The agreement on the settlement of the outstanding public sector wage claims signed on Thursday July 7th was a crucial step in determining the revised total financing needs of Government in FY2011/12. Good progress has also been made toward identifying measures to achieve the agreed primary surplus of the central government for FY2011/12.
Important issues still need to be resolved regarding the structural reform programme and ways to reduce risks to the government’s medium-term fiscal programme. These include ensuring sustainable public sector staffing costs, implementing tax reform, including reductions in discretionary tax waivers, and further improving tax administration.
The Government’s next step will be to engage public sector workers and their representatives in a discussion of public sector staffing costs over the medium term. Drawing on Jamaica’s strong tradition of collective bargaining, we need to agree on a strategy that offers public sector workers the best arrangement possible, while limiting the total wage bill to 9 per cent of GDP by the end of FY2015/16. A more settled outlook for wage costs will help to define a path for public expenditure that is consistent with the elimination of the fiscal deficit and improving debt sustainability in the medium term.
Given the period required for fuller discussion and agreement on the complex issues relating, in the medium term, to public sector staffing costs and revenue policy, the completion of the reviews has been delayed. Submission of the programme documents to the Board will occur after the government and the Fund agree on the policy framework and the commitments on structural reforms are fully reflected in the projections of Government’s financing needs over the medium term.