Roundup: Jamaican economy improves, but can't afford higher public sector wages: minister

Jamaican Financial Minister Peter Phillips said Tuesday night that the country's economy has seen significant improvement, but he refused to compromise in the heated wage dispute between the government and public sector unions.

In a televised address to the nation, Phillips said progress has been made, especially in reducing debt since March 2013, when the country was "on the brink of bankruptcy" with a public debt of approximately 145 percent of the gross domestic product (GDP).

Phillips noted Jamaica's balance of payments deficit has improved from 13.4 percent of GDP in 2011-2012 to 5.3 percent in 2014-2015, the lowest in two decades, and that the net international reserves have exceeded 2.4 billion U.S. dollars, up from just 800 million dollars in 2013.

The inflation rate has declined to a 48-year low of 4 percent at the end of the 2014-2015 fiscal year and foreign direct investment amounted to approximately 700 million dollars, the second highest in the Anglophone Caribbean, he said.

As for the recently heated wage dispute, the minister declined to compromise, insisting the increase in public sector wage bills would damage Jamaica's economic reform program, which is being undertaken with support from the International Monetary Fund (IMF). ' In May 2013, Jamaica adopted an Extended Fund Facility, an IMF program under which some 932 million dollars were expected to be injected into the debt-ridden economy during a four-year term.

However, the IMF set a series of quantitative targets and structural benchmarks for the country. To secure the program, the Jamaican government has carried out a series of austerity fiscal measures over the past years, including a wage freeze for public sector workers.

When the multi-year wage freeze ended this March, the Financial Ministry proposed to increase public sector wages by five percent in the next two years. However, several labor unions insisted the adjustment should take inflation into account.

The government and the unions held several rounds of talks on the wage issue, but no consensus has been reached.

Phillips said the share of the public sector wage bill in overall government expenses has grown from 21 percent in 2010 to 31 percent in 2014, and that a reduction of the wage bill is essential to economic reform.

"Jamaica is still at a fragile point, halfway through the program with the IMF... What the government has offered in the wage negotiations is what we can afford at this time," he said.

The finance minister gave his address on the same day the IMF completed its eighth review of Jamaica's economic performance.

The IMF said the country's commitment to reform is strong and on track as all performance criteria have been met except the central government primary balance criterion, which was narrowly missed.

The agency projected that Jamaica would witness a two-percent economic growth in the 2015-16 fiscal year as a result of lower oil import costs, an improved business climate and strengthened business confidence.

However, according to the IMF, the actual economic growth relies on proactive implementation of growth strategies, including lowering electricity costs, supporting small- and medium-sized enterprises, and reforming the financial sector. Endi