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Business and Economics > Public Finance

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Cover IMF Staff Country Reports
Grenada: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Grenada
International Monetary Fund. Western Hemisphere Dept.
Through end-June 2024, Grenada’s economy was experiencing sustained strong growth supported by buoyant tourism, moderating inflation, and a narrowing current account deficit. A surge in Citizenship-by-Investment (CBI) revenue supported a strong improvement in budget balances, a build-up of government deposits, and a reduction in public debt. On July 1, Hurricane Beryl caused damage in excess of 16 percent of GDP on the Grenadian islands of Carriacou and Petite Martinique, as well as in the northern parishes of the main island, affecting around 15 percent of the population. In response, the authorities triggered the suspension of fiscal rules to permit temporary deficit spending in support of the recovery and reconstruction.
Keywords:
infrastructure investment facility; IIP source data; TA mission; CBI revenue; tourism infrastructure; CBI program; Natural disasters; Caribbean; Global
Cover IMF Staff Country Reports
Eastern Caribbean Currency Union: Selected Issues
International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper on the Eastern Caribbean Currency Union (ECCU) focuses on efficient, sustainable, and fair pension schemes. Despite recent reform efforts, the financial sustainability of the ECCU’s defined benefit social security schemes remains under strain, largely reflecting the still relatively low contributions and generous payouts. This, coupled with a rapidly ageing population and high labor market informality, increases the need for a comprehensive review and adoption of further parametric and non-parametric reforms of the pension systems to avoid abrupt and more sizable adjustments in the future as well as to reduce the risks of old-age poverty. This annex reviews pension schemes in the ECCU, with a focus on assessing their design and performance and identifying policy options to improve their efficiency, fairness, and sustainability. Key recommendations include swift adoption of further comprehensive reforms to address design weaknesses, improving coverage, investment strategy, administrative efficiency, and transparency, and establishing automatic adjustment mechanisms.
Keywords:
NIS pension schemes Overview; labor market performance; public sector pension schemes; labor markets in the ECCU; ECCU migration; Pensions; Pension spending; Aging; Retirement; Labor markets; Caribbean; Global
Cover IMF Staff Country Reports
Eastern Caribbean Currency Union: 2024 Staff Report for the 2024 Article IV Consultation on Common Policies of Member Countries of the Eastern Caribbean Currency Union-Press Release and Staff Report
International Monetary Fund. Western Hemisphere Dept.
The 2024 Article IV Consultation with member countries on common policies of the Eastern Caribbean Currency Union (ECCU) discusses that the economies have registered a strong recovery after successive external shocks. Fiscal and external balances have improved, but public debt and current account deficits remain high. The financial system has been stable and liquid, although it continues to be confronted with asset quality weaknesses and rising risks in the non-bank financial sector. Longstanding structural challenges affecting private investment and employment create a drag on growth going forward. The regional priority is to rebuild buffers while protecting the fiscal space for priority public investment and social spending. Social policies and institutional labor market reforms would help improve competitiveness by addressing structural constraints to employment and labor productivity. Concerted efforts to address gaps in core economic data improve transparency and strengthen resource capacity for data collection would support calibration of economic policies.
Keywords:
ECCU country; asset quality; ECCU member-country government; ECCU member country; CARTAC TA mission; Anti-money laundering and combating the financing of terrorism (AML/CFT); Credit bureaus; Credit; Caribbean; Global
Cover Technical Notes and Manuals
Calibrating Fiscal Rules: A Consideration of Natural Disaster Risks
Olusegun Ayodele Akanbi
,
William Gbohoui
, and
Mr. Waikei R Lam
This technical note assesses how large shocks from natural disasters are key source of vulnerabilities for public finances. It extends the IMF Fiscal Affairs Department calibration toolkit by developing a methodology to calibrate fiscal rules in the event of natural disaster shocks and the possibility of implementing climate adaptation and mitigation measures. The features incorporated in this technical note would allow the calibration of a prudent medium-term fiscal anchor as well as annual budgetary limits that ensure the sustainability of public finances. The note is accompanied by a set of toolkits that provides instructions on calibrating a medium-term debt anchor and corresponding operational rules in the presence of natural disaster risks, accounting for climate investment and other mitigation mechanisms.
