Recovery Spending Will Widen Jamaica’s Deficit

• With the fiscal pressures arising from ongoing hurricane recovery efforts and the passage of the government's FY2026/2027 budget in early 2026, Jamaica's fiscal deficit is expected to widen significantly, from -2.8% of GDP in FY2025 to -4.9% of GDP in FY2026.
• The expansion will be driven primarily by an uptick in expenditures related to ongoing hurricane recovery efforts, projected to rise from 35.5% of GDP in FY2025 to 37.1% in FY2026, well above historical averages, before returning towards trend, as the government reimposes its fiscal rules and growth resumes over the medium term.
• On the revenue side, Jamaica has enacted its first tax increase in nearly a decade to support recovery efforts, introducing a suite of new measures, including vice taxes on alcohol, sugary drinks and cigarettes; a consumption tax on digital imports; and other levies. The decision to remove the fuel-price cap will help to mitigate fiscal pressure arising from the US-Iran conflict and rising energy prices.
• In response to rising fuel costs since the onset of the US-Iran war, in April 2026, the Jamaican government announced its intention to remove the weekly cap on fuel-price changes to reduce the fiscal burden on Petrojam and Jamaica's public finances. While this will increase domestic price pressures, it will help to alleviate fiscal strain, with revenues set to rise, given the existing consumption tax on fuel, a tailwind to overall fiscal stability.
• BMI forecasts that Jamaica's debt-to-GDP ratio will meet the 60% of GDP target by 2030, which is just a few years behind the FY2025/2026 schedule. While near-term exigencies will see debt rise in the near term, the fiscal balance will return to surplus over the medium term with the reimposition of the fiscal rule and economic recovery – as seen after the COVID-19 pandemic – underpinning Jamaica's sustainable fiscal trajectory despite ongoing shocks.
• Jamaica's recovery will likely be lengthy; however, the country has built meaningful fiscal buffers to withstand natural disasters and fund rebuilding. Should recovery financing needs exceed current allocations, which is likely given the estimated extent of damage, Jamaica's strong fiscal position provides room to increase recovery spending without jeopardising long-term fiscal sustainability. International support for ongoing recovery efforts further bolsters Jamaica's public finances. Assessments from the IMF underpin BMI’s optimistic view, indicating that Jamaica has sufficient buffers to fund ongoing disaster relief efforts.

(Source: BMI, A Fitch Solutions Company)