MINISTER of Finance and Planning, Dr Peter Phillips, says that the government will not pursue wholesale lay-offs of public sector workers, to meet the wage to GDP ratio target of nine per cent by March 2017.

“We do not envisage any drastic action or wholesale lay-offs,” Dr Phillips responded to questions from Opposition spokesman, Audley Shaw, in the House of Representatives on Tuesday, after he tabled the 2015/16 Fiscal Policy Paper interim report.

Shaw wanted to know whether the government accepted the options stated by the International Monetary Fund (IMF) in its latest country report on the Jamaican economy.

The IMF stated that to meet the target of reducing public sector salaries to nine per cent of Gross Domestic Product (GDP) by March 2017, would require measures for approximately 0.4 per cent of GDP.

“Current measures under consideration, including through attrition and voluntary separation, may need to be supplemented by additional reform measures to modernise the public sector and transition toward a smaller and more efficient civil service,” the IMF report said.

But Phillips insisted Tuesday that no “drastic action”, including the “wholesale” lay-off of its employees was being considered by the government.

He said that his ministry has been in discussions with the trade unions representing workers in the sector, on issues of attrition, including voluntary separation agreements.

“We have agreed with the unions that public sector transformation efforts, resulting in modernisation and improvements in efficiency, are matters to be considered,” Dr Phillips said.

He admitted that efforts to meet commitments under the IMF’s Extended Fund Facility (EEF) agreement “will require compensatory adjustments to the budget for this fiscal year”. However, he assured the sector that the government intended to meet all outstanding payments this year.

But he confirmed that there are “emerging challenges” on both the revenue and expenditure fronts that the Government will need to overcome, to ensure the continued meeting of targets.

On the revenue side, Phillips said that taxes will be impacted by: later than anticipated implementation of transfer pricing rules; lower than expected yields from major audit operations; and the six-month postponement and adjustment to the imposition of an environment levy on domestic production.

He said that lower aluminium prices will also negatively impact revenue from the bauxite/alumina sector. However, he explained that through financial distributions from self-financing public bodies, and other transfers to the Consolidated Fund, the government would seek to minimise the shortfall in revenue and grants to $2.6 billion.

With respect to expenditure, he confirmed that the main challenge arises from the 2015/17 wage settlements.

He said that the projected shortfall in revenue and higher than planned compensation costs will necessitate cuts in gross recurrent programmes of about $8.6 billion. However, he said that social spending on youth employment, poor relief, children’s homes, places of safety and PATH will be preserved.