tertiary care institutions; and (4) assure that thosewith insurance or other resources pay for their hospital and otherpublicly provided care.

ix. The agricultural sector has grown rapidly in recent years, even thoughGovernment spending on agriculture has declined greatly and is now spread too thinlyto be effective in most areas. While there has been significant divestment of publiclyowned agriculture enterprises, particularly in the sugar sub-sector, several still controlsubstantial amounts of land and other off-budget resources. Some statutory boardsissue liabilities that are outside normal fiscal controls but are in effect publicly backed.

The Government should focus its spending in agriculture,concentrating on disease and pest control and on research andextension that benefit small farmers. Collaboration with the privatesector should be improved. Subsidies to producers associations andstatutory bodies with commercial operations should be phased out.Most remaining public enterprises should be closed or fully privatized.A coherent policy should be adopted for management of Government-owned land.

ix

JAMAICA: PUBLIC EXPENDITURE REVIEW

Institutional issues

x. The Government's agenda of sustaining macroeconomic stability and pressingahead with administrative reform and public sector modernization make it imperative tohave better information and analysis of public sector expenditure. ProgrammeBudgeting and the Financial Management Information System (FMIS) are improvingthe information for policy makers, but the implementation of the FMIS is incompleteand lagging behind schedule. When complete, it will provide the line ministries and theMinistry of Finance with up-to-date reports on the progress of spending for eachprogram and object in the budget.

Implementation of the program budget and the FMIS andstrengthening the capacity for spending analysis and performanceevaluation should continue, both at the Ministry of Finance and in theline ministries. Better information systems should link the two.

xi. The public sector has moved both its revenue and expenditure accounts intocommercial banks, which lessens the problem of short-term liquidity management. Thenew arrangement also creates substantial opportunity for saving on the interest cost ofshort-term domestic debt. The warrant and disbursement system has been revised sothat warrants are made available at a pace to keep the fiscal program within theappropriate envelope. Disbursement of externally financed projects still lags behindprojections, however.

The Government should implement its plans to strengthen the treasuryfunction, so as to better manage its internal and external assets andliabilities, and to keep outstanding domestic debt to a minimum. The

, Government should consider further measures to improve aidutilization.

xii. Many of the inefficiencies of the Government spending arise because thebudget process is not based on systematic performance reviews and does not look morethan one year out. To some extent the short-term focus was necessary formacroeconomic stabilization, but there is now a need for longer term planning in orderto improve efficiency and sustain macroeconomic stability.

The program budgeting process provides for performance reviews, afew of which have begun, based on the goals in the annual corporateplan. It would be useful to have these reviews annually for eachagency and ministry as a prelude to the budget call. The Public SectorInvestment Program process should be rejuvenated, with the programupdated annually and monitored quarterly. It should be accompaniedby a similar rolling three-year plan for overall government spending,including the recurrent budget needed to utilize and maintain theprogrammed public investments.

x

Overview ofpublic sectorresource allocation

This report provides information for policy makers to evaluate the quality andefficiency of spending and to improve allocation of resources for the nation's priorities.It summarizes such information from a database being developed at the Ministry ofFinance, Fiscal Policy Management Unit.

Trends in overall spending and debt service

Government spending, including Bank of Jamaica losses, has grown about 20percent in real terms over the past decade. See Figure 1.1. As discussed in Box 1. 1,the report does not include the amortization and rollover of debt as expenditure, as thispractice (used with the budget) overstates the size of the Government.1 Over the pastdecade, spending as a share of GDP has declined slightly on average but mostlyremained in the range of 35 to 40 percent.2 See Table 1.1. The two major outliers are1988/89, when externally financed reconstruction for damage from Hurricane Andrewcaused a big jump, and 1992/93, when the inflation of 1991-92 had its full effect ineroding real wages in the public sector and the catch-up wage increases were deferredto the next budget year.

Real tax revenues have risen over 80 percent since the mid 1980s, bringing thebudget balance from a deep deficit position in the mid 1980s-debt financing for aboutone-third of expenditures-to a substantial surplus in 1994/95.

Interest on debt and Bank of Jamaica losses have taken about one-third of thetotal Government expenditure for some time. In the 1980s, most of the interest wasowed to foreign lenders who charged high rates because of the high rates in the worldmarket and (from commercial creditors) because of Jamaica's poor credit rating.Interest on external debt has declined since the late 1980s as Jamaica paid down theprincipal and as rates on world markets declined. Interest on domestic debt has risen,

' The spending classifications used here are slightly different than those of the budget. In additionto amortization, discussed in Box 1.1, the other main difference is that BOJ losses are reported here asdebt service in the year they occur, rather than in the following fiscal year when they are paid from thebudget. The IMF also follows this practice.

The choice of a deflator for calculating the real value of expenditures is difficult, since anexplicit deflator for government services does not exit. Both the GDP and the CPI have theirlimitations as deflators. The report uses both in order to enhance the robustness of the results.

1

I Overview of public sector resource allocation

Figure 1.1: Real expenditure by type

40,000 Total Revenue Total Expenditure Fiscal urplusT

35.000 -

30,000 -

a 25,000 -

20 ,000 l | l_o 20,000 Re ll lill l l l l al Non-Financial Capital

Z 15.000

10,000

Real Recurrent Goods and Services (excluding interest5.000

0 1984/85 1986/87 1988/89 199O91 1992/93 1994,85

however, due to both the increasing stock and the rise of interest rates to market levelsin a period of high inflation and stabilization. BOJ losses were steady in real terms(about J$4 billion in 1993 prices) until the past three years when they were shifted overto the Government budget. High domestic interest rates and increasing stocks ofdomestic debt since 1991 were the to some extent unavoidable consequence ofmacroeconomic stabilization and foreign-reserve accumulation in a liberalized financialenvironment. Prudent fiscal and monetary policy will be necessary to sustain the hard-won improvements in current fiscal surpluses and international reserves, to avoid areturn of inflation, and to reduce the interest burden in the future.

Table 1.1 Jamaica: Government expenditure, 1984/85 - 1994/95(As percent of GDP)

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995to to to to to to to to to to to to1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996

Tati Expenditure 40 2 41.5 39 5 35.0 41 5 36.6 33 1 33 9 28.1 34.2 35.7 37.8Recurrent 35.7 36.1 329 288 314 30.0 266 27.9 23.8 289 300 297

Interest&BOJ Losses" 17.7 19.6 175 155 14.5 142 12.2 146 129 123 140 11.7OtherRecurrent 180 164 154 13.3 169 158 14.4 13.3 109 166 160 18.0

Capital (non-financial) 4 5 5.5 66 62 10 0 6.7 6 4 60 4 3 5.2 5 7 81o/wTotalnon-debt 22.5 219 22.0 195 270 224 209 193 152 21.9 21.7 261

Fiscal Surplus/Deficit -12.5 -12 3 -8.2 -6.2 -9 0 -5 3 -1 3 -1.2 -1 0 1 5 1.4 05

Sources: Ministry of Finance, Jamaica, 1995, and Consultant calculations.

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I Overview ofpublic sector resource allocation

Box 1.1 The size of the budget is not the size of government expenditure

The budget includes all outlays that the Government plans to make during the fiscal year.These obviously include expenditure what it pays for goods and services that it uses. Budgetedoutlays also include gross amortization of medium and long-term debt, which is useful for planningthe financing needs of the Ministry of Finance. Outlays for amortization do not reflect the purchase ofany good or service, however, and should not be considered as indicators of the size of Government.

To the extent that the amortization is net, reducing net indebtedness, it is the application oftax revenues to repay some debt that was used to finance expenditure already made and accounted forin past years. The rest of the amortization is rolled over into new debt, carrying forward the obligationto pay for past spending but not involving any new purchase of goods or services, nor any change innet indebtedness. It would be double counting to say that the Government spent $20 million to build abridge in 1990 and then to say that it spent another $20 million in 1995 when it repaid the loan thathad financed the bridge.

The amount of rollover, which is reported in the budget, depends critically and somewhatarbitrarily on the term of the debt. Roll-over of T-bills and other instruments of less than a yearmaturity are not counted in the budget. Once debt has a maturity above a year, locally registered stock(LRS) and bonds, its amortization and rollover are counted in the budget, but of course furtherlengthening of maturity reduces the amount of rollover.

The national accounts are correct in not counting amortization as spending, and the mediaand the citizens should do the same. Thus this report does not count amortization as spending andthus the figures are smaller than in the official budget. The discrepancy varies considerably over time,as shown in the figure below:

Government formal and true budget (as % of GDP

0.6

0.5

0.3

0.2

0.1

00 00 00 I- 00 0 % % 0 0 % 0a, C~~~ 00 a

-4--- Actual Budget - -5 - - Formal Budget

Interest is counted as expenditure. By leaving its debt outstanding, the Government is usingfunds that could otherwise go to other uses in the private sector or abroad, and interest is the price paidfor the use of debt. This report follows that convention. It also counts BOJ losses as expenditure. Theformal budget has also counted BOJ losses since 1992/93, but it did not do so earlier. That is why theexpenditures, counting BOJ losses, were larger than the formal budget in the mid-1980s.

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Spending by function

The broad functional groups of expenditure show that public debt management(interest and BOJ losses) is largest at around 40 percent of total expenditures in1994/5, then human services at around 20-25 percent, then economic infrastructure andservice at 15 percent, and then defense and public order and general government atabout 10 percent each. See Figure 1.3. From 1993/94 to 1994/5 there were minorchanges in this pattern, with interest, economic infrastructure and general governmentexpanding their shares a little at the expense of the others. FYI 992/93 was an outlier,with financial liberalization and inflation dramatically increasing interest costs, whilewages and expenses in the other categories had not adjusted to inflation yet.3

Figure 1.3 Allocation of budget among major expenditure categories

100%

90%

80%

70% 160%

50%

40%

30%

20%

10%

0%

92/93 Actual 93/94 Rev 94/95 Rev

* Human ServicesO Economic Infrastruclure & Services* Defense and Public OrderEl General Government* Public Debt Management

Source: Table 4.2 Nominal Expenditure of Central Government

Table 1.2 shows the largest categories of spending, other than debt service, areeducation and health, averaging over 4.5 and over 2.5 percent of GDP in the last threeyears. There follows a second tier of functions: roads, police, housing-water-sanitation(including the Urban Development Corporation, not counting the National WaterCommission or the National Housing Trust), community-development-social-services,and national defense, each averaging 1.0 to 1.5 percent of GDP.4 From 1992/93 to1994/95, the largest increases were for police (1.2 percent of GDP), housing-water-sanitation (1.3 percent), education (1.2 percent), and health (0.9 percent). Education,

3 For the functional classifications used here, which looks for functions under various heads(ministries), the data are not available for earlier years, because program budgets had not started.

4 Some of the 1992/93 spending economic infrastructure and services could not be attributedaccurately to the current program categories-hence the NAs.

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I Overview ofpublic sector resource allocation

police and health had even larger increases in 1993/94 because of catch-up wageincreases and back pay, and the real spending declined again in 1994/95.

