EU warns Jamaica!
Published:Friday | June 19, 2015 | 11:56 AMGary Spaulding
With the country's economic programme facing the threat of being derailed by high wage increases to public-sector workers, the European Union (EU) has cautioned that grant funding for Budget support could dry up if the country goes off track.
The warning comes days before Jamaica is scheduled to benefit from a drawdown of funds and follows a national broadcast last week by Finance Minister Dr Peter Phillips, who urged public-sector workers to be reasonable in their wage demands.
Declaring that the Government could not afford more than the seven per cent increase now on the table, Phillips warned that any fiscally reckless move would derail the economic programme the Government is pursuing.
That warning was later echoed by the International Monetary Fund, which urged the Government to cut the size of the public sector to restrain wages.
Late last week, chargÈ d'affaires of the EU Delegation in Jamaica, Jes?s Orus Baguena, joined the call as he told The Sunday Gleaner that the disciplined approach adopted by Jamaica has earned it the right for increased grants for Budget support.
"The Budget support is very important for Jamaica because we make a direct transfer to the central Bank, which indicates that euros are coming in and it's grant money and not loan," said Baguena.
He stressed that Budget support gives the Government a much-needed break as it carries out critical reform of the Jamaican economy.
"I am very happy ... and I am hoping that my colleagues in Brussels will give the green light for a new drawdown in a few days.
"It's there to be approved in a few days and we have another request that we have just received in the public financial management (PFM)," said Baguena, who noted that while the regional budget for infrastructure has remained untouched, the EU budget for Jamaica has decreased.
He revealed that some of the funds earmarked for the defunct sugar programme will be directed for Budget support.
Baguena said this includes a significant portion of the €44 million allotted to Jamaica in grant funding.
While the €44 million represents a reduction of previous national allocations, Baguena said Jamaica's demonstrated ability gives the country the potential to have access to more funding.
"In Jamaica, there is a strong interest by the Ministry of Finance for Budget support," said Baguena. "The ministry is doing quite well in order to obtain Budget support by meeting the economic targets," he added.
"That is quite good. The only thing - as have happened before - is that if the situation deteriorates, you have to stop the payments, hence the need to diversify and create and maintain an important Budget-support programme."
Citing other programmes being implemented as projects in which EU funding is utilised, Baguena said: "All in all, we are doing better and all we can do is cross fingers as Budget support is a good option. We will see what happens with evaluation being done within the next few months."