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IMF Loan To Support Grenadian Fiscal Rebalancing

by Mike Godfrey, Lowtax.net, Washington
24 July, 2014

The International Monetary Fund has approved a three-year USD21.6m arrangement for Grenada to support the territory's efforts to rebalance its finances.

The ECF request was made by Grenada's recently elected New National Party Government, which took office in February 2013. The move follows the 2012-13 financial crisis (during which public debt reached about 110 percent of gross domestic product (GDP)). The territory found itself unable to meet financial obligations, leading to the announcement of debt restructuring in early 2013.

To put public debt on a firm downward path, a comprehensive strategy consisting of fiscal consolidation, debt restructuring, and fiscal structural reforms is being implemented.

David Lipton, Deputy Managing Director and Acting Chair of the IMF, said: "Grenada has made important progress in addressing its fiscal crisis, following a protracted economic recession and a difficult social environment. The authorities have taken wide-ranging measures to reduce the fiscal deficit and are negotiating in good faith with creditors to restructure the public debt. The challenges ahead remain significant, with a vulnerable growth outlook, high debt levels and financing needs, and a weakened financial system."

"The authorities' ambitious economic program, supported by the Fund, focuses on restoring fiscal sustainability as an immediate priority, strengthening competitiveness and growth prospects, and securing financial stability."

"A significant fiscal adjustment is needed to strengthen confidence and put public indebtedness on a sustainable path. Achieving the targeted primary surplus requires a carefully calibrated combination of revenue increases and expenditure cuts."

"Improving Grenada's competitiveness and the employment outlook is key to growth and prosperity. Structural reforms focus on improving the business environment, reducing electricity costs, and removing other obstacles to growth," he concluded.

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