Jamaican Government seeks retroactive protection for bauxite levy breach

Jamaican Government is to offer mea culpa to Parliament, before seeking support for a Bill to validate its actions pertaining to the misuse of funds accumulated under the Bauxite (Production Levy) Act since 1999.

A Bill to this effect, titled The Bauxite Act, was tabled last week by Minister of Finance and Planning, Dr Peter Phillips, who led the first and second reading in the House of Representatives last week.

However, while the Bill has not generated much interest either inside or outside of Parliament, it is seen by those in the know as a fundamental departure from the way successive governments have handled the Capital Development Fund (CDF) which is financed by the payments from the 38-year-old bauxite levy in the past.

It is also seen as another effect of the International Monetary Fund's (IMF) insistence on a programme of improved fiscal responsibility, compatible with the medium-term economic objectives.

The Bill before the House seeks to validate and confirm the failure of successive governments to pay all sums received as payment of the levy, and all other income from the assets of the CDF, into the fund; the investment and realisation of such sums and income otherwise than in accordance with the requirements of the Act; and the subsequent withdrawal and utilisation of a portion of such sums and other income from the assets of the Fund for the purposes of satisfying the financial obligations of the Government; "in good faith, from time to time, and inadvertently as to their being unauthorised, unlawfully made or otherwise illegal or improper, during the period from 1st January 1999 until the date of coming into operation of this Act, contrary to section 12 of the Bauxite (Production Levy) Act and to indemnify the Government of Jamaica and persons from liability in relation thereto".

In the past, the House of Representatives has approved the withdrawal of billions of dollars from the CDF for budgetary support, which is in breach of the defined purpose of the funds which is to finance capital development, including programmes in communities in which bauxite and alumina production take place, and not for recurrent expenses or other non-capital expenditure.

Former Minister of Finance and Planning Audley Shaw admitted that using the withdrawals for budgetary support was indeed in breach of the CDF provisions.

Economist Dennis Morrison, a former chairman of the Jamaica Bauxite Institute (JBI), has been among those who have consistently criticised government's voracious appetite for CDF money for budgetary support.

In a previous article in the Observer, Morrison noted that, since the introduction of the levy in 1974, increasing proportions of the inflows had been redirected into the recurrent budget in the face of the economic instability.