Press Release: Statement by the IMF Staff Mission to Grenada
November 17, 2006Press Release No. 06/256
Ms. Nancy Wagner, head of an International Monetary Fund (IMF) staff mission to Grenada, issued the following statement on November 16, 2006 in St. George's:
"An IMF mission visited Grenada during November 8-16, 2006 to review progress with the implementation of the government's economic program supported by the IMF's Poverty Reduction and Growth Facility (PRGF). The mission held productive discussions with the Prime Minister, the Deputy Prime Minister, the Minister of Finance and his staff, and representatives of other ministries and the private sector. Discussions centered on recent fiscal performance, the draft budget for 2007, progress with the government's structural reform agenda, financial sector reforms, and other issues related to the first review under the PRGF.
"Significant progress has been made since the mission last visited Grenada in September 2006. In the fiscal area, the government has mobilized new grants that—if fully delivered—would more than offset the earlier shortfalls identified for 2006. Also, the Ministry of Finance has strengthened its oversight of spending beyond the budget, which should enhance the Ministry's ability to appropriately monitor government finances. On the structural front, the government has fully implemented the automatic fuel pricing mechanism, with only a minimal price change in light of the recent drop in oil prices on the world market. The government has also begun to publish information on tax concessions in the Official Gazette, an important step in achieving greater transparency and accountability. Work towards implementing a VAT remains firmly on track, with the launching of the white paper planned for later this month. A new Investment Act, complemented by amendments to the Income Tax Act and the repeal of other related legislation, is expected to go to Parliament by mid-December 2006, with the aim of strengthening the environment for investment. Meanwhile, the government's efforts to secure substantial foreign investment in the tourism sector appear to have paid off, with some key projects now moving ahead.
"Notwithstanding these positive developments, substantial challenges remain. Preliminary estimates and projections suggest that government spending will considerably exceed program targets for 2006, owing in large part to expenditure pressures from reconstruction and preparations for the Cricket World Cup. The mission underscores the importance of containing public spending in 2007, if the government is to achieve its overarching objective of fiscal and debt sustainability. A key challenge in this context will be to reach an agreement on public sector wages that is consistent with these broader fiscal objectives. In the structural area, reform efforts need to be accelerated so that the benefits can be reaped in the near- to medium-term. These efforts include comprehensively reforming tax administration, pushing ahead with a full-fledged Poverty Reduction Strategy, modernizing the public sector, strengthening the planning and implementation of the public sector investment program, and further efforts to reduce the country's vulnerability to natural disasters.
"The authorities are fully aware of these challenges and reiterated their commitment to the reform program. The IMF will continue to work closely with the authorities to assist them in the implementation of the program.
"The mission is grateful to the authorities for their warm hospitality and hopes to return in early 2007 to continue discussions with a view to completing the first review under the PRGF program."