Governor of the Central Bank of Barbados Cleviston Haynes today warned Prime Minister Freundel Stuart that a pay rise for public servants would deal a crippling blow to Government’s fiscal adjustment efforts.
In delivering his 2017 economic review, Haynes said modest progress made over the last nine months in reducing the public sector wage bill would be wiped out by additional expenditure at a time when the emphasis must be on reducing spending.
“We want to be able to reduce expenditure at this point rather than to increase expenditure. I don’t know if I need to say anymore,” he said in response to questions about whether Government would be able to afford to give public servants an increase.
“An increase in wages at this time, the question is how are we going to finance it? We already have difficulty financing the existing expenditure, so if you have an increase in wages and expenditure at this point, what is going to be the source of that financing? We are setting ourselves up for what I would call a very disorderly adjustment because in the absence of financing what you get is a further build up in arrears in the system,” Haynes warned.
The National Union of Public Workers (NUPW) is demanding a 23 per cent pay rise and a $60 million lump sum as a coping subsidy, which it said Government workers need to help them cope with the rising cost of living which resulted from the austerity measures introduced here last year, including the hike in the National Social Responsibility Levy from two to ten per cent on all imported and locally produced goods.
At the same time, the Barbados Workers’ Union wants a 15 per cent increase for its members in the public service, but has all but abandoned the idea of a subsidy.
The NUPW last month rejected a $49 million lump sum offer, which Permanent Secretary in the Ministry of the Civil Service Alyson Forte yesterday said was not the final offer, but was put on the table for discussion.
Forte also told Barbados TODAY he was awaiting word from Stuart on how much more Government was willing to offer the workers.
However, the Central Bank Governor today stood firm in his opposition to an increase in wages.
“We have to move in a direction of being able to eliminate arrears in the system rather than a further build up. Therefore, adding expenditure is not going to help in that particular situation. And I need not spell out the other balance of payments potential that is created by increased wages at this point,” Haynes said.
Acknowledging that it had been “a long time” since public servants had received a pay rise – ten years – Haynes said “the broader picture” should be considered, stressing that Government would have to find ways to make up for the increase in expenditure occasioned by a salary increase.
The top economic advisor reported that while Government expenditure rose by $9.9 million between April and December 2017, there were modest savings on goods and services, along with wages and salaries.
Central Bank figures showed that at the end of the review period wages and salaries stood at $579.2 million, down from $583.7 million at the end of the corresponding period the previous year.
The increase in expenditure was as a result of hikes in interest payments, transfers and subsidies, as well as grants to individuals and public institutions.