By Robert Hart, Staff ReporterMORE THAN $5 billion will be saved through the recently-signed Memorandum of Understanding (MoU) between Government and trade union leaders, says Minister of Finance and Planning Dr. Omar Davies.
The Minister, who was speaking during yesterday's specially convened meeting of Parliament's Standing Finance Committee, also disclosed that the Government is projecting a 6.9 per cent fiscal deficit to close the current financial year and that it will command a combined debt stock of $690 billion at the end of the current fiscal year.
MAJOR ACHIEVEMENT
According to Minister Davies, who was making an unusual pre-budget presentation on the economy, the savings expected from the upcoming two-year period of wage restraint will account for 'just about' 1.5 per cent of the country's Gross Domestic Product (GDP).
"The agreement as structured will result in the bill for wages being the same in current terms in 04/05 as it was in 2003," Dr. Davies said. Noting that wages and salaries would, at worst, have grown by five to six billion dollars in the coming year, he added that the projected savings would amount to the equivalent of a tax package.
"To hold it (the wage bill) at the same represents a major achievement," Minister Davies said.
On the debt, the Finance Minister noted that the projected debt to GDP ratio was about 143.3 per cent, almost identical to last year's 143.4 per cent figure. The external debt has been projected to round out the year at about $281.6 billion, while the domestic debt should end up at $409 billion. The external U.S. dollar debt is projected at US$4.6 billion, while GDP is expected to be about $482 billion.
CALCULATION INACCURATE
The Minister had earlier suggested that the debt to GDP ratio would end the year at 126 per cent but, on the intervention of the Leader of the Opposition Edward Seaga, recanted. Mr. Seaga pointed out that the calculation, based on the projected figures, was inaccurate.
While providing an outline of $4 billion owed to providers of goods and services, the Finance Minister indicated that the Government was owed more than three times its debt for goods and services.
"We can't simply introduce what Government owes, we have to introduce what is owed to Government," he said.
Dr. Davies subsequently explained that the Government is owed $15 billion in income tax, General Consumption Tax and other receivables.
MEDIUM-TERM TARGETS
Continuing, the Finance Minister pointed to a host of medium-term targets for the economy, including the control of key elements of expenditure, the maximisation of revenues, and a focus on fiscal prudence, macro-economic stability and stimulation of the 'real' sector.
Dr. Davies indicated that revenue had been $1.4 billion below expectation primarily as a result of a shortfall in tax revenue. That shortfall, he added, was due to the changes to and delay in the implementation of the most recent budgeted tax package as well as the delay in the amendments to tax legislation. He also noted the high domestic interest payments of $8.7 billion and the $5.6 billion excess in wages and salaries which resulted from retroactive payments, realignments of salaries and reclassifications of public sector workers.
