The Government will think itself worthy of commendation for having presented a budget for the 2007/2008 fiscal year that, on the face of it, reflects no real increase in spending over last year's outlays.

Indeed, the $380.3 billion package is a littleover six per cent higher than the initial allocation for the fiscal year that ended yesterday, just 2.2 per cent above the adjusted numbers that Finance Minister Omar Davies presented to the legislature at the end of February. But all is not always as it seems, so do not expect that the administration will necessarily be on its best belt-tightening behaviour in an election year and that there will be no 'running with it'.

In the first place, assuming that this administration remains in office, we can almost bank on the fact that there will be supplementary estimates towards the end of the fiscal year. Here, read higher spending than initially projected. That's the history.

But even if the Government is broadly intent on prudence, undeterred by the exigencies of a political campaign and a wish to deliver a feel-good environment ahead of the vote, there are elements of the budget still worthy of close attention. For there are still possibilities for sneaking in extra chunks of pork.

In this regard, watch particularly the capital side of the budget, including the allocation for the amortisation of debt and the discretionary wiggle room afforded to the Government for a certain kind of spending. In the last fiscal year, for instance, the revised capital budget was $147.5 billion, of which $122 billion or 83 per cent went for capital payments on debt. But more important, the Government had only $25.5 billion for discretionary (non-debt) spending, of which nearly $8 billion would have gone into its commitments for Jamaica's hosting of Cricket World Cup.

For the current fiscal year, the capital budget, at $141 billion, indicates a nominal four per cent dip on last year's. But there is more. In this budget, amortisation or capital payments, will amount to about $102 billion, nearly $20 billion less than 2006/2007. More significant, though, is the effect of this, or the manoeuvring space allowed to Dr. Davies and the Government.

After amortisation, there will still be $39 billion available for capital spending, $14 billion or 56 per cent more than last year. The administration, in the circumstance, will be able to maintain the momentum of capital projects, rather than wind down the spending with the completion of the cricket-related projects. Watch the activity in the Ministry of Housing, Water, Transport and Works, which is responsible for road repairs.

The fiscally conservative might be minded to argue that it would have been better had the savings on amortisation not been spent in this way and put towards the overall reduction in the fiscal deficit, which really means borrowing less and lower debt, and strengthening macroeconomic stability. That is our position. So the deficit will remain at nearly four per cent of GDP and we should not expect a balanced budget until 2011.

For all his likely protestations, Dr. Davies is foremost a politician, and with that job, especially at election time, it is better to 'run with it' rather than adhere to fiscal prudence.

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