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Minister of Finance and the Public Service, Audley Shaw, has noted that higher inflation and interest rates will have an effect both on the country’s revenue and expenditure.
“The higher inflation could in fact lead to increased revenue, particularly with respect to income and consumption taxes. The Government of Jamaica, is also a purchaser of goods and services, and accordingly, Government’s expenditure would be influenced by higher inflation, particularly in energy intensive areas such as public utilities and gasoline,” Mr Shaw said.
“Increased prices, over and above what was budgeted, could lead to additional expenditure demands by Ministries, departments, and agencies, in order to properly execute their functions. Within this context, however, the Government will work assiduously to manage the expenditures and undertake initiatives to buoy revenue collections, to ensure that the fiscal targets are achieved,” Mr. Shaw assured.
He was responding to questions posed by Member of Parliament for Central Kingston, Ronald Thwaites, in the House of Representatives, yesterday (Sept. 23), on the impact of inflation on the national budget.
In relation to the Memorandum of Understanding (MoU), between the Government and public sector workers, Mr Shaw said that the MoU is consistent with the latest forecast, by the authorities, for inflation of approximately 15 per cent.
“The challenge for the authorities is to ensure that wage demands do not exceed the passive inflation forecast, lest this translates into self fulfilling prophesy and initiate a wage led inflation spiral,” Mr. Shaw said.
“With respect to those groups that have not yet signed, the Government will have to be firm in its deliberations. The agreed wage settlement by the public sector workers, should also have a demonstration effect for wages in the private sector and hence, constrain the effect of higher wage demand on inflation,” he added.
He also noted that the Government is committed to meeting the announced fiscal deficit and will therefore make the necessary expenditure adjustments should the need arise.