Table 1.2 Jamaica: Central government expenditures (As percent share of GDP)1992/93 1993/94 1994/95 1995/96Actual Actual Revised Proposed

Public Debt Management 12.9 12.3 14.0 11.7Internal Interest & BOJ "Losses" 9.3 8.1 10.2 8.6External Interest 3.7 4.2 3.8 3.1

General Government 2.6 2.8 3.2 4.4Executive, Legislative & Diplomatic 0.7 0.7 0.6 0.7Fiscal Policy and Management 0.8 0.9 1.0 1.7Pensions & Personnel Management 0.6 0.9 1.1 1.5Other (including Information & Broadcasting) 0.5 0.3 0.4 0.5

Defense and Public Order 2.5 4.1 3.2 2.8National Defense Forces 1.7 1.0 0.9 0.7Police 0.5 2.5' 1.7 1.6Justice 0.2 0.3 0.4 0.3Correctional Services 0.2 0.4 0.3 0.2

Economic Infrastructure & Services 3.3 5.1 6.1 6.8Roads 0.8 1.1 1.2 2.0Other Transport & Communications n.a. 0.5 0.5 0.5Housing, Water, Sanitation & Urban Infrastructure n.a. 1.3 1.8 2.0Tourism n.a. 0.6 1.0 0.7Agriculture (excluding agricultural education) 0.8 0.7 0.8 0.8Industry, Commerce, Mining & Energy n.a. 0.8 0.6 0.5Other Services n.a. 0.1 0.1 0.2

Human Services 6.7 9.6 9.0 7.6Education (including agricultural education) 3.5 5.4 4.7 4.2Health 2.3 3.0 3.2 2.3Community Development & Social Services 0.9 1.2 1.2 1.1

Unallocated 0.1 0.3 0.2 4.5

TOTAL EXPENDITURES 28.2 34.1 35.7 37.8FISCAL SURPLUS/DEFICIT -1.0 1.5 1.4 0.5Source: Consultant calculations.

Spending in these labor-intensive sectors has been especially volatile in bothnominal and real terms in the 1990s because there have been several cycles ofinflationary erosion of real wages, followed by unsustainably rapid catch-upadjustments. The 1995/96 actual outcomes will be different from Table 1.2 becauseinterest rates and wage increases have been considerably higher than expected. Somefunds for wage increases were set aside as unallocated in the original budget -- 4.5percent of GDP -- but the increases tumed out to be larger than that. While increasedinflation has brought in revenue above the budget projections, the increased wage andinterest costs have led to substantial cutbacks in capital spending in order to achieveoverall fiscal targets.

Chapter 3 looks at education, health, roads, and agriculture, and similar in-depth studies would be needed before making detailed recommendations or comments

5


about other parts of the budget. Nevertheless, Table 1.2 shows important patterns.General Government is a small component of spending, but is rising some, due mostlyto increased pension expenses for cost-of-living increases and civil service layoffs in1992. Defense and Public Order spending has risen rapidly, mostly because of the largewage increase for policy paid in 1993/94, but also because of a broader upward trend inoutlays to fight domestic crime. Spending on the National Defense force declined toless than I percent of GDP. Economic Infrastructure and Services is surprisingly largeand rapidly rising, considering that telecommunication and part of electric power areprivatized and that public enterprises for water and electric power are off-budget,except when one needs a cash infusion to cover losses. For most sectors within thisbroad functional group-roads is the chief exception-the private sector is large andgrowing, but often reluctant to face an end to traditional government support.Nevertheless, budget allocations to housing, tourism, and agriculture should be phaseddown, in conjunction with regulatory or other action to increase private sectorcontributions and provision.

Human services receives appropriately the largest share of non-debt spending,which in line with the objectives for growth and poverty reduction, spelled out in theGovernment's Medium Term Policy Framework, May 1994. Education spendingshould probably rise further, if combined with improvements in the efficiency ofallocation and when resources become available, as discussed in Chapter 3. In the areasof health and probably community-social-service, the role of the Government needsbetter definition before deciding whether spending should go up or down, and both thepublic and private institutions providing the services need strengthening. For health,the annex report, summarized in Chapter 3, and the Health Sector Strategy Report bythe World Bank extensively discuss these issues. The draft Poverty Strategy Paperfrom PIOJ (1995) and the Country Economic Memorandum from the World Bank(1994) address the issue of spending on social services, and they approved the currentstrategy of using food stamps and other targeted programs to address nutrition needs.Urban and perhaps community development need greater attention, starting with astrategy and more transparent institutions for allocating spending.

Spending by budget category and object

To effect the desired expenditure reallocations requires knowing which objects(wages, equipment, maintenance materials, etc.) receive the spending and knowingwhether the expenditure is financed as recurrent or capital (A or B).5 About three-fourths of non-interest spending went for recurrent expenses in 1992/93 to 1994/95.See Figure 1.3 and Appendix Table A. 1. Thus, any major reallocation of expenditureacross functions will have to be mostly on the recurrent side. The general decline in theexpenditure for recurrent goods and services other than interest is consistent with

5 The Capital A budget includes only projects that are domestically financed from their beginning.(Occasionally external donor funds will go to pay for part of a Capital A project.) The Capital Bbudget has all projects that are identified with an external lender or donor, multilateral or bilateral.Local counterpart contributions for these projects are included in the Capital B budget.

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reducing the number of Government employees and transferring to the private sectormany of the services provided by the public sector

Capital expenditures are not only a smaller share of the total, but well over halfof capital is in the B budget, for foreign financed projects. During the life of a projectthere is little scope for reallocation, but as old projects close and new ones develop, theGovernment can say where the funds should go and should take a more active role indirecting the use of the external funds.

Personnel

Personnel is the Government's largest cost, 54 percent of the non-interestexpenditures in 1994/95-and the most important asset. Table 1.3 shows the share ofspending going to wages for the past two years, with break-downs for the same broadfunctional groups as in Table 1.2. These calculations count not only items explicitlylisted as wages and salaries in the budget but also an appropriate share of grants thatwe know go at least in part for wage payment, such as the grant to local school boards,which are used to pay teachers. This is why these figures differ from those in thebudget memo. The decline in 1994/95 reflects the deferral of wage increases to1995/96, which will bring the ratio back up. Wages take the lion's share in HumanResources and in Defense and Public Order, as one would expect. For GeneralGovernment and Economic Infrastructure the shares are much smaller, reflecting moreuse of private firms on contract and more purchases of goods.

Table 1.3 Estimate government wages, bv function 1993/94 and 1994/95(as percent share of total function group expenditure, from Table 1.2)

1993/94 1994/95Rev. Rev.

SectorGeneral Government 39.1 33.5Defense and Public Order 71.9 54.3Economic Infrastructure and Services 35.0 32.0Human Services 78.4 75.2

TEage Share in Total Budget 37.0 31.7Wage Share of non-debt service budget 60.0 54.0Source: Consultant estimates.

The public service has about 78,000 established posts in the centralgovernment, but not all of them are filled, and 10,000 or more public workers aretemporary and not in established posts. Thirty percent of the posts are in teaching, 15percent constables and firefighters, and 9 percent health professionals, and 46 percentin regular civil service. There are also 30,000-40,000 posts in the statutory bodies andpublic enterprises. The public sector now accounts for around 12 percent of totalemployment, down from 14 percent in the early 1980s. The most recent downsizing in1992 eliminated 8,000 positions, although many of them were not filled at the time.

7

I (Overview ofpuhlic sector resource allocation

The fundamental changes underway in the balance between the public andprivate sectors are creating a need for many changes in the size and composition of theA:ublic employment, changes which will have to be determined agency by agency. Acase for rfurther downsizing of the civil service also derives from a combination of themnacroeconomic constraint on the overall wage bill and widespread evidence that salarylevels now fail to attract near'y enough qualified personnel for the key and criticalpositions The vacancy rate in the civil service is over 15 percent, with almost another10 percent of posts underfilled by acting or tempolary holders. Some unfilled postsshould be eliminated, but over half of the empty or underfilled posts are key technicaland managerial posts. Although salaries in the statutory agencies and for support staffin the ministries are typically over- half of comparators in the private sector, professionalmanagerial and technical posts in the ministries typically get half or less of the pay forpr-ivate secior comparators. (A couple of' years ago the gap was even larger.) TheG,overnment cannot aff'ord to close substantially the gap with the private sector unlessthe overall numbers are substantially reduced. Then it might improve pay and moraleand attract the new talent necessary to improve service delivery by the public sector.

Improved pay alone will not suffice to attract more qualified personnel.Physical working conditions are important. While it is good that Jamaica has avoidedthe error of luxury buildings for its ministries, lack of routine maintenance and ofmodern office technology seriously reduces efficiency. Career prospects also need tobe rnade more attractive to those with talent and ambition, by having open recruitmentfor top posts., enhaniced training opportunities, and more mobility across agencies andministries.

C'onclusions

Education, security, health, and economic infrastructure receive the largestshares of non-debt service outlays, which is broadly consistent with the Government'spriorities, but the intra-sectoral allocations leave much to be desired. Current andprojected budgetary constraints limit the additional funds that will be available in theshort run even for priority sectors, which draws attention to the need to reallocateresources to improve efficiencv The Government should focus its spending into theparts of these sectors where the private sector has not grown, and should pay moreattention to making the allocation within sectors more efficient and equitable, asdiscussed in chapter 3

8

Macroeconomic frameworkThe resource envelope for total Government spending depends on the amounts

that can be raised through taxes and other menans and on the net debt serviceEstimating the resource envelope is essential to evaluate the teasibility of expend!turereallocations, especially since debt service is so importan, hlie debt left by the use ofsubstantial external financing in the past puts a burden of servicing on both theeconomy and Government finances. The inherited domestic debt also leaves a burdenon Government finances, but from the private-sector and economnv-wide viewpoint.there is just a redistribution from taxpayers to bond holders

This chapter considers the prospective etfects that the end of the Paris Clubarrangement, fiscal surpluses, and aggregate growth in the future would have on thiebudget constraints facing the Government The Ministry of Finance and Bank ofJamaica, with support from the IMF and the World Bank, have been preparintm astrategy for debt management to deal with this vital issue.

Long-term trends and short-term hitclhes

In the long-term the Government will have more resources for non-debtexpenditures if it continues to achieve fiscal surpluses and if strong economlic growthoccurs. Growth would expand the tax base and thus real revenues, even witlh a steadyrevenue effort as a share of GDP, i e, with constant tax rates and collecTioneffectiveness. Improved tax administration and collection wouid probablv increase therevenue share with constant tax rates. i.e., without any addi;onal burden on those whoare now paying their taxes. Fiscal surpluses mean declining debt levels and eventual!vdeclining costs of servicing the debt, assuming that interest rates hold steady or decline,and reduction of debt stocks would tend to bring doiwn interest rates. If theseconditions continue in the future, they must eventually have their beneficial effects

The achievement of both growth and fiscal (PSBR) surpluses for two years hasbegun to pay dividends While the Government ran overall surpluses, as shown inTable I 1, non-debt expenditures in 1993/94 and 1994/1995 recovered to 21-22percent of GDP, levels that were attained in the I 980s only with unsustainable deficits,In 1994/95, the cost of interest on debt, xvhich had stayed at just under 10 percent, rcserapidly, see Table 2. 1. Contrary to earlier expectatiors, it has not declined.

