Press Release: IMF Executive Board Completes Third Review Under PRGF Arrangement with Grenada, and Approves US$6.8 Million Increase in Financial Assistance and US$6 Million Disbursement
June 4, 2009Press Release No. 09/200
June 4, 2009
The Executive Board of the International Monetary Fund (IMF) has completed the third review of Grenada’s economic performance under the Poverty Reduction and Growth Facility (PRGF) arrangement and approved to increase financial assistance under the arrangement by an amount equivalent to SDR 4.39 million (about US$6.8 million) to a total of SDR 16.38 million (about US$25.4 million) to help Grenada cope with the adverse effects of the global slowdown and financial turmoil. The completion of the review allows for the immediate disbursement of an amount equivalent to SDR 3.875 million (about US$6 million), bringing total disbursements to SDR 10.825 million (about US$16.8 million).
The Executive Board also approved the request to modify a quantitative performance criterion by relaxing the target for the end-June 2009 primary balance excluding grants because of lower revenues as a result of the slowdown in growth. The Board also approved the completion of the financing assurances review.
The three-year PRGF with Grenada was approved on April 17, 2006 (see Press Release No. 06/75), augmented in July 2008 to SDR 11.99 million (about US$18.6 million), and extended by one year to April 16, 2010.
Following the Executive Board discussion, Mr. Takatoshi Kato, Deputy Managing Director and Acting Chair, made the following statement:
“Grenada has resolutely implemented its PRGF-supported economic program in the face of economic difficulties arising from the global economic downturn. Since the second half of 2008, tourism earnings, foreign direct investment, and remittances have declined, which has led to a marked fall in economic growth and a projected shortfall in government revenue in 2009. The authorities have strengthened policies in response—in particular, they have tightened fiscal policy since the second half of 2008. The IMF is providing additional financing to support the government’s adjustment efforts.
“To address the worsened budgetary outlook, the government is taking measures to contain public spending and increase spending efficiency. The authorities have announced the planned introduction of a value added tax in early 2010 to widen the tax base and increase revenue buoyancy. They are moving forward to introduce a market-based property tax and to improve tax administration.
“At the same time, some economic stimulus is being provided to sustain growth, mainly through an acceleration of priority capital spending and an increase in targeted social spending to mitigate the impact of economic slowdown on vulnerable groups. In that regard, it will be important to complete the Country Poverty Assessment without further delay.
“The authorities have made progress in ongoing institutional reform to improve economic management, including the recent establishment of a Debt Management Unit, a Private Sector Development Office, and a Waste Reduction Unit. They are committed to move forward with a more focused structural reform agenda, including the implementation of a customs reform strategy and measures to improve the business and investment environment.
“Though the banking sector has remained resilient, the authorities are carefully monitoring financial sector vulnerabilities. They have cooperated closely with regional governments to contain the fallout from the Trinidad and Tobago-based CL Financial Group, and plan to continue strengthening nonbank financial supervision and regulation.
“Grenada remains at high risk of debt distress. Any additional borrowing, even on concessional terms, would need to be carefully assessed so as not to undermine progress toward debt sustainability. The authorities are encouraged to build on recent progress in strengthening debt management capacity, and to continue efforts to regularize financial relations with external creditors,” Mr. Kato stated.