By Andrew Green , Staff ReporterTHE ECONOMIC impact of Hurricane Ivan presents no danger to the Memorandum of Understanding (MoU) between government and unions representing state sector workers, said Minister of Finance and Planning, Dr. Omar Davies.
A two-year MoU was signed with trade unions representing employees in the public service in February. The agreement offers job security to the state sector employees in return for a halt in salary increases.
"I have no doubt that when we meet with the trade union leadership, the MoU will be stronger, not weaker," Dr. Davies said. He was addressing a press conference at the Ministry's boardroom in Kingston on Wednesday.
The MoU was signed against the background of a medium term inflation target of between eight and nine per cent in 2004/05 and six to seven per cent in 2005/06.
"There will be some deviation from that inflation target," Governor of the Bank of Jamaica, Derek Latibeaudiere told the press conference. He said the response to that will be "a fairly tight monetary stance for the rest of the year."
Dr. Davies said that while it would be a "formidable challenge" to achieve the inflation target for this financial year, "we will return to single digit levels in the next fiscal year."
The government did not have any power to control Hurricane Ivan and the unions understood this, Dr. Davies said. The focus of the government at this point is to get the country back to normal.
That means schools, hospitals and children's homes will have priority for assistance. He said it also means farms, factories, bauxite/alumina and tourism will be given the necessary assistance.
The Ministry of Finance will face pressure to boost spending in non-priority areas, but there is a limited amount of resources Dr. Davies said. Hurricane reconstruction spending will come from the reallocation of resources, grants, concessionaire loans and private sector support.
The government will try to maintain its 2004/2005 economic targets, Dr. Davies said. "We will be paying our debts as they become due."
All this was necessary because the international capital markets would punish the country severely if it did not honour its obligations, the finance minister said.