Interest on foreign debt has declined slowly in real terms and as a shlare ofGDP, while domestic interest costs have risen rapidly. mainly for three reasons First.the public sector made large outlays for various domestic expenses -- civil service wageincreases, support for failing cornmercial banks, andi take-over of debts from puNiic

9

2 A Iacroeconomicfraifnework

enterprises. Second, the Government spent a lot to build up foreign exchangereserves-about J110 billion in 1994. This served a valuable, if costly, purpose inassuring coverage for future foreign-exchange needs of the Government, and BOJfollowed a strategy of sterilization. From a fiscal view point, however, this wasequivalent to expenditure, which used up the surplus (from above the line) and requiredheavy domestic borrowing as the BOJ sterilized the reserve accumulation. Thus, J-dollar debt financed most of the foreign reserve build up in 1994, with a consequenteffect in building up domestic debt service obligations much faster than the increase ofinterest earned on foreign reserves. Third, stabilizing prices and the exchange rate inthe face of these expansionary surges of fiscal policy required an increases of domesticinterest rates.

Tablc 2.1 Jamaica: Interest and BOJ "Losscs" (As pcrcCnt sharc ol (JD1)1988.X89 1989 9(1 1990'91 1991.92 1992i93 1993/94 1994.95

I otal 14.5 14.2 122 14.6 12.9 12.3 14.0

Interest 9.6 1. g').9 8.8 9.1 10.3 11.7Domestic 4.5 3.7 3.6 4.4 5.4 6.1 7.9Forcign 5.1 (6 I 5.2 4.4 37 4.2 3.8

BOJ 'Losses" 4.9 4.4 3.3 5.8 3.8 2.0 2.4Sources: IPMU/MOF and Consiltlanlt estimiiates.

When the stabilization brings down inflation, then the domestic interest costswill decline, as the interest rate declines. How fast the stock of domestic debt declineswill depend on the extent to which the overall surplus exceeds net external debtrepayment. This depends on the overall surplus and on the gross new external lending,since the gross external repayments are largely given for the next few years. Thestrategy of substituting long-term external debt for more costly domestic debt hasunderlain the programs agreed on with the IMF over the past several years and is areasonable one to continue.

In September 1995 the current rescheduling arrangements with the Paris Cluband the IMF ended, and the Government does not intend to extend them.Consequently, the level of interest and principal repayments to the IMF and Paris Clubcreditors will increase in 1996, by about US$100 million over 1995. Then in 1997 andthereafter, those obligations will begin to decline again.

Gross external financing to the public sector may decline in the medium term,and the composition will surely change. Bilateral financing, especially grants, willdecline, as the United States and Canada cut back aid and most other donors at bestkeep aid constant. (Aid from the European Community may increase.) Multilateralfinancing (World Bank and IDB) could increase, since those institutions are willing tolend more, but the lending would all be for projects (no BOP lending). Thus, increasedmultilateral financing would require improved project development andimplementation.

10

2 M'iacroeconomicframework

Projections

Quantitative projections to sort out the magnitude and timing of theseinfluences on the fiscal envelope are being updated in the preparation of the Bank'sCountry Assistance Strategy and the Govemment's Medium Term Policy Framework.

The projections done earlier, however, show that taxes and domestic interestcosts are the most important variables for determining the size of the fiscal envelop forprogram expenditures over the medium term. Only over the longer term wouldeconomic growth have a large impact on the available fiscal resources. The tax rateshave already been pushed above those in the last Medium-Term Policy Framework --current revenues are over 37 percent of GDP -- and need to be brought back down asgains materialize from improved tax administration. The interest dimension is thus themain one where gains are possible in the short term. In 1994/95, interest costs wereabout 14 percent of GDP, about 10 for domestic interest including Bank of Jamaicalosses and almost four for external interest costs. The latter will decline gradually asprincipal is repaid, coming down below 3 percent after 1998. The domestic interestcost could decline much more rapidly if the government sustains even a very modestbut steady decline in the nominal domestic debt outstanding. This will require avoidingsurges of money or debt expansion, such as those in recent years to pay large wageincreases, to rapidly build up foreign exchange reserves, and to cover losses by publicenterprises or commercial banks. It will also require running overall surpluses at leastas large as the net repayment of external debt. Such a program would act in three waysto bring down the interest cost -- reducing the nominal stock on which interest is paid,letting moderate and declining inflation reduce the real value of the debt, and bringingdown the interest rate by demonstrating to the markets that high inflation and heavygovernment borrowing are ended. The last is potentially the most important, forinterest rates could drop by over half and still remain positive in real terms if annualinflation were brought under 10 percent. The annual fiscal dividend in such a scenariowould rise to about seven percent of GDP within 5 years; the key to realizing it wouldbe to control spending in order to sustain month-to-month declines of domestic debt.

11

Public expenditure in keysectors

The Jamaica Country Economic Memorandum: A Strategy for Growth andPoverty Reduction (World Bank 1994) identified education and roads as priority areasfor Government expenditure. Education is the largest area of government spending,and roads is slated to move up to third in the 1995/96 budget, up from fifth. Health isthe second largest area of government spending and was carefully reviewed in recentstrategy paper (World Bank, 1994). Agriculture, although no longer a priority area forpublic spending, has a large array of public enterprises and other statutory entitieswithin its jurisdiction-more than any other ministry. It was decided, therefore, thatthe expenditure review this year would look in more depth at these four sectors.Consultants have prepared in-depth reports of these sectors, available on request. Theydevote considerable attention to the organization of the ministries and their associatedstatutory bodies and public enterprises, because the reports were also commissioned tosupport the public sector modernization project. This summary concentrates on thediscussions of expenditures in the sectors. In future years, the reviews should revisitsome of these and look in depth at others.

The four sectors differ in terms of the balance between public and private sectorinvolvement. The Government provides essentially all the roads and will continue todo so, with the private sector entering only as a contractor paid with budget resources.In education the Government is the dominant provider, but there are also many privatenon-profit providers, mainly primary schools, and cost recovery is becoming moreimportant. Non-government providers, operating on a cost recovery basis, provideover half of health services. The public sector remains indispensable, however, toperform public health functions, to regulate the private sector, to provide somefacilities and services that the private sector will not, and to help finance health servicesfor the poor. The private sector generates almost all value added in agriculture; indeedthe sector has grown strongly in recent years, even as public spending declined. In allfour sectors most public programs are underfunded; some should be closed, someprivatized, and some strengthened. The recommended solutions depend importantly onthe ability of the private sector to fill the society's needs.

Education

While the Government of Jamaica (GOJ) has assumed the principal role in theprovision and funding of education, declining public resources have resulted ininsufficient funds to ensure the standard of education which would fulfill the

13

3 Public expenditure in key sectors

Government's commitment. Although extensive in its coverage and still providingexcellent education for the best students, Jamaica's education system is characterized bydeteriorating quality and inequity across socio-economic groups. Too many studentsare leaving the formal education system with limited earning potential and without thequalifications necessary to fill the country's labor demands. Although enrollment ratesare nearly universal, which is an important achievement for a lower middle incomecountry like Jamaica, the sector report on education (pp. 30-32, 40-32), the 1994Country Economic Memorandum, and the "Government's Policy towards PovertyReduction in Jamaica" (PIOJ, draft January 1995) document the inadequate preparationfor employment and life of too many of those leaving school in Jamaica. Partly thisreflects a failure to bring students up to traditional standards of literacy and numeracy.About half of students finishing 6th grade have test results indicating functionalilliteracy, and of those staying on at all-age schools about half are still functionallyilliterate at the end of 9th grade. Furthermore, curriculum and staffing have not reactednearly enough to the reorientation of the economy toward high technology and exportservices. Hence, even the students who graduate "successfully" from secondary schoolor university have not usually had a curriculum to equip them with the mix of skills andexpertise needed for today's economy-in the public or private sector.

Although all income groups have equal access to publicly provided primaryeducation, many middle and upper income families send their children to private pre-primary and primary schools in order to improve their chances of admission to thetraditional high schools and eventually the university. Private primary education andprivate tutoring has thus become the main gateway, or at least the surest, for entry intothe high quality part of the publicly funded educational system. The connection is evenbuilt into some of the institutions, as some traditional public high schools have affiliatedprivate primary schools, sharing the same name and board of directors. Because mostof the poor do not have the money or connections to get into private primary schools,access to traditional high schools and universities increases sharply with income. Thus,the funding of public primary and non-traditional secondary education helps the poor,while the funding of upper levels tends to reinforce inequality.

Inequities are also apparent within educational levels. At the primary level andto a more striking extent at the secondary level, schools serving students from relativelywealthy families receive more and better quality inputs. Until the 1994/95 school year,the non-wage per capita allotment to traditional high schools was about four times thatprovided to all-age schools and two and a half times the per capita grant to newsecondary schools. New cost sharing procedures are intended to help redress thisbalance. To improve equity in practice, the subsidy program for low income studentswill need to operate well.

Total expenditure for education

The budget of the Ministry of Education and Culture (MOEC) is the majorsource of education financing. MOEC declined from 5.2 percent of GDP in 1989/90 to4.7 percent in 1994/95. It rebounded in 1995/6 with the wage settlement, but isprobably not, on a sustainable basis, up to the 6 percent recommended in a 1990 policy

14


study by Trevor Hamilton and Associates. In real terms, GOJ expenditures oneducation in the 1994/95 period barely exceeded 1982/83 expenditures, which means asubstantial decline as a percent of GDP and in per capita terms. The 4.7 percent ofGDP in 1994/95 is above the Latin American and Caribbean average (4.2 percent), butwell below Barbados (8 percent).6 Government capital expenditure on education islow, and the Public Sector Investment Program of 1994 called for a substantialincrease, but that has not been realized.

Total expenditures at public schools are not known accurately, as schools havenot reported fully the funds collected from non-Government sources. Recent reformsaim to improve that. The Government's current cost-sharing scheme for secondary andtertiary education is expected to net 4 to 5 percent of the MOEC's recurrent budget.Since schools have been charging fees since the 1970s without any official procedure orrecording, the new program will raise additional revenue only if schools increase theirfees as a result of this policy. Students and parents already make large outlays throughmandatory fees (until 1993/94 recognized but not sanctioned by the Ministry) andvoluntary contributions, as well as money spent on supplies, meals, transportation andadditional private tutoring. According to a MOEC Unit Costs Study, the averageexpenditure by students and their families in all-age schools amounted to approximatelyone-quarter of per capita GDP in 1990. High fees discourage attendance among low-income families.

Corporate and community donations and various fund-raising efforts alsomobilize resources for education. Although funds raised in this manner are difficult toestimate, in 1993 40 primary level schools reported receiving approximately J$3million through the Adopt-A-School Programme. The ability of schools to raise fundsvaries considerably by school type, location and reputation. The schools receiving theleast Government funding and serving the poorest communities (all-age and newsecondary schools) raise the smallest amounts, while well-regarded traditional highschools in Kingston raise the most. The comparatively well-funded traditional highschools, which because of the income level of students' families are able to chargehigher fees, although receiving less from the Government under the new cost-sharingarrangement, have greater resources at their disposal. The new secondary schools, incontrast, receive substantially less because fees are lower.

Distribution of MOEC expenditures

Despite numerous studies showing higher economic returns on expenditures atlower educational levels, and the Ministry of Education's stated priority with respect toprimary education, secondary education commands the largest share of Governmentexpenditures.7 Furthermore, the maldistribution of resources has worsened, with the

6 World Bank. Public Sector Modernization in the Caribbean, Washington, DC, February 1996,p. 24

7 The allocation computed here differs from the activity codes in the budget in that Spending forgrades 7-9 at all-age schools is counted here as secondary, and spending in pre-primary departments atprimary schools is counted as pre-primary.

