Front Matter Page
IMF Country Report No. 15/193
GRENADA
SECOND REVIEW UNDER THE EXTENDED CREDIT FACILITY, REQUEST FOR A WAIVER OF A PERFORMANCE CRITERION, REQUEST FOR MODIFICATION OF PERFORMANCE CRITERIA AND FINANCING ASSURANCES REVIEW—PRESS RELEASE; AND STAFF REPORT
July 2015
In the context of the second review under the Extended Credit Facility, request for a waiver of a performance criterion, request for modification of performance criteria and financing assurances review, the following documents have been released and are included in this package:
A Press Release including a statement by the Chair of the Executive Board.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on June 29, 2015, following discussions that ended on April 15, 2015, with the officials of Grenada on economic developments and policies underpinning the IMF arrangement under the Extended Credit Facility. Based on information available at the time of these discussions, the staff report was completed on June 15, 2015.
The documents listed below have been or will be separately released.
Letter of Intent sent to the IMF by the authorities of Grenada*
Memorandum of Economic and Financial Policies by the authorities of Grenada*
Technical Memorandum of Understanding*
*Also included in Staff Report
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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International Monetary Fund
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© 2015 International Monetary Fund
Front Matter Page
GRENADA
SECOND REVIEW UNDER THE EXTENDED CREDIT FACILITY, REQUEST FOR A WAIVER OF A PERFORMANCE CRITERION, REQUEST FOR MODIFICATION OF PERFORMANCE CRITERIA AND FINANCING ASSURANCES REVIEW
June 15, 2015
Executive Summary
Extended Credit Facility (ECF) Arrangement. The program was approved on June 26, 2014 and the first review completed on December 12, 2014. Grenada has received SDR 4.04 million (about US$5.9 million) so far under the arrangement and the equivalent of SDR 2 million (about US$3 million) will be made available upon Executive Board completion of the second review.
Debt restructuring. Grenada has achieved a critical milestone in its debt restructuring, reaching agreement on key restructuring terms with its largest private creditor group. The agreement implies a net present value reduction in the related debt of 54 percent and will reduce public debt by 13 percent of 2017 GDP once fully executed. The restructuring of Grenada’s debt with the Export-Import Bank of Taiwan Province of China at end-2014 reduced the stock of public debt by another 2 percent of GDP. The authorities expect to finalize negotiations with remaining creditors by end-2015.
Program Performance. Overall program implementation remains solid. All but one quantitative performance criteria for the second review were met with wide margins. Major reforms of the fiscal policy framework to anchor debt sustainability have been completed, albeit with some delay, including new fiscal responsibility legislation and the reform of the bulk of the tax incentive regime to eliminate discretion. The strategy to reform parastatal entities has also been completed and its implementation started.
Second Review. Discussions focused on meeting the 2015-16 fiscal targets and the structural reform agenda. Modifications are proposed to the 2015 performance criteria to accommodate one-time costs of structural reforms and to the ceiling on non-concessional borrowing to clarify when a loan is considered contracted. Proposed structural conditionality seeks the transparent and sustainable management of citizenship-by-investment receipts and to bring the chart of accounts in line with international best practice.
Approved By
Robert Rennhack (WHD) and Bob Traa (SPR)
Discussions took place in St. George’s during February 18-26, 2015 and continued in Washington DC during April 13-15, 2015. The staff team comprised Aliona Cebotari (head), Kimberly Beaton, Xin Li (all WHD), Nujin Suphaphiphat (SPR), Eriko Togo (MCM) and Jemma Lafeuillee (local IMF economist). Representatives from the Caribbean Development Bank, the Eastern Caribbean Central Bank, and the World Bank attended some of the meetings.
Contents
BACKGROUND
RECENT DEVELOPMENTS AND OUTLOOK
PROGRAM PERFORMANCE
A. Fiscal Consolidation
B. Structural Reforms for Fiscal Sustainability
POLICY DISCUSSIONS
A. Restoring Fiscal Sustainability
B. Structural Reforms to Support Competitiveness and Growth Prospects
C. Financial Sector Reforms
PROGRAM DESIGN AND FINANCING
STAFF APPRAISAL
BOXES
1. The Macroeconomic Impact of the Decline in World Oil Prices
2. Strengthening State-Owned Enterprises (SOEs) and Statutory Bodies (SBs)
FIGURES
1. Recent Economic Developments
2. External Developments
3. Monetary Developments
4. Fiscal Developments
TABLES
1. Selected Economic and Financial Indicators, 2009-20
2a. Operations of the Central Government
2b. Operations of the Central Government
3. Medium-Term Financing of the Central Government
4. Public Sector Debt, 2012-14
5. Arrears, 2013-14
6. Balance of Payments Summary, 2012-2020
7. Summary Accounts of the Banking System, 2009-16
8. Indicators of Capacity to Repay the Fund, 2012-20 1/
9. Financial Sector Indicators, 2009-2015
10. Schedule of Disbursement under the Extended Credit Facility
11. Structural Program Conditionality
ANNEXES
I. The Macroeconomic Impact of the Decline in Global Oil Prices
II. Progress in the Restructuring of Grenada’s Public Debt and Updated Debt Sustainability Analysis
III. Strengthening Grenada’s State-Owned Enterprises and Statutory Bodies
IV. Grenada’s Fiscal Responsibility Framework
APPENDIX
I. Letter of Intent
Attachment I. Memorandum of Economic and Financial Policies for 2015-17
Attachment II. Technical Memorandum of Understanding
Front Matter Page
Press Release No.15/304
FOR IMMEDIATE RELEASE
June 29, 2015
International Monetary Fund
Washington, D.C. 20431 USA
