A 26 per cent or $30.7-billion increase in total government expenditure, largely driven by the recent public sector compensation exercise, stood among the key highlights of the fiscal performance review delivered by the Economic Programme Oversight Committee (EPOC) Thursday.

Describing the undertaking as unprecedented and one “never seen in the history of Jamaica”, chairman of EPOC Keith Duncan said that the increased employee compensations, which went up by about $24 billion or near 53 per cent, significantly added to total year-on-year expenditure totalling $148.4 billion for the April-May 2022 review period.

“Wages and salaries was a very hot topic and continue to be a sort of hot potato for many. Total wages and salaries was $95.2 billion ahead of 2021/22, coming in at $317.9 billion — which is actually 42.8 per cent greater than the 2021/22 year. This public sector review has been a very complex one and I believe the Ministry of Finance has done a very good job in restructuring the compensations, making them more efficient, reducing the salary bands and the number of allowances. The most important thing is that we now have an efficient compensation model,” Duncan said.

Commenting on the climate of the economic environment, which continues to be tempered by rising interest rates, high inflation, and the tightening of monetary policy by the Bank of Jamaica (BOJ), Duncan also said that the recent increases in public sector salaries could possibly force the BOJ to further hold its current policy rate over the next few months.

Inflation, which continues to hover around the outer band of the targeted range, was 6.1 per cent in May, influencing the central bank’s decision to hold interest rates at 7 per cent, following its last monetary policy committee meeting.

The continued growth of industries, such as tourism and the return of other key sectors, such as mining after the return of Jamalco’s operation, have also helped to fuel economic growth of 4.7 per cent for the fiscal year, pushing gross domestic product above the pre-pandemic level.

Noting the country’s access to the International Monetary Fund’s (IMF) US$968 million Precautionary and Liquidity Line (PLL) and US$764 million Resilience and Sustainability Facility (RSF), Duncan said that the availability of these programmes provides that additional buffer of safety for the economy, which can only help to strengthen the institutional framework for fiscal policy.

“We continue to achieve our targets under the fiscal responsibility targets and Jamaica continues to do really well in getting its levels down. What we have seen so far is that the economy has been witnessing a strong recovery after COVID, which I would say has been very well managed by Government, the finance minister, and the BOJ,” he stated, noting that while the BOJ in its outlook has projected 1-3 per cent growth for the economy in 2023/24 — the desire is for the economy to outperform these numbers despite risks such as a slowdown in private credit and the tightening of monetary policy.

“Aside from this we are however hopeful that the economy will continue to meet its growth projection,” he further said while underscoring the need for there to be a balancing act and the continuation of proper fiscal management.

Duncan, who continues to chair EPOC, providing oversight for fiscal rules, said that with the appointment of Courtney Campbell as fiscal commissioner in March, his role will soon come to an end when EPOC is replaced later this year.

“The office is now being set up, and we expect by around maybe December that it should be up and running, EPOC will transition and the fiscal commissioner will take his rightful role in guarding the fiscal rules, providing oversight in his independent capacity to ensure that government adheres to the rules under the fiscal responsibility laws,” he said.