Cut the civil service – IMF message

Debt servicing cost, wages and related expenses are two big items that have prevented the Jamaican government from performing the role of government the way they ought as money expended on the excess staffing and by and large part of the debt servicing are non-productive expenditure that divert funds from areas of need. It is therefore not surprising that the International Monetary Fund (IMF) has placed a great deal of focus on these two areas in getting the government to reform the system and move the country intro economic equilibrium. The Fund is of the view that in spite of the move to contain the wage bill by constraints and attrition, more is needed to be done to restore balance in this area.
“Public sector reform is a key pillar of the fiscal consolidation effort over the medium term. The authorities aim to reduce the wage bill from a projected 9.9 percent of GDP in fiscal year 2015/16 to 9 percent of GDP in fiscal year 2016/17. To date, much of this lower spending has been driven by nominal wage freezes, and authorities aim to secure continued moderate wage increases in the context of the ongoing wage negotiations, mindful of the trade off with other spending priorities. There is, however, a need to refocus attention on modernizing the public sector and transitioning toward a smaller and more effective civil service”, the IMF review report says.
The target is steep a cut from 9.9 to 9 percent is a 10 percent change. The wage settlement for 2015 is 4 percent and if all of that was paid in the current fiscal year it would require nominal gross domestic product to rise around 5 to 6 percent. With inflation looking very subdued and real growth not looking robust, the target is likely be a big challenge. The other issue is that even if the government were to achieve the target is, will maintaining it be sustainable long term? The government can cut the number of workers and the wage bill by divesting some services rather than lay workers off.