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Grenada's Fiscal Consolidation On Track, IMF Says

by Mike Godfrey, Lowtax.net, Washington
01 September, 2014

The International Monetary Fund (IMF) has said that Grenada has made a strong start in implementing its IMF-backed fiscal consolidation program.

The IMF approved in June 2014 a three-year USD21.6m arrangement for Grenada to support the territory's efforts to rebalance its finances.

In August of this year the IMF sent a team to the Caribbean island to conduct discussions on the first review of the program. "Continued strong program implementation will be critical to overcoming the challenges faced by the Grenadian economy," Aliona Cebotari, the Fund's mission chief for Grenada, said following the staff mission.

The fiscal consolidation will rely on measures that ensure a broader and a more equitable participation in the tax effort, as well as reductions in less productive spending, according to the IMF.

The program includes a reduction in the personal income tax threshold from the current XCD60,000 (USD22,222) to XCD36,000 in the current year. A lower rate of 15 percent applies to income below XCD60,000, while the rate for income above XCD60,000 remains unchanged at 30 percent.

Other measures include increasing the property tax rate, restructuring the tax incentive regime, and broadening the value-added tax (VAT) and excise bases.

"Looking ahead, the authorities' program will continue to focus on restoring fiscal sustainability, strengthening competitiveness and growth prospects, and securing financial stability," Cebotari said. "In addition to the programmed fiscal adjustment, progress on the comprehensive debt restructuring underway will be needed to secure fiscal sustainability."

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