Keywords:
Fiscal rules; natural disaster; debt anchor; debt limit; climate adaptation investment; fiscal risks; mitigation; climate resilience; natural disaster risk; climate investment; natural disaster shock; IMF Library; Natural disasters; Climate finance; Fiscal stance; Fiscal consolidation; Caribbean
Cover IMF Staff Country Reports
Grenada: 2023 Article IV Consultation-Press Release; and Staff Report
International Monetary Fund. Western Hemisphere Dept.
The 2023 Article IV Consultation analyses that the Grenada’ tourism-dependent economy continued to recover from the pandemic amidst rising energy and food prices. Growth is estimated to have reached 6.4 percent in 2022, driven by a tourism rebound and construction activity. Inflation rose moderately to 2.9 percent by end-2022, as the authorities’ policy response dampened the pass through from rising global food and fuel prices. Public debt is now back on a downward trend. The financial sector is well capitalized and liquid although nonperforming loans (NPLs) of credit unions have risen. The government is committed to a return to the fiscal rules in 2023, after triggering the escape clause in 2020–22 to address the fallout of the pandemic. It planned to amend the Fiscal Responsibility Law this year to best support the country’s sustainable development. The government is seeking international support to facilitate the implementation of its Disaster Resilience Strategy and a transition toward renewable energy, critical for enhancing resilience to natural disasters and economic competitiveness.
Keywords:
Policy effort; CPI basket; IIP datum; Policy advice; calculation system; IMF's transparency policy; policy priority; Credit bureaus; External sector statistics; Natural disasters; Global; Caribbean
Cover IMF Staff Country Reports
St. Kitts and Nevis: 2018 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for St. Kitts and Nevis
International Monetary Fund. Western Hemisphere Dept.
Growth decelerated marginally in 2017, as the continued decline in CBI inflows slowed growth in construction. Consumer inflation was low, partly due to a small contraction in food prices. The overall fiscal balance remained in surplus but has deteriorated markedly since its 2013- peak, and the debt-to-GDP ratio increased marginally from the previous year. The current account deficit remains high and only marginally declined in 2017, as the decline in CBI receipts was more than offset by growing tourism receipts and a significant decrease in imports. Foreign reserves at the ECCB remained at comfortable levels, well above the various reserve-adequacy metrics. The banking sector has reported capital and liquidity ratios that are well above the regulatory minimum but has elevated NPLs and risks, including delays in completing the debt-land swap arrangement and loss of Corresponding Banking Relationships (CBRs).
Keywords:
SKN government; SKN economy; CBI program; NPL resolution strategy; due diligence; Commercial banks; Public sector; Government finance statistics; Credit; Caribbean
Cover IMF Staff Country Reports
Eastern Caribbean Currency Union: Selected Issues
International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper focuses on scarring effects of the pandemic on the Eastern Caribbean Currency Union’s (ECCU). Assessing the extent of the scarring effects is essential for the conduct of future economic policy in the ECCU. A better understanding of the factors affecting the scarring effects and their fiscal implications could help inform the discussions on policies needed to overcome them, especially for economies with limited economic diversification and high vulnerability to frequent shocks and natural disasters such as the ECCU countries. The significant output contraction would generate scarring effects in the ECCU countries. The degree of scarring could vary with countries’ economic structure and policy responses to the pandemic. ECCU countries need to balance difficult tradeoffs to mitigate scaring effects of the pandemic, other recent shocks, and limited fiscal policy space. In the short term, the priorities are to continue health spending to cope with the pandemic and use effective social transfers to cope with rising living costs. In the medium term, moving from income support and job retention measures to adopting active labor market policies would facilitate the reallocation of workers and resources to their most productive uses and help foster productivity growth.
