Good Job So Far But Be Careful Going Forward, IMF Tells Jamaica

KINGSTON, Jamaica, Thursday April 20, 2017 – The International Monetary Fund (IMF) strongly cautions Jamaica to tread cautiously on ongoing public sector wage negotiations, as it gave the island a pat on the back for largely meeting the targets under its Stand-By Arrangment.

According to IMF Mission Chief for Jamaica Uma Ramakrishnan, the Andrew Holness government met all structural benchmarks and all but one performance criteria for the first review under the new arrangement.

As a result, Jamaica got the nod to draw down another US$170 million from the US$1.64 billion available over a 36-month period.

But Ramakrishna warned that this progress could be derailed if the Government failed to “carefully plan, manage and communicate” upcoming public sector changes, during ongoing public sector wage negotiations, to the country’s trade unions.

Minister of Finance Audley Shaw, in his budget presentations last month, indicated an estimated two to three per cent increase in the salary of public sector workers.

The IMF official warned, however, that this would exceed Jamaica’s required wage bill of nine per cent of Gross Domestic product for fiscal year 2018/2019.

“With that in mind, the path needs to be agreed on by the unions about how to meet that nine per cent, because the two-year wage negotiation is going to happen. So the question is what the path is going to look like; the budget has made certain assumptions on what wages could be for this year.

“That budget is based on calculations of 9.6 per cent of GDP, and the question is how to get to nine per cent within the time frame required on what is required by law,” Ramakrishnan told media representatives during an IMF video press conference at the Bank of Jamaica yesterday.

Insisting that the country’s wage bill was too high by international standards, Ramakrishna added that while the Jamaica economy was showing positive signs, it was not out of the woods just yet and restraint must remain a priority.

“In the context of wage negotiations and other discussions, this broader perspective has to be borne in mind and to recognize the fiscal reality for Jamaica, which is not an easy run.

“Times are still tough, because the fiscal consolidation has continued in order to reach the debt targets and to reallocate spending into growth-enhancing expenditure. Therefore, the wage bill is part of that discussion on how to manage,” she said.

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