IFC urges Gov’t to reinstate public sector wage cap
Published:Wednesday | October 8, 2025 | 12:08 AMKimone Francis/Senior Staff Reporter
The Independent Fiscal Commission (IFC) says the Government must consider reintroducing a ceiling on wages and salaries following its latest assessment of the Dr Andrew Holness administration’s fiscal performance.
The commission said the reintroduction of a cap will increase predictability in public sector wages and fiscal operations, improving allocation of public expenditure.
The IFC said this is necessary to limit crowding out of spending in other critical areas.
It said wages have been consuming a growing share of tax revenue with 36 per cent in 2021-2022, 48 per cent in 2024-2025 and 49 per cent for 2025-2026.
The commission said a fiscal rule on wages and salaries will hold expenditure in check.
“Furthermore, as it relates to [the] Public Sector Transformation Programme, urgent steps should be taken to accelerate the other areas targeted for transformation, including shared services and outsourcing selected services, thereby complementing the overall compensation restructuring exercise,” the IFC said.
The commission’s position follows those raised by former chair of the Economic Programme Oversight Committee, Keith Duncan, who warned that the country’s GDP was slowing while wages and salaries consumed approximately 45 per cent of tax revenues and 40 per cent of total revenues.
He said this raised alarm about Jamaica’s fiscal sustainability and economic health and called for the Government to reintroduce a fiscal rule that caps public sector wages as a percentage of GDP.
The previous cap, which limited wages to nine per cent of GDP, was removed in 2023, but current fiscal policies are focused on performance-based pay and productivity improvements instead of a strict wage cap.
The IFC sidestepped questions concerning the near $700-million wage bill of the recently announced executive and state ministers and whether this counters calls for a cap on wages and salaries.
ASSESSMENT’S FOCUS
“The IFC focuses its assessment on the overall fiscal position of the Government of Jamaica, including the aggregate wage bill and the sustainability thereof, and not on any specific public sector group,” it said in an emailed response to The Gleaner.
At the same time, the commission called for the Government to align public sector wage negotiations with the budget cycle, as required by the Financial Administration & Audit Act (FAAA).
The commission said wage negotiations do not currently follow an established negotiation cycle, pointing to the Finance Ministry’s Fiscal Policy Paper which mentioned that the compensation of employees allocation includes a $33-billion contingency for “further distribution across MDAs (through a Supplementary Budget) once definitive calculations in respect of the requirements for FY 2025-2026 by each MDA is identified”.
The IFC noted section 48 (h) of the FAAA provides for Government to develop compensation/negotiation cycles for the public sector to allow for completion of all wage negotiations and settlements in time for the tabling of the annual budget.
The calls from the commission come amid the Government’s report card at the quarter ending June which shows a steady macroeconomic footing for fiscal year 2024-2025.
The commission said inflation held at 3.8 per cent in June, unemployment hit a record low of 3.3 per cent in April, and real GDP grew by 1.4 per cent, despite weather-related setbacks. The adoption of the 2008 System of National Accounts lifted nominal GDP by eight per cent, pushing the debt-to-GDP ratio to 62.4 per cent, meeting the 60 per cent target early.
However, it said a $14.2 billion tax shortfall and underspending on infrastructure ($20.1 billion of $40.5 billion budgeted) threaten growth.
Post-report, June saw 1.6 per cent growth and inflation fell to 1.2 per cent.
Further, it said a tax shortfall of $1.5 billion was registered in the first quarter of the fiscal year 2025-2026 but noted that there was an uptick in revenue in the past two months.
“The Government has several options to address the shortfall and still maintain the target fiscal and primary balances, including implementing revenue-generating measures and reducing public expenditure,” the IFC told The Gleaner.