THE Government is committing to the International Monetary Fund (IMF) that it will reduce the size of the public sector wage bill from 11.75 per cent of GDP during the fiscal year that ends March 31, 2010 (2009/2010) to 9.5 per cent of GDP by 2013/2014.

Yesterday, Finance Minister Audley Shaw tabled in Parliament the Memorandum of Economic and Financial Policies (MEFP) that it intends to submit, along with its Letter of Intent, to the IMF.

The wage bill, which is estimated will cost the Government $126 billion this fiscal year, will not be increased nominally over the next

two years.

At the same time, the Government hopes to cap the wage bill at $150 billion in 2013/2014, or 19 per cent higher than at the start of the programme, even while it is projecting inflation of 29 per cent over the four-year period.

Moreover, the Government says it remains committed to paying increases agreed to prior to 2009/2010 and

to health-care workers under the reclassification case now under arbitration.

The Government has not made clear plans to lay off workers, which would provide room for higher increases to others, or to implement unequal salary increases.

What’s clear, is that quite a number of public sector workers will end the programme in a worse financial state.

The Government also plans to nominally freeze allocations towards purchases of goods and services, awards and indemnities; cut travel costs by 10 per cent; and reduce public utilities cost by five per cent.

According to the MEFP, loss-making public entities will have to be eliminated as the Government is committed to reducing the overall public sector deficit from 12.75 per cent in 2009/2010 to five per cent by 2011/2012 and one per cent by 2013/2014.

This includes the divestment of Air Jamaica, which the prime minister last week said was near completion. But the MEFP went further to say that should a deal not be delivered by this month it would initiate plans to liquidate the airline altogether by June 2010.

Another key component of the expenditure reduction programme is the Jamaica Debt Exchange (JDX) offer initiative, which involves the swapping of the bulk of public sector domestic debt — 350 notes valued at $700 billion — for 24 notes carrying

lower interest rates and

longer tenors.

The lower rates are expected to yield an average rate on domestic debt of 12.25 per cent and save the Government $40 billion in its first year of implementation.

Golding said last week that tax waivers would be drastically curtailed and existing incentives revised. The MEFP set a deadline of September this year to make an announcement on a strategy for the reform of tax incentives.

The Government also plans to make adjustments to property taxes on April 1, which, according to the prime minister, will include forced property sales to recoup revenues from non-compliant taxpayers.

Apart from reducing the fiscal and overall public sector deficits, the Government is also committing to increasing the primary surplus of the central government from six per cent of GDP to nine per cent by 2013/2014.

It expects to achieve these targets within the context of 0.5 per cent real growth in GDP in 2010/2011, and sustained growth of two per cent thereafter.

Also, the Government is expecting inflation will remain below eight per cent as of 2010/2011 and that the public debt ratio will be reduced from 140 per cent of GDP to less than 120 per cent by 2013/2014.