15


real value and the share for primary education declining in recent years. (While therecent wage agreement will increase the overall allocation for education and increasethe share for wages, compared to 1994/95, it will not have much effect on the sharesgoing to primary and secondary.) Thus, efficiency and equity considerations bothargue that the Government should increase the share of total education resourcesdevoted to primary and lower secondary education. Pre-primary education relies largelyon private financing, hence only 3 percent of the Ministry's recurrent budget is currentlyallocated to this level. (See Figure 3.1). Jamaica spends about 27 percent of itsrecurrent education budget on primary education, significantly below the 41 percentrecommended by the Hamilton and Associates study. The University of the West Indiesreceives two-thirds of the budget for tertiary institutions.

Figure 3.1: MOEC recurrent expenditure by program a/ (1993 JSmn)

1,8001,6001,400 -_ _ _

1.200 _ Early Childhood1,000

800 *Primary600 3 lSecondary1400

200 _ ] I I H l ITertiary (incl voc/tec)0

1991/92 1992/93 1993/94 b/ 1994/95 cl

Notes: a/ Actual except revised est.1993/94 and approved est.1994/95.b/ Includes back pay for 1992/93. c/ before salary increased.

Sources: Ministry of Finance of Jamaica, 'Estimates of Expenditure," various year: World Bank

Within both the primary and secondary programs, salaries and allowancesaccount for 95 percent of the Ministry's recurrent expenditures, which explains thepoor physical facilities, lack of equipment, and virtual non-existence of teaching aids inmost public schools. (See Figure 3.2.) At the tertiary level, salaries comprise 82percent to 85 percent of expenditures at multi-disciplinary colleges and 52 percent to61 percent at teachers' colleges in 1993/94 and 1994/95.

Capital expenditure as a proportion of the Ministry's total education budgetdeclined by almost 50 percent, from 16 percent to 8.1 percent between 1989/90 and1992/93, before increasing somewhat in the past two years. Capital expenditures arehighest at the primary level, reflecting the recent emphasis of donors on primaryeducation.

The lack of accurate data on the number and qualifications of teachers seriouslyimpairs budgetary planning. For instance, the number of teachers used by the MOECFinance Unit to calculate the 1994/95 budgetary requirements was significantly lowerthan the number actually on the payroll. The Ministry should therefore consider aprogram to eliminate duplicate and retired teachers from the teaching payroll and

16


determine the vacancies and under-filled positions by school and subject in order toassess the true needs of the teaching service.

Figure 3.2: Government Education Expenditures by Object a! (1993 J$mn)

1,800

1,600 - _ | n Primary Salaries

1 ,400- _

1,200 - Secondary Salaries

1.000 - Tertiary800 - Grants/Contributions

600 - X Other Recurrent

400 - Expenddures

200 - M Capital Expenditures

0 -

1993/94 1994195

Note: a/ Revised est.1993194 and approved est. 1994/95.Sources: Ministry of Finance of Jamaica, 'Estimates of Expenditure," various year; World Bank calculations.

Recommendations

- Consistent with the Government's commitment to basic education, theMinistry should increase public funds for enhancing staffing and improved facilities atprimary and all-age schools. This and other actions involving increased funding need tobe timed and matched with spending cuts elsewhere, so that they do not lead toaggregate overspending.

- Increased cost-sharing at the secondary and tertiary levels is necessary,given current funding constraints, but it should be done in ways that do not furtherentrench the significant funding disparities currently existing among school types,particularly at the secondary level. To reduce the inequities among types of secondaryschools, the Ministry should sustain the program, begun under ROSE, of increasingexpenditures at all-age and new secondary schools, but not at traditional high schools,although their quality should be maintained.

* The secondary and tertiary curricula for training and education shouldbe updated, and hence the staffing and equipment revised, in consultation with businessleaders, to make education more relevant to the needs of today's economy. This shouldmake cost recovery at these levels more acceptable.

* The Ministry should increase non-wage recurrent and capitalexpenditures at the primary and secondary levels. Improved contracting procedureswould help the Government utilize external funds for education investments.

* The lack of accurate and timely data hinders resource allocation anddecision-making. The current decentralization of decision making in the educationsector increases the need for information systems to integrate its components.Improved information is particularly needed on the number and qualifications ofteachers.

17


* Teacher assignments should be more flexible, to allow some scope forreassignment of teachers between schools, to balance supply and demand, at leastamong schools in one parish or smaller area.

Health

Jamaica's health indicators are more favorable than most countries of its incomelevel, and these prolonged success have brought about changes in the health issuesfacing the country, as described in Jamaica Health Sector Review: Present Status andFuture Options, World Bank, 1994. More deaths are due to chronic and degenerativediseases and less from infectious and vector-borne diseases, although some preventableproblems like perinatal mortality remain unnecessarily high. Life expectancy was 70 in1990, and 10 percent of the population was over 60. This implies that publicly fundedhealth efforts should give more attention to lifestyles, and also that the rising trend ofhealth care for old age and chronic disease will continue to increase the demand forhealth services. Rationalizing the health care system will be essential to avoid abreakdown.

While the Ministry of Health (MOH) remains an important provider of healthcare, over the last decade the private sector has taken on a majority of health caredelivery and financing. Privately operated facilities now provide 75 percent of out-patient services, but the public sector provides nearly all in-patient care, however,which takes up 75 percent of all public outlays for health. Households and privateinsurance schemes pay for about 65 percent of total expenditures on health care, upfrom about 25 percent a decade ago. Since public expenditure for health in real termsand as a share of GDP has stayed roughly constant, all the increase in health carespending-from 5 percent of GDP in 1980 to 8.9 percent in 1993/94-has come fromprivate sources. Total estimated revenues and outlays for fiscal year 1993/94 for healthamounted to J$9.0 billion, representing approximately J$3,570 per capita (or US$105).

Private sector health care has grown even while there is underutilized physicalcapacity in parts of the public sector delivery system, particularly at clinics. The typicalpattern is that "free" public facilities lack staff and supplies, particularly the latter, soeven the poor start going to private or NGO clinics and doctors who can actuallyprovide some medicine, even if at a price. There is no public insurance scheme to payfees for the poor, however, since the original philosophy of the current system was thatthe public sector would provide everything free of charge.

In an attempt to provide and finance the full range of health care services to allJamaicans, the MOH's resources are spread too thinly, making it difficult either tosustain earlier achievements or to meet the emerging chronic health problems of itsaging population. Public funds are insufficient to maintain health infrastructure andprovide adequate levels of supplies and manpower. Professional personnel andequipment maintenance are two concerns of the Ministry that must be dealt with bothimmediately and as part of any sector reform effort. The health sector, especially thepublic portion, faces great difficulty in recruiting enough trained personnel to providehealth care through traditional doctors-nurses teams. Alternate modes must be

18


explored, relying more on paramedics and specially trained personnel, not as stop-gapmeasures but as part of a planned rationalization.

MOH expenditures

Within the Ministry of Health budget, recurrent expenditures have not keptpace with capital, which increased their share from 5.3 percent in 1987 to just overtwenty percent in 1993/94. All of this increase came from externally financed projects,mostly for secondary and tertiary care. In 1994/95, 12 percent of the total capitalbudget went for health, almost 10 percent for secondary and tertiary care.

Comparing levels of care, over the last decade, secondary and tertiary care hasconsistently absorbed between 60 to 70 percent of total recurrent budget of theMinistry, while primary care has commanded around 20 percent. Indeed, the recurrentbudget for primary care has remained constant in real terms despite the expansion ofthe primary care infrastructure in the late 1970s and early 1980s. At the hospital level,the three tertiary facilities absorbed 38 percent of the recurrent budget in 1992/93.Nearly half of this allotment went to the UHWI. MOH support provides almost 70percent of the hospital's recurrent budget. Hospitals providing secondary referral(Type B hospitals) received about 17 percent of recurrent outlays, while districthospitals (Type C) received 13 percent. Except for a sharp rise in 1993/94, due tosalary settlements, expenditures for central administration stayed roughly constant as ashare of the recurrent budget (at less than 10 percent). (See Figure 3.3.)

Figure 3.3: Recurrent Public Expenditures in Health by Program a/(1993 J$mn)

1,400

1,200

1,000

800

600 --

400-

200 _ ...l

01989/90 1990/91 1991/92 1992/93 1993/94

E*1Exec Dir/Admin *Primary 10 Secondary GPharmaceutical

Note: a/ Revised est.1993/94 and approved est. 1994195.Sources: Ministry of Finance of Jamaica, "Estimates of Expenditure," various year; World Bank calculations.

Wages and salaries account for the bulk of the Ministry's recurrent budget.Over the last three budgets, outlays on personnel have increased from 61 percent to 79percent in the 1993/94 budget. During the real recurrent budget contraction between1991/92 and 1992/93, compensation actually increased its share of the total (and real)

19


value, while the cut was disproportionately felt in the purchase of drugs as well asmaintenance (net purchase goods and services). (See Figure 3.4.)

Figure 3.4: Recurrent public expenditures in health by object a/ (1993 JSmn)

1.600T

1,400

1,200 -i-E Compensalion

1 Net purchases goods/services

800 _- * Grants/contributions::.- . -. ... .... . OMaintenance

400 I =.. i..2 -:. .... .. ... ..... o. . .. .. .. ...=

1991/92 1992/93 1993/94

Note: a/RPevised est.1993/94 and approved est. 1994/95.Sources: Ministry of Finance of Jamaica, "Estimates of Expenditure,' various year; World Bank calculations.

Maintenance budgets for both physical infrastructure and equipment (medicaland non-medical) have been chronically underfunded for years in Jamaica. Based onWorld Health Guidelines, approximately 10 percent of equipment value and 2 percentof facilities' value is needed annually for preventive and routine maintenance. Recentallocations have only been about one-fifth of that.

User fees contribute marginally to financing public hospitals, although thecontribution has risen since being virtually nothing in the 1980s. By 1993, afterintroduction of a new fee schedule, individual hospitals achieved percentages rangingfrom 5 percent to 13 percent. This is still inadequate. Cost recovery at public facilitieshas been minimal, even from patients with insurance. Hospitals have little incentive tocollect fees, the exemptions individuals are broad, and fees are not regularly adjustedfor inflation. Nevertheless, priority access to public hospitals for non-emergency careis often given to (those who can afford to be) private paying patients of physicians onthe staf. The Ministry is now reviewing this practice.

Private financing of health care, mostly at private facilities, amounted to J$6billion in 1993, almost double the Government outlays. Of this, out-patient careaccounted for 75 percent. While average fees for general practitioners' office visitshave increased in nominal terms over the last decade, they do not appear to haveoutpaced inflation.

Recommendations

Given the increasing importance of the private sector as a major provider ofhealth services, the Government should clearly define the division of labor between the

20


public and private sectors for providing health services and for paying for them,recognizing that provision and financing are substantially separable decisions.

In terms of provision, the basic allocation of activity cannot be quickly changed,but the Government as a provider of health care needs to be more selective and moreefficient. Government should consider the following:

* Reducing the number of public clinics in areas where private and NGOclinics are currently providing the care and/or leasing them to the private or NGOsector (with support for the poor as noted below), and using the freed up resources tobetter maintain, equip, and staff the public clinics in areas with no other clinics;

* Putting more emphasis on public information campaigns for preventingmajor chronic diseases such as diabetes and hypertension;

* Setting up the provisions for paying for health care so that providers,public and private, have strong incentives to improve service delivery and contain costs;

* Decentralizing the public health care system and increasing the financialand managerial autonomy at the facility level,

* Making the role of the central Ministry of Health more regulatory andless managerial.

