Economists weigh in

Experts advise on way out of Government-public sector workers stalemate:

DR DAVIDSON DAWAY, Economist

I think it's an absolute mistake in the Government not honouring its responsibility. In my opinion, the Ministry of Finance has too much authority on this thing. There is not only a monetary side to this, but there is also a social aspect, people need to survive, especially in the climate and environment we are in right now. I believe the Government should make an effort to really pay these people their money because it is very difficult for people to see you spending money left, right and centre, but when it comes to the value of their work, it is not being compensated. It is a situation where they already worked for that money, it is not a matter of something that is projected. If they had owed the Government taxes, the Government would seize their property.

RALPH THOMAS, financial consultant, Senior teaching fellow of the Mona School of Business

A combination of a cash payment and a security should be considered and there is adequate precedent for this. The parties could consider an immediate cash payment of 20 per cent, for which fiscal space would need to be created by negotiating an increase in the fiscal deficit target with the International Monetary Fund or by using other mechanisms. The remaining 80 per cent would be settled by issuing a bond instrument, whereby the Government is relieved of the necessity to come up with all of the amounts in cash.

The maturities of the public-sector bonds could be laddered to come due in increments over a three-year period, thereby diminishing the ultimate cash impact over time and creating fiscal space to bridge the gap until the economy recovers robustly and government revenue intake improves. To preserve budget flexibility, the bonds could have a call provision whereby the Government could prepay the face amount of the bonds if there is a strong uptick in revenues and it is opportune to do so. Such bonds should be freely tradable and permit the holder to sell to a willing institutional investor in order to obtain liquidity and meet pressing obligations.

To be fair to the workers, I recommend that all frictional charges accompanying the sale of the bonds by the workers should be waived and the Government reimburse the participating institutions such as banks, brokerages, credit unions and building societies for the avoided charges. To further enhance the attractiveness of the bonds to the holder or holder-in-due course, transactions should be free of all taxes of any kind. Workers have already suffered opportunity cost because of the delayed payment, so the design of the bond should be highly favourable to the workers. The issue of the appropriate interest rate on the instrument arises and this should command a two per cent premium over similar maturity government securities, since the transaction arises under some element of duress.

Because the Government in the recent past has engineered an involuntary default on its bond obligations with the Jamaica Debt Exchange, the public-sector workers should insist on an iron-clad guarantee, to which upside penalties would attach in the event that the suggested public-sector bonds were caught up in a wider restructuring of the Government's debt at any time in the future life of the bonds. I believe it is imperative that such a solution be quickly agreed and implemented and the prime minister dedicate a day to honour and thank the workers for their contribution.

MILTON SAMUDA, President of the Jamaica Chamber of Commerce

There is a great need for soberness, for a lack of inflammatory language on either side and for the national interest to be considered as paramount while recognising the sacrifices that the public servants are being called upon to make. Because a lot of people who want to label them as greedy and unmindful of the national interest, have not been subject to a wage freeze and have never been told that salaries that they earned will not be paid. So there is already a debt which we owe the public servants and the discussions need to take place in the context of a national recognition of that and an acknowledgement of the tremendous sacrifice made and which we are asking them to add to. Therefore, the mechanisms that are going to be used to work through a solution must be mindful of that reality. I encourage the parties to continue to explore the various avenues that I know are being explored to come up with a package that both can live with and that will be to the benefit of the country. No side can take a hard and fast position. There is need for genuine openness and respect on both sides and an ever-mindful view of what is the national interest.