## cr17131

## Source details

**Canonical URL:** [cr17131](https://www.imf.org/-/media/files/publications/cr/2017/cr17131.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/cr/2017/cr17131.pdf.md)
- [Structured JSON version](/-/media/files/publications/cr/2017/cr17131.pdf.json)

---

### Executive Summary — ECF Arrangement and Program Performance
- Arrangement approved on June 26, 2014; fifth review completed on December 14, 2016.
- Disbursements to Grenada so far under the arrangement: SDR 12.04 million (about US$17.5 million).
- SDR 2 million (about US$2.7 million) to be made available upon Executive Board completion of the Sixth Review.
- Overall program implementation for the sixth ECF review: strong.
- All continuous and end-December 2016 performance criteria and structural benchmarks: met.
- End-March 2017 structural benchmarks related to management of the public sector wage bill: implemented, one with a short delay.
- Fiscal program for 2017: consistent with the Fiscal Responsibility Act (as confirmed by staff).
- Remaining debts to be restructured now amount to about 15 percent of total restructurable debt.

### Perspective, Outlook, and Key Priorities
- Core ECF objectives met: restore fiscal sustainability, strengthen the financial sector, set stage for sustained growth.
- Public debt: prospects for sustainability vastly improved but still high; Grenada remains vulnerable to shocks.
- Authorities need to persevere with the new fiscal policy framework to meet medium term debt targets.
- Additional priorities:
  - Reduce unemployment.
  - Improve the efficiency of the public service.
  - Lower the cost of doing business.
  - Re-invigorate the agriculture sector.

### Recent Economic Developments and Labor Market
- 2016 GDP growth: about 3.9 percent.
  - Underpinned by tourism-related construction activity and steady tourism demand.
  - Partially offset by contraction in agriculture output caused by drought followed by excessive rains.
- Output gap: positive, about 3 percentage points, after above average growth over the past three years.
- Unemployment:
  - Declined from over 35 percent (estimated) in 2012 to 28.6 percent in 2016.
  - Youth unemployment: around 40 percent.
  - Drivers: structural skills mismatch, incentive effects from remittances, wage setting delinked from productivity.

### Inflation and Sectoral Growth
- Headline inflation in 2016: 1.7 percent.
  - Core inflation contributed more than 2 percentage points due mainly to a jump in telecom prices in June 2016 (and September 2015) after two telecom service providers were merged.
- Contribution to real growth by sector, 2016: (chart referenced; sources: IMF staff projections).

### External Sector and Tourism
- Stayover tourist arrivals growth in 2016: 2.6 percent (down from 5.1 percent in 2015).
- Cruise-ship passenger arrivals growth in 2016: 12.3 percent (down from 19.3 percent in 2015).
- Significant decline in tourists from Europe and Venezuela.
- Current account deficit in 2016: estimated at 14.6 percent of GDP, financed mostly by non debt creating inflows.
- Real effective exchange rate (tourism weighted) in 2016: depreciated by 3.5 percent (y/y).
- Note: ECCB to release new BoP data in 2017 based on improved methodology expected to show a much lower current account deficit.

### Credit, Banking Sector, and Financial Indicators
- Overall credit to the private sector growth in 2016: 2.7 percent.
- Credit unions:
  - Sector assets growth in 2016: 13 percent.
  - Credit union share of total credit rose from 17 percent to 24 percent during the program.
- Banks:
  - Liquidity coverage ratio: around 45 percent of deposits.
  - Lending rates: fell by 34 basis points (y/y) in 2016.
  - ROAA: 0.4 percent.
  - Provisions for impaired assets at 54 percent of NPLs.
- Asset quality:
  - NPL ratio decreased from 13.8 percent of gross loans in 2013 to 6.7 percent in 2016 (and from 11.3 to 3.9 percent of GDP).
- Capital adequacy:
  - Average CAR: about 14 percent.
  - Average T1R: about 12.5 percent.
  - Both above the 8 percent regulatory minimum.

