2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Grenada

Abstract

2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Grenada

Fund Relations

(As of April 30, 2019)

Membership Status: Joined: August 27, 1975; Article VIII

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Latest Financial Arrangements:

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Formerly PRGF.

Projected Obligations to Fund1/

(SDR Million; based on existing use of resources and present holdings of SDRs)

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When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

Implementation of HIPC Initiatives: Not Applicable

Implementation of Multilateral Debt Relief Initiative (MDRI): Not Applicable

Implementation of Catastrophe Containment and Relief (CCR): Not Applicable

Safeguards Assessment: The 2016 update safeguards assessment found that the ECCB continues to maintain a governance framework that provides for independent oversight. Transparency in financial reporting has been maintained and the external audit mechanism is sound. The ECCB has restructured the internal audit function and established an independent risk management unit in line with leading international practice.

Exchange Arrangement: Grenada is a member of the ECCB, which manages monetary policy and the exchange system for its eight members. The common currency, the Eastern Caribbean dollar, has been pegged to the U.S. dollar at the rate of EC$2.70 per U.S. dollar since July 1976. In practice, the ECCB has operated like a quasi-currency board, maintaining foreign exchange backing of its currency and demand liabilities of close to 100 percent. Grenada accepted the obligations of Article VIII, Sections 2, 3, and 4 in January 1994. It maintains an exchange system free of restrictions on the making of payments and transfers for current international transactions.

Article IV Consultation: Grenada is on a 12-month consultation cycle. The last Article IV consultation was concluded by the Executive Board on July 13, 2018 (IMF Country Report No. 18/236).

FSAP Participation: Grenada participated in the regional Eastern Caribbean Currency Union FSAP conducted in September and October 2003. The Financial System Stability Assessment is IMF Country Report No. 04/293.

Technical Assistance:

Caribbean Regional Technical Assistance Centre (CARTAC)

CARTAC has provided wide-ranging technical assistance (TA) to Grenada.

  • Public Finance Management (PFM). CARTAC TA in PFM has focused on reform of SOEs and statutory bodies (SBs), cash forecasting and commitment control, development and transition to a new chart of accounts consistent with the Government Finance Statistics Manual 2014 (GFSM 2014), and the Public Expenditure and Financial Accountability (PEFA) assessment. Assistance was also provided on strategic budget reform to modernize the budget preparation process. Regarding the SOE/SB reforms, the 2016 CARTAC mission provided some limited assistance on Public Service Pension Reform. In 2017, CARTAC provided assistance with a one-week training mission for the Grenada Fiscal Responsibility Committee and conducted a risk assessment on the SOEs. In April 2018, a mission was completed on assisting with moving to International Public Sector Accounting Standards (IPSAS) cash-based accounting and to bring their public accounts up to date. A roadmap on reforms to move Grenada to IPSAS Accruals was provided. Later in the year, Grenada participated in regional workshops geared at improving capacities for Internal Audit, Cash Management and SOE Oversight as well as assessing Fiscal Risks. In February 2019, a TA mission from Fiscal Affairs Department reviewed the Fiscal Responsibility Law with the aim of strengthening it by removing inconsistencies and ambiguities and reframing the expenditure rule.

  • Tax Administration. TA was provided to strengthen tax administration at both the Inland Revenue and Customs Departments. For IRD, the support included establishing a Large and Medium Taxpayer Unit and a Design, Planning and Monitoring Section.

  • Financial Stability. Supervision and Regulation. Significant TA has been provided to the Grenada Authority for the Regulation of Financial Institutions (GARFIN) to implement risk-based supervision across the non-banking sector, including capacity building to review reinsurance contracts, contingency planning for crisis preparedness and management, and conduct review of retail lending portfolios at credit unions. TA was also provided, as part of the broader ECCU-wide initiative, to develop financial health and stability indicators for the insurance sectors.

