The steep revenue fallout, which continued during the period April to January of this fiscal year, could lead to a failure of the March 31 targets outlined under the agreement with the International Monetary Fund (IMF).

These include the fiscal deficit, overall public sector deficit, the debt to Gross Domestic Product (GDP) ratio, the net domestic assets ratio and the inflation targets.

Failure to meet these targets could lead to a freeze on the remainder of the US$2.4 billion, which the country would get from the IMF and the other multilateral agencies, if it successfully meets the eight quarterly performance tests outlined under the agreement.

This means that no more money would flow until corrective actions are taken, leading to increased hardships for Jamaicans who are already reeling from the decline in the economy, high levels of unemployment, cantering inflation and rapidly escalating levels of crime and violence.

The massive $29.0 billion revenue shortfall experienced during the period April to January of this fiscal year will however make it difficult for the country to meet the fiscal deficit target of 10.0 per cent of Gross Domestic Product (GDP) and the overall public sector deficit target of 13.5 per cent of GDP, outlined under the agreement for March 31.

The fiscal deficit was running at $106.0 billion or 10.0 per cent of GDP, way above the $83.0 billion programmed during the period and the $95.0 billion projected for during the entire fiscal year. A higher than budgeted for fiscal deficit could lead to a larger than expected for overall public sector deficit and an increase in interest rates.

Under the agreement, the overall public sector deficit – the fiscal deficit plus that of the select group of public sector entities must be slashed by 5.0 percentage points of GDP to 9.0 per cent by the end of the next fiscal year.

If the deficits end up at 15.0 per cent of GDP, rather that the 13.5 per cent budgeted for under the agreement, then more drastic expenditure cuts and fee increases, focusing on areas such as the subsidy on tertiary education and increases in items such as bus fares will have to take place next year.

The revenue shortfalls could also result in the government’s failure to meet the target for the amount of money which is to be set aside to pay the debt, rather than to spend on the provision of basic social services such as money for the Programme of Advancement through Health and Education (PATH).

This target, which is called the primary surplus, was projected at $83.0 billion or 7.5 per cent of GDP for March 31 of this year but the amount set aside as at the end of the period April to January of this fiscal year was just over $50.0 billion. This was so, despite the massive cutbacks in PATH grants currently taking place.

Meanwhile the IMF wants to the government to cap the amount money printed and borrowed from the central bank at $49.0 billion as at the end of March this year and to reduce this amount to $18.5 billion by the end of March 2011.

This means that the government will not be able to borrow more from or force the central bank to print more money in order to help it finance its operations in the face of the drying revenue streams. This will also be compounded by the order from the IMF not to build up any more arrears in the system.

The stock of outstanding arrears is currently running at about $50.00 billion or 5.0 per cent of GDP. Inflation, which is also projected at between 11.5 and 13.5 per cent, could also jump to about 15.0 per cent because of the imposition of higher taxes on electricity and petrol, as well as food and other basic goods and services.