THE Government says it will have to cut at least $8.6 billion from its recurrent budget for 2015/16 due to a projected shortfall in revenue and the “higher than planned” cost of its compensation packages.

Minister of Finance and Planning Dr Peter Phillips made the announcement after tabling the Fiscal Policy Paper interim report in the House of Representatives, yesterday.

“The projected shortfall… will necessitate cuts in gross recurrent programmes of about $8.6 billion,” Dr Phillips stated. He explained that the details will be presented when he tables the supplementary estimates by the end of the calendar year.

Opposition spokesman on finance and planning, Audley Shaw, meanwhile, noted that issues raised by the International Monetary Fund (IMF) in its most recent review of the Government’s performance under their Extended Fund Facility agreement, included the possibility of cutting public sector staff and increases in taxes.

He questioned whether the cuts in housekeeping expenditure would be enough to avoid any drastic action, in relation to jobs of the public sector workers, or the possibility of tax increases this and next year.

In response, Phillips said that there was no secret that the Government of Jamaica and the IMF, as well as international partners and the private sector and the public sector unions, had agreed that faster rates of growth must be the priority going forward.

However, he insisted that the Government intended to stick with its policy of using attrition and voluntary redundancies as the main source of public sector staff reduction.

“… And, of course, we have agreed with the unions that public sector transformation, resulting in improved efficiencies, are matters to be considered in the effort to reach that point,” he said.

Phillips said that there was no plan to change the basic trajectory of the public sector programme, as it is now. However, he admitted that meeting the commitments, which include the four per cent and the three per cent (pay increases), as well as the cost of allowances including those which extend beyond four per cent, will require compensatory adjustments to the budget for this fiscal year.

He assured the public sector workers that the ministry intends to pay all the arrears in the course of the current fiscal year, but cautioned that the Government will have to undertake adjustments in order to achieve the targets for next year.

Through amendments to the Financial Administration and Audit and Public Bodies Management and Accountability Acts in March 2014, Government adopted enhanced fiscal rules. The enhanced fiscal rules, among other things, require that within six months of the passage of the Appropriation Act for the financial year to which the relevant estimates of revenue and expenditure relate, the minister shall cause to be tabled in both Houses of Parliament, a Fiscal Policy Paper.

Phillips said that the new interim report would be sent to the Public Administration and Appropriations Committee for review and discussion with key Government of Jamaica officials, including representatives of institutions, including the ministry, the Bank of Jamaica and the Planning Institute of Jamaica.