  • Macroeconomic framework and statistics. To support the authorities’ efforts to establish an annual medium-term economic framework and promote informed policy making, CARTAC provided TA to strengthen medium-term macroeconomic projections and improve macroeconomic statistics. TA was provided during 2013 to 2015 to assist with compiling GDP by expenditure estimates; and during 2016, 2017, and 2019 to develop quarterly GDP by economic activity at current and constant prices and improve them further. In addition, CARTAC conducted TA in 2017 to develop the Producer Price Index. TA was also provided in 2014–19 to produce balance of payments (BOP) statistics according to the Balance of Payments and International Investment Position Manual (BPM6) and to initiate the production of international investment position (IIP) statistics, and review and improve upon the BPM6-compliant BOP and IIP statistics first released in July 2017.

Other Technical Assistance (Since 2014)

FAD and LEG have provided extensive assistance on tax policy and administration, public financial management, and public expenditure rationalization. In particular, TA was provided in the design and drafting of the PFM legislation and the Tax Administration legislation, reforms of the tax incentives system, and reform of the following Acts: income tax, property, VAT, excise tax. FAD provided TA on the public wage bill reform. FAD/LEG also provided comprehensive TA to draft the Fiscal Responsibility Act of 2015. FAD also provided TA in 2019 to further strengthening the Fiscal Responsibility Act. MCM provided TA on formulating a medium-term debt management strategy and implementing institutional changes to strengthen debt management and, together with LEG, provided TA to draft the Public Debt Management Act of 2015.

Grenada: IMF Technical Assistance: 2016–present

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Source: Based on available TA reports and consultations with CARTAC

Relations with Other International Financial Institutions

Statistical Issues

(As of May 13, 2019)

I. Assessment of Data Adequacy for Surveillance

General: Data provision has some shortcomings, but is adequate for surveillance.

National Accounts: The base year of GDP series, 2006, is outdated. Current price GDP estimates by expenditure require improvements to gross capital formation and private final consumption expenditure components to be reliable. There are significant delays related to both receiving and processing survey data for GDP compilation, for example with respect St. George’s University’s data provision to the Central Statistical Office (CSO). Supported by the CARTAC mission, estimates of quarterly GDP by production approach have been developed but compiled with a lag.

Prices and high frequency statistics: The authorities compile regular data on consumer prices, retail sales; agricultural production and purchases; motor vehicle registrations; total cargo handled; fish production and exports; industrial production; imports of construction material; and water and electricity production. The 2010 update of the CPI brought methodology in line with international standards. The CPI basket is based on the 2007/08 Household Budget Survey (HBS). The 2018/19 HBS is being conducted from July 2018 to June 2019. A producer price index (PPI) and export and import price indices are not yet available, but the CSO intends to develop a PPI for certain sectors.

Labor statistics: Labor statistics are improving. The authorities introduced an annual Labor Force Survey in 2013, which was completed again in 2014 and 2015. They started a quarterly Labor Force Survey in 2018. A population census was completed in 2011. Regular wage data are not available with the exception of partial data available from the National Insurance Scheme. The CSO conducted a Country Poverty Assessment in 2008, with assistance from the Caribbean Development Bank, and is working with the International Labor Organization (ILO) to improve the coverage of labor market statistics.

Government finance statistics: The reporting of central government data has improved in recent years, with monthly data being provided to the ECCB, IMF, and other users in Fund economic classification format with lags of about 4–6 weeks. However, some challenges remain with the availability of fiscal data: (i) receipts from the CBI program to the central government are not comprehensively reported in the fiscal accounts (ii) some donor-financed capital spending data are often not available until the end of the year, as they are not reported to or do not pass through the accounts of the central government. The new Chart of Accounts introduced in 2016 has improved the classification of public expenditure. The coverage of the rest of the public sector has improved, but remains limited, and there are no consolidated public-sector accounts. Financial information on selected public enterprises has been included in the budget documents since 2016. This is consistent with the requirement in the PFM Act of 2015 that the Minister of Finance present a statement of the overall performance of all enterprises to Parliament alongside the budget proposals. The PFM Act also requires public enterprises to submit annual financial statements no later than three months from the end of the fiscal year to the Director of Audit and the Minister of Finance.

