Tue | Jan 15, 2019

Government to seek extension to reduce wage bill

Published:Wednesday | March 4, 2015 | 12:00 AMMcPherse Thompson
Dr Peter Phillips, minister of finance planning (left), and International Monetary Fund mission chief, Dr Jan Kees Martijn.

The government will be seeking permission from the International Monetary Fund (IMF) to extend the deadline for a reduction in the size of the public sector wage bill to nine per cent of gross domestic product (GDP).

The Government had agreed to reach that target by the end of fiscal year 2015/16, but IMF mission chief to Jamaica, Dr Jan Kees Martijn said last week that the authorities have now committed to do so by fiscal year 2016/17.

The December 2014 memorandum of economic and financial policies, the last one the Government submitted to the IMF executive board ahead of its approval of the sixth quarterly review, has indicated that the deadline for doing so would be the upcoming fiscal year.

At the conclusion of the seventh review mission to Jamaica on February 25 Dr Martijn noted that the Government, having tabled its budget in Parliament in February, "the authorities intend to maintain the wage bill in line with the budget allocation, and they remain committed to reduce the wage bill to nine per cent of GDP by 2016/17".

However, it is the IMF's executive board which will ostensibly be required to give the go-ahead to Jamaica to extend the deadline for reducing the wage bill. The board is expected to consider the seventh review of Jamaica's IMF-supported programme under the extended fund facility this month.

According to the 2015/16 Fiscal Policy Paper tabled by Finance and Planning Minister Dr Peter Phillips in Parliament in February, the allocation for wages and salaries of $161.7 billion for fiscal year 2014/15 represented the largest share of the non-debt expenditure budget, accounting for 52.7 per cent, a marginal reduction from the 54.8 per cent the previous fiscal year. That provision amounted to 10 per cent of GDP, down from 10.6 per cent in 2013/14.

Wages and salaries for the period April to December 2014 totalled $120.8 billion, which was $1.7 billion or 1.4 per cent less than the amount budgeted, the Paper said.

Contributing to the lower spending was the fact that actual payments from some settlements were less than the amount budgeted for payment during the review period. The payout for the one-off payment of $25,000 to public sector workers was $2.3 billion compared to the budgeted $2.7 billion.

Compared to the corresponding period the year before, spending on wages and salaries during the period to December 2014 increased by $1 billion due mainly to the implementation of the second phase of the health sector reclassification as well as performance increments, arrears associated with implementation of a relativity study for firefighters, and holiday hours worked by the police.

However, those costs were offset by significantly lower payment of back pay which totalled $7.2 billion compared to $12.5 billion in 2013.

For fiscal year 2015/16, wages and salaries as a share of non-debt recurrent expenditure is projected at $165.2 billion or 55 per cent.

That allocation includes amounts for back pay primarily to correctional officers, firemen and health sector workers, as well as the final tranche of the $25,000 one-off payment due to public sector workers.

Provision is also made for the payment of new rates to groups such as medical officers, consultants and correctional officers, which settle outstanding wage issues during fiscal year 2014/15, as well as an amount for wage adjustment from the negotiations currently underway with unions.