In terms of financing, the Government needs to increase cost recovery for theservices that it provides and to devote more its expenditures to assure that the poorhave access to at least basic services, whether provided by the public or private andNGO operated institutions. The Government should consider the following:

* Formulating a basic national package of the most cost-effectivepreventive and clinical interventions that would have the greatest impact in reducingJamaica's current disease burden and providing insurance or subsidies for the poor tomake sure they have access to this package;

D Reducing the share of public financing for tertiary care institutions, viamore vigorous cost recovery from the non-poor;

-- Strengthening the collection mechanism for user fees in public facilities.Fee schedules should be re-examined in terms of exemption criteria and automaticallyindexed each year for inflation.

Estimating the resources required to meet the goals of the MOH must wait forthe Government to decide upon the future direction of the health care sector, the scopeof the public mandate for both provision and financing of health care, and the divisionof labor with the private sector.

Transport-roads

Jamaica has had an extensive road network for decades, but much of the systemhas deteriorated badly in the last 20 years, some irreparably. Less than one-fifth ofpaved roads are in good condition.8 Some primary roads need to be replaced or

g WDR 1994, p. 28.

21


substantially up-graded to handle increased traffic.9 Recent increases in roadexpenditures show an awareness of the problem, but the Government has not yet donea good road inventory nor developed a strategy for efficient road maintenance andrepair. The national Government lacks consistent standards for deciding whether andat what level to maintain road segments. Local governments lack the fiscal autonomyto decide about local roads, although current reform plans may change that.

This review analyzed transport issues in relation primarily to the Ministry ofConstruction (MOC) and secondly to the Ministry of Water and Transport (MWT), asthese ministries existed in 1993-1994. Although the 1995 cabinet reorganizationrecombined these ministries with other ministries, the issues raised here remainimportant and warrant attention as the newly constituted ministries develop theirstrategies. The roads sub-sector is particularly important as a spending program.Under-funding and uncertainty of financing road maintenance has long been cited as themajor issue in the roads sub-sector. Other aspects of transportation spending could beconsidered in the next round of expenditure analysis.

The Parish Councils via the Ministry of Local Government and Works (formerlythrough the Ministry of Local Government) also have responsibility for local roadmaintenance. The previous division of responsibilities across Ministries results ininstitutional weakness and implementation problems, which the newly combinedministry should be better able to address.

Total expenditure for transport

Total spending on roads averaged only about one percent of GDP in the early1990s.10 Most of the spending by MOC for roads went to the capital budget, with theshare increasing from about 80 to 95 percent. The share of expenditures financed withexternally supported projects (the Capital B budget) rose from 40 to 90 percent, asexpenditures for maintenance and staff doing project management, which wouldnormally be classified recurrent, were reclassified and funded with external resources.(See Figure 3.5.) From 1991/92 to 1994/95, transport investment increased 52 percentin real terms, with all the increase coming in the capital B budget. By contrast, theCapital A budget for 1994/95 fell to 6 percent of the total budget, from nearly 40percent in 1991/92. Increased use of the Capital B budget made sense as a strategy tomobilize resources, but the extent of reliance on external funding now raises questionsabout sustainability. There are limits on how long and how much of the necessaryoperations and maintenance expenditure can or should be projectized and put on thecapital budget.

9 Jamaica Transport Sector Study, Wilbur Smith Associates for Ministry of Water and Transport,1994] Total expenditure on roads for recent years cannot be precisely determined because of difficulties

in estimating the Ministry of Local Government's funding for local roads.

22


Figure 3.5: MOC expenditure trends in the road sub-sector al (1993 JSmn)

1200 T

1000

800ICapital B

600 -~

40- Capital A

200

Recurrent __o ! -- 9 ~ e - q- 1991/92 1992/93 1993/94 1994195

Note: a/ Actual except revised est. 1993/94 and approved est.1994/95.Sources: Ministry of Finance of Jamaica,"Estimates of Expenditure," various years; World Bank calculations.

Most of the MOC budget goes for road maintenance and especiallyrehabilitation, not new investment. Road rehabilitation accounts for almost half of totalexpenditure, while periodic and routine maintenance represents one sixth. Theallocation across road types (arterial, secondary, tertiary, and urban) has remainedrelatively constant over the past few years. (See Figure 3.6.) Expansion of the existingnetwork does not appear to be a priority now.

The recurrent budgets of both the MWT and the MOC have been declining. In1994/95, the MWT's budget has fallen to 82 percent of 1991/92 levels and for theMOC, to 64 percent of 1991/92 levels. Most of the MOC recurrent budget goes forsupport service, presumably ministry overhead. The Capital B budget has also coveredabout half of support services since 1992/93. Capital B accounts for 64 percent of staffcosts in the Ministry's 1994/95 budget compared to 1992/93, when it accounted for 32

Figure 3.6: Total MOC expenditures in the roads sub-sector by program a/(1993 JAmn)

500

400 l rE Support Services|Arterial Roads

300- . Secondary Roads

200 _Tertiary Roads10 Urban Roads

10013 OOther Expenditures a/

0199V293 1993/94 1994/95

Notes a/ Actual except revised est 1993/94 and approved est 1994/95b/I tncludes disaster management drainage/flood control, road traff & safety

Sources Ministry of Finance of Jamaica, "Estimates of Expenditure 'various years, World Bank calculations

23


percent. The increase and shifting of expenditures can perhaps be attributed to agrowing tendency to use "project units" to employ and pay staff as well as internalconsultants assigned to projects funded by international aid agencies. This points toinstitutional weaknesses within the Ministry itself, because a number of key managerialposts are vacant.

Recommendations

* The Government should develop a comprehensive strategy for thetransport sector, using existing studies and in cooperation with all the ministriesinvolved. This strategy should provide the setting for subsector policies for roads, rail,ports, and airports. It should consider limits both on what the private sector can do andon what the public sector can afford.

* To remedy the chaotic provision and chronic underfunding ofrehabilitation and routine and periodic maintenance of the road network, the MLGWshould develop a comprehensive program to determine road funding needs, based onappropriate maintenance standards and priorities. A major increase in funding shouldcome only if the MLGW presents and commits itself to a coherent strategy formaintenance and rehabilitation.

* To generate resources needed for maintenance, the Dedicated RoadMaintenance Fund proposed by the Jamaica Transport Sector Study and in the draftNational Transport Policy and Plan could be reconsidered.

* The Ministry should reconsider its current reliance on the Capital Bbudget, particularly for staffing and internal consultants. Aside from the negativeimplications with respect to developing permanent staff, this strategy places theMinistry in a vulnerable position if there is a change in financing policies of donors.

Agriculture

Agricultuce has been a leading sector of growth in the 1990s, almost all fromthe private sector. At the same time government spending on agriculture has droppedby over 50 percent since the late 1980s. This implies that many of the Ministry ofAgriculture (MAO) programs, which still exist from the 1980s but without adequatefunding to be at all effective, could be eliminated without serious harm to the privatesector. Part of the resources saved should go to rejuvenate the MOA programs thatstill have a vital function in a market economy-disease and pest control, for instance,and research and extension for small farmers.

The role of the public sector in agriculture is evolving from one withconsiderable public sector involvement in production, particularly for exports, to onewhere the private sector has sole responsibility for production, while the public sectorprovides facilitating services, especially to small farmers, and a regulatory function.Besides MOA, the Ministry of Water & Transport (irrigation), the Ministry ofEducation (agricultural education), and the Ministry of Finance (agricultural credit)Ministiy of Agriculture (MOA). have important responsibility for public services to theagricultural sector. Also, many public sector enterprises are linked to agriculture,ranging from statutory authorities to publicly owned companies. Peculiar to the

24


agricultural sector are the Commodity Boards, which are statutory authorities withregulatory powers over the commodities for which they are responsible. The majorityof other public enterprises in the agricultural sector either (i) have already beenprivatized, (ii) are in the process of privatization, (iii) have been identified as candidatesfor privatization in the future, (iv) are financially viable subsidiaries of other publicenterprises or (v) are company shells, with few or no remaining assets. MOA hasdivested or closed some statutory agencies identified in earlier drafts of this review, andreforms in this direction need to continue.

MOA's mandate has not diminished commensurately with the severe reductionin available resources-a 30 percent decline since 1990/91, and about a 65 percentdecline since 1988/89. Public spending on agriculture is about 1 percent of GDP, orabout 10 percent of GDP originating in agriculture. MOA does not explicitly setpriorities among its many mandates, although an informal consensus exists on theimportance of some areas, such as research and extension. Ministry departments stillattempt to carry out activities for which they no longer have either personnel or otherresources. The obligation to do too many different things with too few resources hasresulted in the expenditure failing to have the desired effects in almost every area.

Agricultural research has fragmented initiatives and lacks policy direction, withthe resulting neglect of key areas. Public and private sectors agree on the urgency ofapplied agricultural research and acknowledge the need for public/private sectorcooperation in planning and implementation, but in practice it has proved impossible toreconcile rival interests.

In principle, all Government land should be vested in the Commissioner ofLands; in practice, other agencies lease or manage a number of Government properties.No inventory exists of Government lands nor is there a consistent approach to theirmanagement. Squatting is becoming more prevalent.

The Commodity Boards and most other remaining public enterprises in thesector are theoretically financially independent of Government, since they receive nodirect budgetary allocation. Some of them have long-term liabilities, however, forwhose repayment GOJ is finally responsible. Total liabilities are not known, becauseannual reports and audited accounts are significantly in arrears.

Distribution of agriculture sector expenditures

Public funding of agriculture has already been significantly trimmed withreductions in MOA's budget, the divestment of sugar estates, and privatization of someother public enterprises in the sector. There are 18 programs in the agricultural sectorbut 4 of them account for 60 percent of expenditure. (See Figure 3.7)Crop/Livestock (28 percent of 1994/95 budget allocations) primarily consists ofdonor-supported projects. Irrigation (22 percent in 1994/95) frequently requiressupplementary funding due to difficulties in achieving cost-recovery targets. The LandAdministration program has maintained its share of expenditure at about 10 percentover the last 5 years. Expenditure on agricultural extension, provided by RADA (8

25


percent), has declined in real terms since 1991/92, owing to significant cutbacks instaff. RADA also administers programs such as the Social and Economic SupportProgramme in rural areas and the Production Incentives scheme promoted by theMinister of Agriculture, which reinforces the traditional perception of the extensionservice as a source of handouts.

The allocation of resources does not accord well with MOA/GOJ priorities forthe sector. The weight of the Capital B budget in the Ministry's largest programunderlines the driving force of donor interests. Agricultural research (3 percent ofagriculture budget) is underfunded, and even within the program there appears to be anoveremphasis of resources for livestock relative to crops, which are more important forthe sector and especially small farmers. Although the majority of small farmers are notreached by extension services, there is little point in strengthening those services untilresearch develops improved technological packages for diffusion to farmers.Continued allocation of a fairly large share of resources to land administration may bejustified in the short term while the Government is divesting a lot of land, but theallocation should decline once the bulk of lands are divested or under long-term leasearrangements. Given the limited area under irrigation and the large potential for costrecovery, irrigation's share of the agricultural budget is excessive, and cost recovery isfar behind schedule.