Monetary statistics: Monthly monetary statistics are compiled and reported to the Fund by the ECCB, based on standardized report forms (SRF) for the central bank (SRF 1SR) and for other depository corporations (SRF 2SR), since July 2006. In April 2007, a data ROSC mission assessed the monetary statistics with reference to the GDDS and the Data Quality Assessment Framework (DQAF, July 2003). It indicated that the institutional coverage of other depository corporations is incomplete, as data for mortgage companies, finance companies, building societies, and credit unions—all of which accept deposits—are excluded. Also, accrued interest is not incorporated in the value of the interest-bearing assets and liabilities, and valuation adjustments are included in other liabilities. In addition, source data for the commercial banks do not provide the disaggregation recommended by the Monetary and Financial Statistics Manual and Compilation Guide. The ECCB is currently working on implementing a new reporting system for commercial banks that is envisaged to address the recommendations made by the April 2007 data ROSC mission.

Grenada reports some data and indicators of the Financial Access Survey (FAS), including the two indicators adopted by the UN to monitor Target 8.10.1 of the Sustainable Development Goals (SDGs).

Financial Sector Surveillance: The ECCB reports quarterly all Grenada’s core and additional FSIs for deposit takers, covering commercial banks only.

External Sector Statistics: BOP statistics are improving, but there is uncertainty on the stability of the data series. BPM6-compliant BOP and IIP were released in July 2017 for 2014–16 and 2013–16, respectively for the first time, as part of the ECCU-wide initiative. Subsequent data releases in September 2018 and April 2019 added preliminary and estimated data for 2017 and 2018, and also reviewed and revised the entire data series by improving data sources.

Ongoing work continues to strengthen estimates of travel services exports and direct investment flows. Further work is required to release consistent historical data series prior to 2014, improve data timeliness, and produce comprehensive public and private sector external debt statistics in line with international standards. Actions are undertaken in collaboration with the ECCB, which coordinates the compilation of external sector statistics of the ECCU economies.

External and domestic debt statistics: The database for central government external debt is comprehensive and can be used to provide detailed and reasonably up-to-date breakdowns of disbursements and debt service, including future projections. Capacity upgrades are however needed to improve reliability of the data and fully eliminate the possibility of errors. There is also a detailed database on domestic government securities maintained by the Regional Governments Securities Market (RGSM) that provides data on auction results, and outstanding securities of the central government. Although the stock information on privately placed domestic T-bills, loans, bonds, and overdraft facilities are available on a monthly basis, there is no reliable data on future projections. Data availability on government-guaranteed debt and debt of public enterprises has been improved, and there is data on private sector external debt, other than from the monetary survey, in the case of the commercial banks.

II. Data Standards and Quality

While Grenada has participated in the Fund’s General Data Dissemination System since March 2001, most of the metadata have not been updated since late 2002. Grenada has not fully implemented the e-GDDS as it does not yet have a National Summary Data Page (NSDP).

III. Reporting to STA

The International Financial Statistics page includes data on exchange rates, international liquidity, monetary statistics, prices, balance of payments, national accounts, and population. The authorities do not report fiscal data for publication in International Financial Statistics (IFS). The ECCB provides data to the IMF for publication in the Balance of Payments Yearbook. Grenada has not provided any fiscal data, either on a GFSM 2001 basis, or a cash basis, for presentation in the GFS Yearbook. The ECCB disseminates Grenada’s quarterly GFS data in its Economic and Financial Review.

Table of Common Indicators Required for Surveillance

As of May 13, 2019

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Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I); Not Available (NA).

Grenada is a member of the Eastern Caribbean Currency Union, in which the common currency of all member states (EC dollar) is pegged to the U.S. dollar.

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank and domestic nonbank financing.

Including currency and maturity composition.

Public external debt only.