Jamaica adjusts primary target as wages derail Budget
Published:Sunday | September 11, 2011 | 12:00 AM
Daraine Luton, Senior Staff Reporter
The seven per cent wage increase to public-sector workers has forced a revision of a key fiscal target, Prime Minister Golding said Thursday as he conceded that the economy was far from healthy.
"We have work to do, no question about it," he said while warning the Opposition not to wish doom on the economic programme agreed with the International Monetary Fund (IMF).
"We have this rare ability to talk ourselves into failure, and I think this time, the stakes are too high and the dangers are too intense that we need to pull up," Golding said while making his contribution to his debate on the first Supplemen-tary Estimates in Parliament.
To make room for the salary increases, Government has revised the projected primary balance from 5.2 per cent of GDP, or J$69.3 billion, to five per cent of GDP of J$65 billion for fiscal 2011-12.
"We had to approach the IMF to say we need an adjustment in the target, particularly the primary balance, because particularly with the seven per cent that we now have to pay the public-sector workers, we cannot achieve that target," Golding said.
"The IMF is not unwilling to work with us on the adjustment, but the IMF has raised a concern which we have to address. What the IMF has said to us is that 'Look, if you have a disturbance in the targets at this stage, you have to indicate how you are going to make that back up in the medium term', and particularly because the seven per cent that we have had to make provision for in this year's Budget is not a one-off expenditure," he told lawmakers.
The Government will now have to rework its medium-term programme to demonstrate to the Fund that it will be able to meet its 2016 targets, Golding said. It means the Government will have to recast the programme, Financial Secretary Dr Wesley Hughes said earlier last week.
Wage freeze
Under the standby agreement with the IMF, Jamaica had agreed to freeze public-sector wages until the end of fiscal year 2012, including the J$30 billion of increases that would have been payable over five years.
However, under pressure to pay from public-sector unions, the Golding administration has decided to pay out J$9.2 billion of outstanding increases this year.
Opposition Spokesman Dr Peter Phillips and Opposition Leader Portia Simpson Miller both accused the Government of keeping the country in the dark on the IMF programme.
"We need to have some idea as to the situation regarding the Fund relation with the Government of Jamaica," Phillips said.
"It is not clear whether the current agreement will be replaced. If so, will it replaced by an extended Fund facility? What is the status of the current negotiation, and what in addition to this current supplementary budget will be needed to resolve the current impasse?" Phillips queried.
"There is no need for the Government to treat this matter as if it is their private affair. The plans of all the Jamaican people depend on the answers to these questions and depend on full disclosure by the Government of Jamaica," Phillips said.
Golding told Parliament during the debate that while there are challenges with the IMF programme, the approval by the World Bank board last week of a US$100 million policy-based loan to Jamaica was made possible because the bank got positive signals from the IMF about Jamaica's programme.
The IMF is yet to review Jamaica's performance under a standby agreement for the Dec-ember 2010, March 2011, and June 2011 quarters.