Figure 3.7: Agriculture Expenditure by Program (1993 JS'000)

600000 -

500000 -

400000

300000

J ~ ~~~~~ 7

200000 1100000

0

1990/91 1991/92 1992/93 1993/94 1994/95

L*Crop/Livestock ELand Adniii., etc. E Irrigation CiRADA L Research DOthers (1I)

Grants and contributions account for the largest share of MOA expenditure-58 percent of the recurrent budget and 48 percent of all expenditure. Although onlyabout 15 percent of total expenditure is explicitly recorded as wages and salaries, theactual share is much larger, for a large part of grants and contributions goes for salariesin agencies, such as the Rural Agricultural Development Authority (RADA) and theNational Irrigation Commission (NIC).

26

3 P'ublhc expenditure in keY sectors

Recommendations

* The Ministry of Agriculture's mandate needs to be reformulated andactivities prioritized, focusing on regulatory activities and public goods, especially forsmall farmers. The mandate of the Ministry needs to be focused so that it caneffectively carry out remaining functions Areas where cuts could be made are grantsto the Agricultural Development Corporation and the Jamaica Agriculture Society, andthe Social and Economic Support Programmes in agriculture, which need moretransparency and accountability

* The Ministry should strengthen its capability for policy analysis andformulation.

* GOJ should consider measures to recover more of its cost in theagricultural sector through user charges. Two areas hold immediate promise. First, theland administration program could significantly increase revenue by updatingregistration charges and adopting a consistent land administration policy based oncommercial land values. Second, public operations in the irrigation sub-sector couldimprove cost recovery, although only a gradual increase would be realistic, due to thenature of existing public irrigation facilities and the tradition of not charging full costfor water.

* Agricultural research needs a larger share of MOA's resources in thecontext of a clear national policy involving close coordination with and financialcontributions from the private sector. Once technological packages suitable forextension become available, extension services will need strengthening.

* The Commissioner of Lands should make a thorough inventory ofGovernment land and should implement a coherent management policy for Governmentagricultural land.

* Growers should expand their involvement at the executive level of theCommodity Boards, with a view to the Boards' evolving into independent growers'associations. The Government should sell assets of Commodity Boards withcommercial potential, including land held by the Coffee Board, and empty companyshells left over from previous divestment exercises should be closed.

* MOF should review the long term liabilities of statutory authorities inorder to assess the financial implications for the Government and to resolve outstandingissues.

Financing for key sectors

This chapter has shown that the Government needs to spend more in someareas and could cut back in others. Chapter 2 described how the fiscal situation willbecome tighter in 1996 and then will ease, due to changes in debt service. As theGovernment does its medium-term fiscal projections each year in preparation for thebudget call, it should consider what combination of increases in the priority sectors andcuts or freezes in non-priority areas would be consistent with the changing macroenvelope.

The sectoral analyses summarized in this chapter suggest that most of any fiscaldividend from declining debt service for the rest of the decade should have to go to

27

3 IPublic expenditure in key sectors

road rehabilitation and basic education, restraining the shares for other programs as agroup. Such a reallocation would be difficult, but desirable if done well, with soundstrategies for improving the effectiveness of spending on roads and basic educationand with good selection of other programs to eliminate or trim on a sustainable basis,i.e., not just deferring maintenance and wage increases.

28

4Institutions and the publicexpenditure process

The institutional set up for the expenditure process has undergone a number ofchanges in recent years, and some further changes are underway or underconsideration. It seems important, therefore to understand them. This chapter looks atthe determination of the budget, at the process of implementing it, and at theinstitutional set up for gathering information on that implementation. The chapter alsonotes the problems with the institutions for handling personnel decisions-appointments and wage setting. Personnel decisions are often made on a parallel trackwith budget decisions, but they have vast implications for the budget and in practicemay preempt or override budget decisions.

In recent years the Government has moved to program budgeting in order tomake the allocation of resources more transparent and to improve monitoring. TheFinancial Management Information System (FMIS) is a companion reform to improvethe speed and accuracy of accounting for expenditures. When in place, it will enablemanagers to compare budgeted figures with the actual rate of expenditure forprograms, sub-programs, and activities under their authority. This will help improvethe efficiency of public service but it will also be important to have regular evaluationsof the quality of performance by ministries and other public agencies. Program budgetsshould specify criteria upon which to assess performance. The Ministry of Health hasbegun such performance evaluations, and the Ministry of Finance is beginning regularperformance reviews of externally funded investment projects. Other agencies shouldfollow suit.

Formulating the budget

Formulating the budget involves a complex series of discussions andnegotiations, described in Annex V. The core steps are to set the budget envelope atthe Ministry of Finance, to make the budget call to line ministries, and to negotiate incabinet an agreement on a budget to submit to Parliament.

Setting the budget envelope for the overall public sector and its maincomponents has in recent years been undertaken in the context of the negotiation ofJamaica's programs with the IMF. The Government will need to take this step at thebeginning of the budgeting process even after Jamaica ceases to have IMF programs.

29

4 Institutionis and the puiblic expenditure process

Once the macroeconomic envelope for the budget is set, the Ministry of Financeissues a call to all ministries in November to submit their budgets along with theirprograms. The instructions in the call are predominantly macroeconomic, which tendimplicitly to suggest how much to scale the request up or down from the previous year.The call is not preceded by a Cabinet-wide review of existing allocations and of publicspending priorities for the medium term.

Priorities are discussed, of course, in putting together the overall budget aftereach Ministry has submitted its proposal. By then, however, the Ministers are morelikely to be in the mode of defending their own requests and their carefully writtenprograms to justify the requests. The sequencing in current procedures may encourageagency heads and ministers to build empires and defend turf

Besides the inertia of past allocations, there is the inertia of the wage bill, forministries have no influence in the short run on their wage rates and cannot easilyreduce the number of workers. Thus, ministries with large numbers of workers tend tobe protected over the medium term, although inflation can erode the real value ofsalaries.

The medium-term public sector investment program (PSIP) and the capitalbudget are often greatly over-optimistic, with programs sometimes being slashedbecause of various combinations of inadequate implementation capacity and lack ofcounterpart funds. As a result the actual investment pattern is not planned in advance,is not internally consistent, and does not transparently reflect national priorities. ThePSIP and the annual capital budgets that derive from it need to be more realistic, takinginto account not only staff implementation capacity and counterpart funding limitations,but also the subsequent needs for operation and maintenance spending. In order toallow for a high case scenario, which seems to be what goes into the PSIP and budgetnow, a notation could tell what projects would be included in a supplemental budget ifresources become available. The PSIP and budget should make clear, however, what isthe core investment program. The program should have a clear strategic focus and notbe driven by domestic politics or donor ideas. Dividing the capital budget into A and Bcomponents is useful for clarifying some issues, but the basic allocation of publicresources should be done according to national priorities, independently of the sourceof funding.

Implementing the budget

The budget, when approved by Parliament, allows spending up to the amountsagreed, but does not require them. Furthermore, in order to actually spend, a lineministry must obtain a warrant from the Ministry of Finance. Control of warrants hasbeen an important means for keeping the overall expenditure in line with the macroenvelope, even if some elements of revenue or spending deviate from the plan in thebudget.

Major deviations of spending from budget in recent years have resulted from avariety of things: increased external debt service because of devaluations, increased

30

4 Institutions and the public expenditure process

domestic debt service because of increased interest rates, public sector wage increases,emergency repairs of washed out roads or blowout power plants, and the discovery oflarge deficits of public enterprises that must be paid off in order for the enterprise tocontinue operations or to be privatized. The Ministry of Finance adopted in 1993/94the practice of putting a contingency line in the original budget to cover things likewages increases that are anticipated qualitatively, without knowing the exactmagnitude. Nevertheless, the ability of public employee unions and public enterprisesto present the Government with a fait accompli to finance is a serious handicap tosound economic and expenditure management.

Another complication to implementing the budget in recent years has been thedirect effects on the amount of liquidity in the economy, because of how Governmentoperations involve the Consolidated Fund at the Bank of Jamaica. Liquidity is removedfrom the economy as the Government's revenues are lodged to the Consolidated Fund,and it is injected when moneys emerge from that Fund as currency or commercial bankdeposits. Over the past decade various institutional developments have substantiallychanged the overall effects, as follows:

0 Originally, not merely were the revenues lodged to the ConsolidatedFund on a daily basis, but also most Government expenditure accounts were held in theBank of Jamaica. Thus Warrant releases from the Consolidated Fund were in the firstinstance only transfers within the Central Bank, to the accounts of the Ministries anddepartments, and it was only when those agencies actually issued their checks on thoseaccounts that funds entered the Money Supply. Since this happened on a daily basis, itwas essentially canceled out by the daily inflows of revenues into the ConsolidatedFund.

- Beginning in the mid-1980s, however, the Expenditure Accounts beganto shift out of the Bank of Jamaica. This move began with the transfer of certainSalaries Accounts, and it culminated with the shifting in July 1992 of all majorExpenditure Accounts except those for the public debt. Daily inflows of revenues nolonger effectively compensated for small daily outflows of Government moneys fromthe Bank of Jamaica; on the contrary, once a month there was a gigantic injection ofliquidity which had to be mopped up by Open Market operations conducted at a highinterest cost to the Fiscal Accounts, and which was then gradually countervailed overthe course of the succeeding month by the revenue inflows. In this second phase therewas a powerful need for coordination between the Ministry of Finance, the AccountantGeneral and the Bank of Jamaica to ensure that the bank was informed early enough toconduct these Open Market Operations. This process encountered great difficultiesand probably led to higher interest costs.

* To solve this problem the Ministry of Finance has ceased to transfer theRevenue Accounts into the Consolidated Fund on a daily basis. Pending the necessaryamendment to the Financial Administration & Audit Act to allow for the ConsolidatedFund legally to be held outside the Bank of Jamaica, the present strategy is to keep therevenues in holding accounts in commercial banks and to transfer them into theConsolidated Fund once per month on the same date that Warrant releases are made.In this way the letter of the law is scrupulously observed without the unfortunate

31


macroeconomic effects of the second phase. In particular, there is no longer the needfor large monthly cycles of Open Market Operations.

Moving the public sector accounts to commercial banks has created asubstantial opportunity, largely unexploited as yet, to save on interest costs. Althoughthe Government earns some interest on its deposits, the rate is far below the rate it payson its short-term domestic debt obligations. As long as it has outstanding short-termdebt, every dollar that it holds in deposits has an opportunity cost of the interest ratedifferential. Strengthening the Treasury function could save some of this cost. Thiswould require having all public entities report on all their accounts very frequently andwould require safeguards to assure that funds were reliably restored to the entities intime to make their payments. Benefits would include reduction of domestic interestcharges, and an approach to liquidity management less dependent on the use ofGovernment debt instruments. The amounts involved are not trivial, and the potentialsavings would figure at least in the hundreds of millions of J$ per year. The best way todo this would be directly by the Government, without changing its position at the BOJ.In that case, reserves of the commercial banking system would not change, but more ofthe credit derivable from those reserves (holding required reserve ratios constant) canbe shifted to private sector borrowers. "

The actual disbursement of the budget differs from the initial estimates,of course. The discrepancy has widened in the fiscal years since the exchange rate wasliberalized, in 1991. Appendix Table A.3 shows a summary of the Budget EstimatesApproved and the Preliminary Actuals, as reported in the Estimates of Expenditure.The main item behind the increased volatility is debt service. This includes recurrentpublic debt management (interest), recurrent general economic regulation (paymentsfor BOJ losses), and capital public debt management (principal repayment, which otheraccounting practices would put below the line). The total outlays and those for debtservice were substantially over budget in the two years with high inflation, 1991/92 and1993/94. Debt service was under budget in 1992/93, when the exchange rate was heldstable by agreement with the commercial banks, but BOJ followed an easy-moneypolicy, pushing down interest rates. Volatility of these outlays does not reflect aproblem with the budgeting process but rather was a side effect of broader problems inmacroeconomic management. Some of these problems were unavoidable as theGovernment shifted to a market-oriented foreign exchange system.

