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© 2010 International Monetary Fund
January 2010
IMF Country Report No. 10/14
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2009 Article IV Consultation, Fourth Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, Request for Modification of Performance Criterion, and Financing Assurances Review for Grenada, the following documents have been released and are included in this package:
The staff report for the 2009 Article IV Consultation, Fourth Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, Request for Modification of Performance Criterion, and Financing Assurances Review, prepared by a staff team of the IMF, following discussions that ended on September 25, 2009, with the officials of Grenada on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on November 4, 2009. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
A Public Information Notice
A Press Release
The document listed below will be separately released.
Letter of Intent sent to the IMF by the authorities of Grenada.*
Supplementary Memorandum of Economic Policies by the authorities of Grenada*
*Also included in Staff Report.
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
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International Monetary Fund
Washington, D.C.
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INTERNATIONAL MONETARY FUND
GRENADA
Staff Report for the 2009 Article IV Consultation, Fourth Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, Request for Modification of Performance Criterion, and Financing Assurances Review
Prepared by Western Hemisphere Department
(In consultation with other departments)
Approved by Rodrigo Valdés (WHD) and Aasim Husain (SPR)
November 4, 2009
Executive Summary
Economic activity is slowing significantly, reflecting the drag of the global crisis on tourism receipts, FDI, and remittances. Commercial banks have remained resilient thus far, but the intervention of the Trinidad and Tobago-based CL Financial Group has heightened financial uncertainty.
All quantitative targets for end-June 2009 were met. All but one of the structural benchmarks were met, in most cases with short delays. The benchmark on establishment of a Public Procurement Authority will be rephased until the fifth review.
Staff supports the authorities’ proposal to relax the end-November 2009 PC for domestic arrears over 60 days by EC$12.5 million (0.7 percent of GDP) reflecting the increasingly tight liquidity situation and the likelihood that several large external disbursements will not take place until December.
The government is still considering a US$107 million (17 percent of GDP) concessional loan from the Export-Import Bank of China to build a luxury hotel. Such a large loan could jeopardize debt sustainability and would breach a program ceiling on bilateral concessional debt.
The authorities were in broad agreement with the staff’s assessment and associated policy recommendations. Staff recommended anchoring medium-term fiscal consolidation on a balanced mix of revenue and expenditure measures; continuing with a regional strategy to address the collapse of the Trinidad and Tobago-based CL Financial Group; and moving ahead with structural reforms to improve the business environment and make Grenada a more attractive destination for investors, as well as to enhance export diversification.
Contents
I. Recent Developments and Outlook
II. Performance under the Program
III. Policy Discussions
A. Fiscal Policies and Debt Sustainability
B. Financial System Vulnerabilities
C. Medium-term Outlook for Growth and FDI
IV. Program Issues
V. Staff Appraisal
Boxes
1. Debt Sustainability Analysis
2. Exchange Rate and Competitiveness Assessment
3. Previous Article IV Recommendations
Figures
1. Inflation Developments
2. Banking System Vulnerabilities
3. Fiscal Sector Indicators
4. Competitiveness Indicators
5. Doing Business Indicators, 2009
Tables
1. Selected Economic and Financial Indicators, 2006-10
2. Central Government Finances, 2006-10 (in millions of EC dollars)
2a. Central Government Finances, 2006-10 (in percent of GDP)
3. Cyclically-Adjusted Balances and Fiscal Impulse, 2007-10
4. Summary Accounts of the Banking System, 2006-10
5. Summary Balance of Payments, 2006-14
6. Medium-Term Macro Framework, 2006-14
7. Reviews and Disbursements under the PRGF Arrangement, 2006-10
8. Indicators of Capacity to Repay the Fund, 2007-16
9. Vulnerability Indicators, 2004-09
Annex
Summary of Appendices
Attachments
I. Letter of Intent
II. Supplementary Memorandum of Economic Policies
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INTERNATIONAL MONETARY FUND
GRENADA
Informational Annex
Prepared by Western Hemisphere Department
November 4, 2009
Contents
Appendices
I. Fund Relations
II. Relations with the World Bank Group
III. Relations with the Caribbean Development Bank
IV. Statistical Issues
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Public Information Notice (PIN) No. 10/05
FOR IMMEDIATE RELEASE
January 8, 2010
International Monetary Fund
700 19 StreethNW
Washington, D. C. 20431 USA
On November 25, 2009, the Executive Board of the International Monetary Fund (IMF) concluded the 2009 Article IV consultation with Grenada.1
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Press Release No 09/434
FOR IMMEDIATE RELEASE
December 1, 2009
International Monetary Fund
Washington, D.C. 20431 USA
