THE International Monetary Fund (IMF) has advised the Jamaican Government to enact another wage restraint programme in order to meet the country’s planned 2015/16 budgetary targets.

“A key component to achieving the fiscal targets will be securing a new multi-year wage agreement, and the Government of Jamaica is now actively engaged with employee representatives to reach an agreement that facilitates achievement of the targeted wage bill of nine per cent of GDP,” said a statement published on the IMF website on December 23 by Serge Dupont, IMF executive director for Jamaica, and Trevor Lessard, alternate executive director.

The statement was one of three adjoining documents which included the Sixth Review of Jamaica. The IMF added that budget revenues as a share of GDP are expected to decline in 2015/16 and that keeping wages lower would aid in balancing the books.

Specifically, Government’s bill for wages and salaries is set to dip towards $158 billion for the next fiscal year ending March 2016 compared to $160.8 billion for this fiscal year, according to the IMF document.

“The overall tax base is expected to be eroded by a lower Government wage bill and weaker imports (including due to lower oil prices) and, to a lesser extent, declining government interest payments, all of which are important contributors to tax revenue,” stated the document.

Several public sector unions and associations signed a Heads of Agreement with Government to enact a wage restraint covering the contract period 2012-2015. The Government aimed to generate growth over that period in order to achieve sustainable development. However, it achieved average growth levels of under 1.0 per cent a year. As such, the IMF sees another wage restraint as warranted.

“A mix of wage containment (through a new wage agreement) and efficiency improvements will be needed. There was broad agreement on the need to maintain social spending as a top priority and retain a substantial contingency in the budget to address possible further revenue shortfalls,” added the IMF.

In October, Horace Dalley, the minister without portfolio in the Ministry of Finance and Planning, had told the Jamaica Observer that the Cabinet had no intention of seeking another three-year wage freeze, as had been the case over the past six years, for public sector employees.

“We have just concluded work on the parameters of what we will be putting on the table to the unions and, as the chief negotiator (for the Government), I am expecting the negotiations to commence within another two weeks. I am not preparing for another wage freeze,” Dalley said.

“Something will be on the table. It might not be as much as they would want, but something will be on the table,” he added.

In july, Dalley told the House of Representatives that the Government — as part of its human resource reform, and recognising that the public sector is in need of a “more robust and effective” compensation package — had conducted a compensation review in March as an IMF structural benchmark.

The IMF, in its December 23 statement, conceded that investor confidence continues to grow, as evidenced by the Government’s US$800 million dominated bond issue that was oversubscribed and settled at the lowest commercial rates ever enjoyed by Jamaica.

“Our authorities consider this a strong positive shift in investor sentiment that reflects the steady progress under the Extended Fund Facility (EFF). They expect (domestic and external) confidence to continue to rise as fiscal targets and structural benchmarks continue to be met in the future. While it in no way diminishes their commitment to fiscal and debt sustainability.”

The IMF also lauded the island for improving its exchange rate competitiveness and for improving its rank in the global Doing Business Report. The island jumped some 27 places to 58th.

“Jamaica is now number one in the Caribbean, according to this World Bank survey,” stated the IMF, which added that as stability becomes entrenched, emphasis will shift towards growth and job creation.