### Public Debt, Debt Restructuring, and Domestic Debt Management
- Restructuring progress:
  - Grenada restructured 85 percent of the stock of restructurable debt.
  - Paris Club debt restructuring completed with agreements with Russia and the United Kingdom; discussions with Algeria progressed.
  - Domestic restructurings include Petrocaribe Grenada, two domestic banks, and large portions of a bond; government guaranteed debt restructuring completed.
- Public debt stock at end-December 2016: US$866 million, or 83.4 percent of GDP (compared to 91.7 percent of GDP at end-2015).
- T-bill market:
  - Reservation yield lowered from 6 to 4 percent.
  - First auction under new approach in January: record yield of 2.4 percent (against 4.5 percent a year earlier).
- Deposits equivalent to 6.2 percent of GDP at end-January, earning average interest rate of 0.9 percent.
- Staff recommendation: speed up pace of debt reduction, beginning with more costly privately placed T-bills.

### Program Performance and Fiscal Outcomes (2016 and Program Period)
- All end-December performance criteria met for the Sixth Review.
- Primary surplus in 2016: 5.4 percent of GDP, exceeding the adjusted quantitative PC due to higher-than-projected revenues and expenditure restraint.
- Fiscal adjustment over 2014-2016 (ECF-supported program): total adjustment 9.6 percent of GDP (9.1 percent excluding grants). Adjustment exceeded original program intentions by 1.5 percent of GDP.
- Chart of Accounts reclassification shifted 3.5 percent of GDP of spending from capital to non-interest current expenditure.
- SEED program disbursements fell short of the December indicative target by EC$0.4 million (US$150,000) in late 2016.
- New beneficiary information system operational since Q3 2016.
- Budget includes CBI-related grant projections from the National Transformation Fund (NTF) of EC$32.4 million.
- Contracting of new non-concessional external debt limited to financing from the Caribbean Development Bank within program envelope.
- No new budget arrears or external arrears accumulated (outside of debt under negotiation).

### Structural Reforms and Institutional Measures
- Quarterly debt statistics bulletin: published by end-December 2016 and again at end-March 2017 (with improvements).
- CBI statistics for 2016 and Q1 2017: published.
- Human resource registry: prepared by end-March with pilots completed; backup, archive, and payroll consistency processes established.
- Public Sector Management Reform Strategy: finalized and approved by Cabinet in April; four pillars include re-engineering the public service, strategic human resource management, wage bill reform, and an integrated IT platform; phased implementation starting 2017 and concluding by 2019.
- Recurring structural benchmarks: met; remaining benchmarks met (one with delay) and implementation ongoing.

### 2017 Fiscal Outlook, Wage Settlement, and Budgetary Assumptions
- Union wage increases agreed in March for 2017-2019: 3, 3, and 4 percent respectively.
  - Increase estimated at EC$6.5m in 2017; would yield a wage bill equivalent to 8.7 percent of GDP.
- Staff baseline incorporates:
  - salary increment deferred from 2015 of EC$3.4 million and increments due in 2017 of EC$1.1 million;
  - wage increases of 3, 3, and 4 percent from 2017-2019;
  - maintenance of hiring controls by the DPA;
  - wage and fringe benefits lump-sum payment of EC$5.4 million (0.2 percent of GDP) covering 2014-2016.
- Public wage bill projection (EC$m):
  - Wages & Salaries: 217.2 (2016) → 222.9 (2017)
    - o/w increments paid in December 2016 for 2014: 1.8
    - o/w wage increase for 2017: 6.5
    - o/w increment for 2017: 1.1
  - Increment outstanding for 2015: 3.4
  - Personnel allowances: 23.2 → 24.9
  - Lump sum payment negotiated for 2014-16: 5.4
  - Total wage bill (a+b+c+d): 240.4 → 256.6
  - % of GDP: 8.6% → 8.7%
- Budget capital grants:
  - Budget assumes capital grants of 4.3 percent of GDP; staff use a more conservative estimate of 3.4 percent of GDP.
  - Capital expenditures will not be undertaken until full financing secured.
- Tax policy changes:
  - PIT rate on annual income between EC$36,000 to EC$60,000 reduced from 15 to 10 percent.
  - Income tax on pensions removed.
  - Price of LPG gas reduced by 5 percent.
  - Staff estimate combined loss of EC$3.8 million, or 0.13 percent of GDP, from PIT reduction and removal on pensions.
  - PIT receipts for first two months higher than projected, suggesting wage increases in SOEs and private sector could offset losses.