" Consider the alternative of taking all the excess deposits of public agencies back to BOJ. thatwould result initially in a corresponding contraction of the reserves of the commercial banks,tightening credit and raising interest rates. If BOJ had been satisfied with monetary policy before, itwould respond with an open-market operation to restore reserves to their original levels. The BOJoperation of buying T-bills or other interest bearing instruments would increase BOJ profits and froma consolidated public sector viewpoint effect the same savings as a direct Ministry of Financeoperation described earlier. Doing it through BOJ, however, creates more risk of monetary turbulenceif there are discrepancies in timing. It would be a similar problem as when expenditure accounts wereat commercial banks but revenue accounts were still at BOJ.

32


For social and community services, the recurrent expenditures usually ran overbudget, mainly for teacher and medical personnel salaries. This reflected the see-saweffects of inflationary erosion of wage rates, then a catch-up with overshooting, andthen another round of inflationary erosion. The capital budgets for the social sectorswere repeatedly under-executed, reflecting the effects of fiscal squeezes in order tomeet the targets for the overall public sector balance.

The important policy lesson from the increase of budget volatility is thatmacroeconomic instability has negative repercussions for the microeconomicmanagement of the budget.

Monitoring implementation of the budget

To provide a relevant and reliable database on the allocation and use of publicresources, the strategy of the ongoing financial management reform under theAdministrative Reform Programme (ARP) focuses on (i) generating comprehensiveand accurate data in real time, as the money is spent, and (ii) building up the capacity touse the data for making decisions and evaluating implementation. The following toolshave been or will be provided as part of the reform process:

* Program budgets for all ministries and departments, with corporate plans,

* Accounting systems with the program budget structure,

* Computerized accounting, the Financial Management InformationSystem (FMIS)

* Rationalized and updated financial reports

The program budget organizes budget allocations by specific purpose, links thecapital and recurrent budgets to reveal the total allocation for each program and sub-program, and provides information that could be used to link outputs (such as miles ofmain road resurfaced or primary school educational attainment) with the financialinputs for the corresponding program. It began in FY1993/94 for a few mninistries, andby 1995/96 all ministries put their budgets in a program format. Ministries still vary inthe extent to which they actually develop their budgets by deciding first how much toallocate to each program, and then deciding how much to budget for each sub-programand object. The Ministry of Construction, for instance, is fairly good in this regard, asthey design their budget by deciding how much to allocate for primary and secondaryroads, and for the rehabilitation and maintenance of each. In other ministries, such asEducation, the definition of programs and the priorities for allocation across them areclear, but the Ministry has little flexibility to reallocate resources across programs orobjects, since most spending is precommitted to certain objects (salaries) in certainprograms (schools). International funding from donors and lenders also locks fundinginto particular objects and functions. This is not necessarily a criticism of the particularallocations. Program budgeting will allow policy makers to better see the existingpattern resulting from past commitments and thus to identify the reallocationsnecessary to achieve the most important objectives of the Government.

33


The accounting system has been revised for all ministries to follow the programbudget. Each spending event is recorded with full information as to both the program(and sub-program) and the object. Initially, clerks were taught to record theinformation manually, as the computerization of the information system was being putin place, using the same formats that are being used now with computers. The degreeof success has varied according to the familiarity of staff with computers andaccounting. Training procedures will need to be modified to succeed at ministrieswhere staff are less well prepared. Also, at the Ministry of Finance and the AccountantGeneral office, the standard formats were not well suited to record the agencies'activities.

Computerization of this information in its new structure is allowing the creationof a true financial management system, from which the Ministry of Finance, the lineMinistries, OPM, etc. will be able to find out each month the amounts that have beenspent for each program. The computerized accounting (FMIS) has been installed in theMinistries of Health, Construction, Education, Agriculture, and Finance, and partiallyin the OPM. These Ministries account for 80 percent of Government spending. Beforethe computerized FMIS is installed at other ministries, the Administrative ReformProgramme plans to consolidate the process and extend it down to regional and locallevels within the ministries where it is already installed.

These tools for faster, more accurate financial accounting will be most useful ifcombined with prompt and serious accounting for performance. This has been intendedall along as part of program budgeting, and it is in the spirit of the executive agenciesthat will be introduced on a pilot basis as part of the next phase of the AdministrativeReform Program, supported by the Public Sector Modernization project with the Bank.

The public service

Many important budgetary decisions are de facto made through the personnelappointment and salary setting processes. And then the formal budget process has toallocate or reallocate spending to finance the personnel decisions, sometimes by takingresources away from objects and programs that contribute more to the priorities foreconomic development and poverty reduction. The rules of the civil service weredesigned to protect a highly qualified technocratic service from political interference.While the rules still serve the function on some occasions, they more often serve nowto lock the door of a barn from which most of the highly qualified horses have fled andwhich offers no attractions to young thoroughbreds. Reform of the personnel andadministrative systems will succeed only if based on a sound conceptualization of thepublic sector mandate and a streamlined ministerial structure, to deal with issues raisedin the rest of the report.

The First Ministerial Roundtable Report on the "Emerging Role of the State"held in August 1993 endorsed the administration's commitment to increasing theefficiency and service delivery of the public service through suitable restructuring,rationalization, and human resource development. The current mix of centralizationand decentralization results in both fragmentation and central bottlenecks-inadequate

34


accountability in part because individual decision-makers lack authority to make thepersonnel decisions needed to assure the success of their activities. For instance, theeducational sector and statutory boards have independent hiring and firing authority (asopposed to line ministerial authority), salary and incentives are determined (based onsome relational notion to the private sector) at the entity level, and in a number of casesthe relationship between posts and functions is even less clear than in the CentralGovernment. Coexistent personnel "systems" include the Central Government, theeducation sector, each statutory body, the constabulary force, local authorities, parts ofthe health sector, and the implementing units of projects, which the donor communityfinances and supervises.

Reform proposals under discussion favor two main approaches-reforming thecore civil service and creating alternate structures. Each approach has some merits,and each has been tried before in Jamaica. Both will probably be used in the eventualreforms, but success will require adequate planning to avoid repetition of past mistakes.Implementation of either approach must not lose sight of the necessity in the aggregateto end up with fewer people who have higher qualifications, to stay within thesustainable fiscal envelope, and to recruit new blood to the system. New alternatestructures, such as executive agencies, should be used only with checks against theproblems that plagued statutory bodies. The latter were often introduced for the samepurpose as the executive agencies being considered today-to get around thebureaucratic inflexibility of the personnel system and of the substantive decisionprocess in the regular civil service.

For proper design and monitoring of either reform strategy, the Office of thePrime Minister, which has the Public Service portfolio, the Office of ServicesCommissions, and the line ministries need faster access to up-to-date information onthe human resources in the civil service in order to perform their functions efficientlyand accurately. The Human Resource Management Information System (HRMIS),established in 1988, is a modular database. In a phased way it will use as much aspossible the already registered information, extending the electronically capturedinformation with manual information from central sources, and then by letting everyministry and department employee complete and update the information.

The personnel records computerization under HRMIS has made limitedprogress. After the initial data collection records, the update and entry effort has metwith partial and sporadic compliance from ministries and departments, and agencies useit little, because the personnel records are so partial. The delay in setting up a ReformCell at MPS and the lack of capacity of the computer cell at ARP to support FMIS andHRMIS components simultaneously contribute to HRMIS's lack of progress.

Operation of the system is divided between the recently privatized NationalComputer Service (NCS), which stores and processes the files, and the HumanResources Planning division of MPS, which serves as the facilitator between NCS andthe various users of the data. The NCS is currently running a number of payrollsystems on behalf of various ministries and agencies. They include payroll systemswhich are processed through the Accountant General's Office and account for

35


approximately one-third of the Establishment. The remaining public sector entitieshave other contractual arrangements for the processing of their payrolls.

The limited progress of HRMIS is reflected in the content of the existingdatabase. Over 70 percent of the data records are incomplete; many input controlprograms have been allowed to accept partial data in order to allow as many records aspossible, resulting in an incomplete database with an error rate of approximately 50-60percent. HRMIS has suffered from lack of financial resources for effective system-wide implementation, lack of ownership by senior officials, and lack of a vision for howthe system would serve owners, users, and their clients. Poor record keeping and non-compliance in some ministries and departments partially due to the absence of direct-user access and interactive processing, and the lack of trained personnel to develop andimplement the system left HRMIS underutilized. The design stage involved mainlytechnical consultants without user/participant input, computerized personnel data formswere so long and complex that most agencies preferred to continue with manual recordkeeping. Most critically, line agencies did not perceive the benefits of HRMIS and hadlittle incentive to use it. Consequently, the central agencies-Office of the ServiceCommission, Ministry of Public Service (in its various locations) and Ministry ofFinance and Planning-did not see usable output. Once the scope of the core civilservice is decided, a more user-friendly version of HRMIS will be needed to implementand sustain its reforms.

Recommendations

- The Government needs to establish a rational and transparent procedurefor assigning priorities to programs, project and policies across the Central Governmentand public entities, rather than allowing the outcomes to depend as much on thenegotiating skills of the individual ministries and departments.

* The information for forecasting the balance of Payments and theMonetary Accounts should be improved, which would improve the estimate of totalfinancing allowable to the economy and of the proportions of credit allowable to thePrivate and Public Sectors.

* To improve the ability of the Government-both the Ministry of Financeand the line ministries-to monitor the implementation of the budget, the FMIS needsto be completed as quickly as possible, and the Government should consider extendingit to the SPEs. As the FMIS is completed, it needs to be linked in an automatic,computerized way with the budget. This will enable the Cabinet, the Ministry ofFinance, and the Ministry concerned to monitor in real time the extent to which thebudget is being implemented. Reporting procedures will need to be developed so thatthis information gets to the right hands. For instance, by the time the budget call ismade in the fall, the Cabinet should be able to know from this system how much of thebudget was implemented (spent) in the first half of the fiscal year. By the time thebudget is voted on in the spring, Cabinet should have preliminary figures forimplementation in the preceding fiscal year.

* Program budgeting needs to be matched with performance reviews,monitoring achievements in relation to the targets set in the corporate plan.

