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Public wage bill reduction necessary for growth - Byles

Published:Friday | June 10, 2016 | 12:00 AMMcPherse Thompson
Richard Byles

Jamaica must reduce the public sector wage bill as part of the structural benchmarks under the economic support programme with the International Monetary Fund (IMF) if it is to get more resources to invest in productive capital projects and boost economic growth.

That is according to co-chairman of the Economic Programme Oversight Committee (EPOC) Richard Byles, who noted that the nine per cent wages to gross domestic product (GDP) target agreed as part of the IMF programme should have been achieved during the last fiscal year but was missed.

Byles cited the example of Barbados, whose public sector wage bill was currently at nine per cent.

"We lag Barbados in that respect, and one of the important structural benchmarks that we are going to have to meet is public-sector reform. We are going to have to do it. It's part of the IMF programme," he emphasised.

"And one of the indicators of that public-sector reform is the wages-to-GDP target which, as we know, was set at nine per cent for (fiscal year) 2015-16, which we missed, was put off to 2017-18 and I believe may now even be out at 2018-19," he added.

"To the extent we keep postponing this challenge, it's to the extent that the Government has less to invest in productive capital projects," Byles said during a media briefing where he released the 37th communiquÈ of the private sector members of EPOC at Sagicor Life's New Kingston offices yesterday.

ECONOMIC GROWTH

Byles, referring to the less than one per cent economic growth for the fourth quarter of 2015, said: "We'd like to see growth a little stronger, but we have to understand the reasons why. It takes time to get growth in an economy that is so burdened with debt and in an economy that has such a small domestic market."

Noting that Jamaica's capital Budget for fiscal year 2016-17 is $43 billion, the EPOC co-chairman said Jamaica's primary surplus under the IMF programme for the year is $122 billion.

"If we were in an economy that could afford to spend all of the revenues that we earn, our capital Budget would be $165 billion. Instead, it's $43 (billion)," said Byles.

"So you begin to understand what it means when the Government is not a full-blooded participant in growing the economy. So instead of taking that $122 billion and investing it in the economy to do productive things and to facilitate further production, we have to be paying down debt," he noted.

"And so the more we can get rid of that debt is the more we can spend on capital expenditure," he added.

Byles said that one of the reasons why the Government could not participate "as full-bloodedly in the economic development and growth is because it costs so much to run government".

It was in that context that he cited the example of Barbados, noting that the Eastern Caribbean economy is at an important crossroads and that they resisted devaluation of their currency.

"But it's not that they haven't done some tough things. One of the tough things that they have done is reduce the wages in their GDP," Byles said.

"Our wages in GDP is 10.3 per cent. Their wages in GDP is nine per cent," he said, noting that that was made possible because they reduced their public sector substantially.

"And what that has done is given them a bit more room, bit more space to spend on development issues," said Byles.