International Monetary Fund (IMF) staffers have told the Government to slash the size of the civil service and pay those who remain more if it wants to retain motivated and qualified staff, capable of doing the job.

While such a move would mean the collapse of the wage restraint agreement the Government has cobbled together with trade unions to help rein in the public sector deficit, the Fund suggest that the administration could close the fiscal gap by revenue measures, such as a wider tax net, expanding the taxes on motor vehicles and the introduction of a capital gains tax.

But the administration says that a large-scale cut in the civil service is impractical at this time, given the emerging electoral season, when it is difficult to gain political and social consensus on sensitive issues.

General elections are constitutionally due by the end of 2007. The job cut recommendation and the response from Jamaican officials are contained in an assessment of the island's economy, published this week by the IMF, following a review by staff members in March.

According to the document, with regard to expenditures, notwithstanding the 2006/2007 wage increases, civil servants' real wages had declined sharply with the earlier across-the-board wage freezes, making it difficult for the government to retain qualified and motivated staff in critical functions.

Wage bill high

At the same time, the IMF report says the expansion of public sector employment in the 1990s left the overall wage bill at a high level. The mission suggested that civil service reform should help to rationalise the wage structure and allow the Government to attract and retain qualified personnel with a leaner overall envelope."

Jamaica's central government employs over 40,000 people, with a projected wage bill for this fiscal year of $73 billion, or about 10 per cent of the value of all the goods and services produced in the country. In 2004, with the wage bill rising fast and the Government under pressure to deal with a gaping budget deficit, trade unions agreed to a two-year freeze of wages in exchange for the saving of 15,000 jobs.

That initial memorandum of understanding (MoU) has since expired and most public sector unions have agreed to a new pact that would limit pay hikes to an average 16 per cent in the first year and five per cent in the second. Some unions, such as those representing the police and teachers are still holding out.