Abstract
Request for Disbursement Under the Rapid Credit Facility; Press Release; Staff Report; Staff Statement; and Statement by the Executive Director for Grenada;
Lending into Arrears. As noted in the staff report, Algeria and Libya requested more time to consent to the IMF financing notwithstanding Grenada’s arrears owed to them. Since then, consent was received from Algeria on April 22, 2020. Having not received such consent from Libya, staff has examined the application of the three criteria under the Lending into Arrears policy (see BUFF/15/113) with respect to the provision of Fund financing for Grenada in view of Libya’s claims. Based on staff’s assessment (see Annex I attached to this supplement) all three criteria are satisfied.
Annex I. Lending into Arrears to Official Bilateral Creditors – Staff’s Assessment of Three Criteria
1. Prompt financial support from the Fund is considered essential and the member is pursuing appropriate policies.
The Fund’s prompt financial support is considered essential to address Grenada’s balance of payments problems arising from the sharp contraction of exports and the need to bolster spending to contain the pandemic and support the economy. Regarding the pursuit of appropriate policies, once the current crisis dissipates, the Grenadian authorities will unwind the temporary measures to cushion the pandemic impact and return the focus of policies to building resilience to natural disasters and safeguarding macro-financial stability.
2. The debtor is making ‘good faith’ efforts to reach agreement with the creditor on a contribution consistent with the parameters of the Fund-supported program.
In terms of process, the Grenadian authorities, during the 2014–17 ECF arrangement reached out bilaterally to the Libyan authorities to restructure the debt owed and to regularize arrears, and they offered to engage in a substantive dialogue and have sought a collaborative process with Libya to reach an agreement. The Grenadian authorities repeatedly (i) sent direct letters to the Libyan authorities, (ii) approached the office of Libya’s Executive Director at the IMF, and (iii) provided the relevant information on a timely basis. The Grenadian authorities are committed to continue making their good faith efforts until all the remaining arrears are resolved.
The terms the Grenadian authorities have consistently offered to the Libyan authorities are terms comparable to the Paris Club rescheduling negotiated in November 2015. Accordingly, these terms do not imply a contribution that is disproportionate relative to contributions provided by other official bilateral creditors.
3. The decision to provide financing despite these arrears is not expected to have an undue negative effect on the Fund’s ability to mobilize official financing packages in future cases.
The contribution sought from Libya does not account for the majority of financing contributions required from official bilateral creditors. Libya does not appear to have a strong track record of providing contributions in the context of Fund-supported programs, having undertaken only 5 HIPC restructurings out of its total 18 Completion-Point debtors. Therefore, in staff’s view, providing financing to Grenada despite the arrears is not expected to have an undue negative effect on the Fund’s ability to mobilize future financing packages, given strong support from the international community in the context of the Fund-supported program for Grenada and the Grenadian authorities’ efforts to resolve this in a timely manner.