Keywords:
responsibility framework; ECCU country; difference in Debt-to-GDP projection; B. output loss; Real GDP loss; Fiscal rules; Natural disasters; COVID-19; Fiscal stance; Global; Caribbean
Cover IMF Staff Country Reports
Eastern Caribbean Currency Union: 2022 Article IV Consultation with Member Countries on Common Policies of the Eastern Caribbean Currency Union-Press Release; Staff Report; and Statement by the Executive Director for the Eastern Caribbean Currency Union
International Monetary Fund. Western Hemisphere Dept.
This 2022 Article IV Consultation highlights that with Eastern Caribbean Currency Union economies slowly emerging from the pandemic with scars, the impact of the war in Ukraine is a setback to the nascent recovery. Higher food and energy prices, amid ongoing supply disruptions and intra-regional transportation bottlenecks, are raising inflation, eroding income, lowering output growth, worsening fiscal and external positions, and threatening food and energy security. The financial system has remained broadly stable so far, with adequate capital and liquidity buffers, but nonperforming loans remain high and could rise further following the expiration of the Eastern Caribbean Central Bank’s loan moratoria program. The outlook is subject to large downside risks, primarily from further increases in commodity prices and new coronavirus disease variants amid vaccine hesitancy, in addition to the ever-present threat of natural disasters. The report recommends that maintaining fiscal prudence while protecting the vulnerable through health spending and temporary targeted transfers and enhanced social safety nets to cope with rising living costs. Adopting well-designed rule-based fiscal frameworks would help achieve fiscal consolidation, enhance resilience to shocks such as natural disasters, and preserve the credibility of the regional debt target.
Keywords:
ECCU economy; ECCU member country; ECCU country; ECCU member states; ECCU region; Natural disasters; COVID-19; Fiscal stance; Caribbean; Global; Climate change; Loans
Cover IMF Staff Country Reports
Grenada: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Grenada
International Monetary Fund. Western Hemisphere Dept.
Grenada’s economy was hit hard by the pandemic, with a decline in real output of 14 percent in 2020 from both a collapse of tourism-related activities and the suspension of in-person classes at Saint George’s University (SGU). Growth in 2021 is estimated to have partly recovered to 5.6 percent, driven by construction and agriculture. The authorities’ policy response helped mitigate the pandemic’s impact through containment measures, increased health and social spending, and an expanded public investment program (including to build resilience to natural disasters). Central government debt rose to 70 percent of GDP in 2021 (from 59 percent in 2019) and the external position has worsened. The financial sector has so far weathered the crisis well.
Keywords:
Grenadian authorities; vaccination campaign; central government debt; IIP data; Policy discussion; Credit bureaus; COVID-19; External sector statistics; Caribbean; Global
Cover IMF Staff Country Reports
Eastern Caribbean Currency Union: 2021 Discussion on Common Policies of Member Countries-Press Release; Staff Report; and Statement by the Executive Director for the Eastern Caribbean Currency Union
International Monetary Fund. Western Hemisphere Dept.
The fallout from the COVID-19 crisis is hitting ECCU economies hard. Tourism receipts (accounting for nearly 40 percent of GDP) have dried up, as tourist arrivals have come to a grinding halt. The authorities successfully contained the spread of the virus at the onset of the pandemic by largely closing the borders, but a reopening of the economies since the summer has led to a surge in COVID cases. The ECCU economy is projected to contract by 16 percent in 2020 and by a further near ½ percent in 2021. Fiscal positions have deteriorated sharply, and public debt is projected to reach near 90 percent of GDP in 2021 and remain at an elevated level for years to come. Headline indicators suggest the financial system is relatively sound with ample liquidity buffers, but nonperforming loans are expected to rise significantly. The outlook is clouded by exceptionally high risks, including from the uncertainty concerning the evolution of the pandemic.
Keywords:
ECCU economy; ECCU member states; ECCU country; ECCU price aggregate; headline indicator; COVID-19; Loans; Nonperforming loans; Tourism; Caribbean; Global