36


* The capacity to analyze the budget and monitor expenditures needs tobe strengthened in the line ministries as well as in the Ministry of Finance. The twoefforts need to be pursued with compatible information systems. The FMIS has abudget building module (not yet in use) as well as the expenditure recording modecurrently being implemented. Both need to be fine-tuned and linked with analyticsoftware (like that being developed by the Fiscal Policy Management Unit (FPMU) forthis PER) in order to be useful planning and monitoring tools for the seniormanagement of the line ministries. Only if these systems meet needs in the lineministries will they devote enough attention to making sure the information is accurateand up-to-date. With accurate, up-to-date, machine-readable, and uniformly formatteddata in the line ministries, it will be straight-forward for the Ministry of Finance toextend and fine-tune its budget and expenditure analysis system so that it automaticallyrolls up the data from the line ministries and presents overviews in formats useful forthe Ministry and the Cabinet.

* Ihe Treasury function needs to be strengthened, in order to use idlepublic sector balances in the banking system to reduce short term domestic debt. Thiswould help reduce interest costs.

37

Appendix Table A.1: Jamaica -- Central Government Real Expenditures (In 1993 JSmt)

-- TOTAL -------------- ------------------------------- -- ------ RECRRENT- -------- --- CA A-------- - ---------------------------- CAP B-------

1992/93 1993/94 1994/95 1995!96 1992/93 1993/94 1994/95 1995/96 1992/93 1993194 1994i95 1995/96 1992/93 1993/94 1994/95 1995/96

Actual Actual Revised Budget Actual Actual Revised Budget Actual Actual Revised Budget Actual Actual Revised Budget

Public DebtManagement a/ 12,205,916 12,635,800 13,888,819 12,139,645 12,205,916 12,635,8(t0 13,888,819 12,139,645

lntemal (Recurrentonly) 8,722,445 8,358,145 10,118,997 8,923,158 8,722,445 8,358,145 10,118,997 8,923,158

Extemal (RecunTent only) 3,483,471 4,277,655 3,769,822 3,216,48- 3,483,471 4,277,655 3,769,822 3.216,487

General Government 2,457,018 2,855,069 3,135.542 4,533.16' 1.863.480 2,354.38? 2,468,471 3,172,676 253,156 27',558 493,041 1,018,968 340,382 223,124 174,029 341,523

Executive, Legislative & Diplomatic 620,325 706,598 624,390 697,517 620,325 706,598 621,108 697,093 0 0 3,282 424 0 0 0 0

Fiscal PolicyandManagement 753,883 919,799 968,747 1,708,260 532,452 675,253 645,666 833,422 137,350 163,185 23-,241 714,386 84,082 81,361 85,840 160,452

Penions& Pensonnel Mgt 575,956 897,085 1,139,442 1,599,219 545,104 245,829 983,300 1,470,227, 2',155 31.250 86,196 53,002 3,697 119,956 69,946 75,990

(ther (nc Information& 506,854 331,587 102,962 528,171 165,600 226,65' 218,39' 1'1,931 88,651 83,123 166.322 251,156 252,603 21,80- 18,243 105,081

Broadcastmg)

Defense adPublic Order 2,402,411 4,258,308 3,174.809 2,881,398 1,446,852 3,818,108 3,057,160 2,579,181 106,007 427,232 97,655 270,388 849,553 12.968 19,995 31,829

National Defene Forces 1,598,393 1,068,593 857,105 737,646 771,629 1,032,175 827,858 678,956 50,240 36,418 29,247 58,690 776,524 0 0 0

Police 436,989 2,525,113 1,6'9,629 1,613,'47 341,703 2,163,714 1,642,418 1,424,025 24,730 361,399 37,211 189,722 70,556 0 0 0

Justice 157,563 299,187 351,694 28(),181 138,273 268,584 320,975 241,440 16,816 17,635 10,724 6,912 2,473 12,968 19.995 31,829

Confectional Services 209,467 365,415 286,382 219,824 195,248 353,635 265,909 234,760 14,220 11,780 20,473 15,064 0 0 0 0

EconomicInfrastructive & Services 3,157,534 5,228,613 6,081,712 7,040,933 1,631,526 2,150,016 2,532,130 2,227,042 594,831 1,023,362 945,899 1,501,517 931,177 2,055,235 2,603,683 3,312,374

Roads 753,543 1,178,097 1,172,308 2,090,011 75,261 75,801 63,103 51,776 77,602 115,8S1 89,621 872,960 600,681 986,445 1,019,584 1,165,275

OtherTransport &Communicaions na 464,865 532,636 554,747 na 361,765 385,083 284,154 na 14,100 116,134 205,643 na 89,000 31,420 64,950

Housig Water, Sarutation& Urban na 1,307,640 1,833,839 2,113,019 na 371,126 424,362 565,184 na 264,142 248,166 2(2,337 na 672,372 1,161,311 1,345,498

InfirastructureTourism na 645,747 952,406 682,231 ria 575,059 859,116 596,720 na 70,688 93,291 85,511 na 0 0 0

Agriculture(excl agic education) 721,184 757,890 803,310 875,099 286,769 324,956 339,714 266,478 126,666 160,516 168,132 61,788 307,750 272,418 295,464 546,833

Industzy, Coinerce, Mining & na 780,467 639,529 503,551 na 377,152 353,659 340,254 na 389,915 215,089 57,407 na 13,400 70,781 105,890

EnergyOther Serices na 93,907 147,683 222,275 na 64,157 107,093 122,476 na 8,150 15,467 15,871 na 21,600 25,123 83,928

Human Services 6,273,171 9,822,158 8,950,215 7,890,715 5,260,689 8,504,476 7,664,370 6,519,372 273,386 342,708 411,265 323,513 739,096 974,974 874,580 1,047,830

Education(inc AgncEduc) 3,265,962 5,507,184 4,649,453 4,377,896 2,938,667 5,060,006 4,145,733 3,776,051 91,577 83,218 112,697 85,075 235,718 363,960 391,023 516,770

Health 2,184,524 3,084,681 3,125,316 2,409,184 1,635,717 2,427,858 2,583,975 1,769,919 58,734 89,461 124,563 128,205 490,073 567,362 416,778 511,060

CommurutyDevelopment&Social 822,686 1,230,294 1,175,446 1,103,635 686,306 1,016,612 934,662 973,402 123,075 170,030 174,005 110,233 13,305 43,652 66,779 20,000

Services

Unallocated 52,754 287,403 186,382 4,637,164 42,521 250,915 185,452 4,119,175 10,233 36,488 930 517,989 0 0 0 0

TOTAL 26,548,804 35,087.351 35,417,478 39,123,022 22,450,984 29,713,702 29,796,402 30,757,091 1,237,612 2,107,348 1,948,791 3,632,375 2,860,208 3,266,301 3,672,286 4,733,556

Source: Ministry of Finance, Jamaica, and consultant calculations.

C.s

Appendix Table A.2: Nominal expenditure of central government (in J$rnn)

1992/93 1993/94 1994/95 1995/96Actual Actual Revised Budget

Public Debt Management (Recurrent 9,871,320 12,635,800 18,520,740 18,573,656only) a/

Internal 7,054,124 8,358,145 13,493,682 13,652,431External 2,817,196 4,277,655 5,027,058 4,921,225

General Government 1,987,070 2,855,069 4,181,132 6,951,538Executive, Legislative & Diplomatic 501,677 706,598 832,603 1,069,631Fiscal Policy and Management 609,690 919,799 1,291,789 2,619,589Pensions & Personnel Mgt 465,794 897,085 1,519,404 2,452,377Other(inclnformation& Broadcasting) 409,909 331,587 537,336 809,941

Defense and Public Order 1,942,908 4,258,308 4,233,496 4,418,578National Defenae Forces 1,292,672 1,068,593 1,142,919 1,131,168Police 353,407 2,525,113 2,239,726 2,474,655Justice 127,426 299,187 468,971 429,655Correctional Services 169,403 365,415 381,880 383,100

Economic Infrastructure & Services 2,553,600 5,228,613 8,109,747 10,797,160

Roads 609,415 1,178,097 1,563,231 3,204,998OtherTransport&Communications na 464,865 710,252 850,696Housing, Water, Sanitation & Urban na 1,307,640 2,445,360 3,240,282

Infrastructure.Tourism na 645,747 1,270,000 1,046,191Agriculture (excl. agric. education) 583,245 757,890 1,071,185 1,341,951Industry, Commerce, Mining & Energy na 780,467 852,789 772,186Other Services na 93,907 196,930 340,856

Human Services 5,073,317 9,822,159 11,934,791 12,100,285Education (incl. Agric. Educ.) 2,641,289 5,507.184 6,199,880 6,713,434Health 1,766,695 3,084,681 4,167,497 3,694,445Community Development & Social Services 665,333 1,230,294 1,567,414 1,692,406

Unallocated 42,664 287,403 248,534 7,111,018

TOTAL 21,470,879 35,087,351 47,228,440 59,952,235

Sources: Ministry of Finance, Jamaica; consultant estimates; and World Bank calculations.

41

Appendix Table A.3: Jamaica - Comparing Initial Budget and Actual Expenditures (In J$ millions, nominal)

FY 89/90 FY 90/91 FY 91/92 FY 92/93 FY93/94

Budget Budget Budget Budget Budget

Approved Actual Diff Approved Actual Duff Approved Actual Duff Approved Actual Duff Approved Actual Diff

General Services 5468 4715 -753 6576 6608 32 9384 11461 2077 19132 16558 -2574 24507 28363 3856

Recurrent 3407 2824 -583 4324 4440 116 5813 6713 900 10571 8335 -2236 17623 21211 3588

o/w debt interest 2055 1872 -183 2730 2766 36 3451 4505 1054 5925 5604 -321 8200 10205 2005

BOJiLosses' 0 0 0 0 0 0 0 20 20 67 500 433 4745 5452 707

Capital 2062 1890 -172 2252 2167 -85 3570 4748 1178 8560 8223 -337 6884 7152 268

o/wdebtarnortization 1919 1696 -223 2071 1981 -90 2975 4207 1232 7341 7162 -179 5986 6218 232

Social and Community Services 2565 2490 -75 3258 3380 122 3729 4243 514 5290 5265 -25 9326 10654 1328

Recurrent 1851 1931 80 2385 2507 122 2847 3400 553 3896 4337 441 6923 8660 1737

Education and Culture 933 861 -72 1262 1334 72 1555 1938 383 2382 2406 24 4704 5112 408

Health 531 478 -53 682 719 37 812 931 119 1022 1323 301 1396 2428 1032

Capital 714 560 -154 873 873 0 881 841 -40 1393 927 -466 2403 1994 -409

Education and Culture 247 247 0 263 243 -20 219 234 15 298 272 -26 582 441 -141

Health 197 57 -140 171 138 -33 170 200 30 542 444 -98 773 663 -110

EcononucServices 1090 1552 462 1365 1554 189 1716 1874 158 1877 2519 642 3722 4294 572

Recurrent 342 339 -3 422 489 67 523 440 -83 566 1302 736 1245 1844 599

Capital 747 1213 466 944 1065 121 1192 1434 242 1310 1217 -93 2477 2450 -27

Miscellaneous 1 30 29 1 1 0 1 0 1 1 855 854 3017 289 -2728

Total 9124 8787 -337 11200 1154 343 14829 17577 2748 26299 25196 -1103 40572 43600 30283

Recurrent 5600 5123 -477 7131 7438 307 9185 10554 1369 15035 14663 -372 28347 31967 3620

Capital 3523 3663 140 4069 4105 36 5644 7024 1380 11265 10533 -732 12225 11632 -593

Source: MOF "Estimates of Expenditures," various years.

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report no. 14387-jm jamaica public expenditure review

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