Press Release No. 10/450

Press Release: IMF Executive Board Completes First Review Under the Extended Credit Facility for Grenada and Approves US$1.95 Million Disbursement

November 19, 2010

The Executive Board of the International Monetary Fund (IMF) today completed its first review of Grenada’s economic performance under the three-year arrangement under the Extended Credit Facility (ECF). The Executive Board also approved the modification of the end-December 2010 performance criterion on non-concessional debt for the completion of an agriculture feeder road project. In addition, the Executive Board completed the financing assurances review. Completion of the first and financing assurances reviews enables Grenada to draw an amount equivalent to SDR 1.25 million (about US$1.95 million) immediately, bringing total disbursements under the arrangement to an amount equivalent to SDR 2.525 million (about US$3.94 million).

The Executive Board approved the three-year ECF arrangement for Grenada in April 2010 (see Press Release No. 10/133) in the amount of SDR 8.775 million (about US$13.69 million, or
75 percent of Grenada’s quota in the Fund).

Following the Executive Board’s discussion of Grenada, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, issued the following statement:

“Grenada’s economy has yet to recover from last year’s sharp output contraction. Two of its key sectors, tourism and construction, continue to be significantly affected by the lack of a firm global recovery. Despite this difficult environment, the authorities have met all quantitative targets for end-June and all the structural benchmarks agreed under the program.

“The authorities continue to make progress in fiscal consolidation. Starting with the 2011 budget, a three-year rolling budget will be adopted. Regarding fiscal adjustment, the objective is to improve the efficiency and compliance of tax collections, and to improve the overall management and efficiency of spending. The full Poverty Reduction Strategy Paper (PRSP) is being finalized and a quarterly indicator of social spending is also being put in place.

“The banking sector has remained resilient but the increase in the rate of non-performing loans is a concern. The authorities are continuing to work with regional governments to minimize the fallout from the collapse of the Trinidad and Tobago-based CL Financial Group.

“The near-term prospects for the Grenadian economy remain challenging and there are downside risks stemming from financial sector stresses and a stalled recovery. However, with continued progress toward fiscal consolidation, structural reforms, and a cautious debt management policy, the long-term outlook is favorable.”