### Arrears Regularization, Membership Fees, and Payment Plans
- Negotiations underway with three bilateral creditors and commercial creditors to resolve remaining external arrears (Algeria, Libya, and Trinidad and Tobago).
- Agreements reached with regional organizations to restructure obligations or establish time-bound repayment plans; payments starting in 2017 to be completed by 2022.
- Payments made to each of the seven organizations with largest overdues, representing approximately 80 percent of outstanding overdues.
- Membership contributions outstanding (EC$ millions):
  - TOTAL outstanding: 58.85
  - Payments Jan-April 2017: 8.41
  - University of the West Indies: 20.03 (Payments Jan-April 2017: 2.00) — Quarterly payments for 8 years commencing 2018.
  - RSS: 9.35 (Payments Jan-April 2017: 1.87) — Quarterly payments for 10 years commencing 2018.
  - OECS Secretariat: 9.12 (Payments Jan-April 2017: 2.00) — Monthly payments for 8 years commencing 2018.
  - CARICOM: 5.21 (Payments Jan-April 2017: 0.50) — No agreement; Government will pay quarterly for 5 years commencing 2018.
  - Eastern Caribbean Supreme Court: 3.38 (Payments Jan-April 2017: 0.25) — Quarterly payments for 7 years commencing 2018.
  - Caribbean Institute for Meteorology & Hydrology: 2.20 (Payments Jan-April 2017: 0.31) — Annual payments for 5 years commencing 2017.
  - UNDP: 1.00 (Payments Jan-April 2017: 0.17) — No agreement; Government will pay annually for 5 years commencing 2018.
  - ICAO: 0.68 (Payments Jan-April 2017: 0.18) — Annual payments for 10 years commencing 2018.
  - Others (53 organizations): 7.88 (Payments Jan-April 2017: 1.14) — Quarterly payments for 6 years commencing 2017.
- Note: Stock of contributions outstanding to 8 organizations are 86.6 percent of the total at end-2016.

### Sustainability, Medium-Term Outlook, and Risks
- By end-2017, public debt to GDP expected to decrease by 36 percentage points to around 72 percent.
  - Nominal GDP growth contributed about 50 percent of this decline.
  - Fiscal consolidation and debt restructuring contributed about 25 percent each.
- Public debt expected to decline below 55 percent of GDP by 2020, assuming appropriate policies and only concessional borrowing.
- External debt risk rating assessed to remain “in distress” due to unresolved arrears to external creditors.
- Growth projection: annual growth projected at 2.5 percent over the medium term, around estimated potential.
- Baseline drivers:
  - Adherence to the fiscal framework to produce higher public savings and restrain domestic demand.
  - External demand in 2017 expected to slow further as tourist arrivals from the United Kingdom moderate.
  - Increases in hotel rooms and new flight connections to the U.S., together with a slowdown in construction-related imports, will support contraction in the current account deficit.
  - Structural reforms approved during the program expected to support growth and close the output gap towards the end of the forecast period.
- Contingency: Mandatory repurchase claim by Grenada Private Power (GPP)
  - GPP demanded government repurchase shares in Grenlec within 30 days at an estimated price of EC$177 million (6 percent of GDP).
  - Staff uncertain about estimated value or government’s legal recourse; if debt financed, public debt would not fall below 55 percent of GDP by 2020 unless deposits drawn down or a strategic investment partner found.
- Risks to outlook:
  - Upside: stronger US growth, hardening of U.S. foreign policy stance towards other destinations, higher CBI and FDI inflows.
  - Downside: uncertainty associated with U.S. immigration and trade policies, unforeseen forces in advanced economies hurting tourism demand or CBI revenues, hurricanes, fiscal policy slippages, fiscal contingencies from contractual issues with the monopoly energy provider or foreign tourism operator, unforeseen costs related to pension system reform.

### National Insurance Scheme (NIS) Reform and Social Protection
- Actuarial finding: current NIS revenues insufficient; assets projected to be depleted by 2035.
- Public sector pension reform should be undertaken consistent with planned NIS reforms.
- Fiscal contingencies: costs of pension and NIS reform are uncertain and pose domestic fiscal risks.
- Policy recommendations:
  - Undertake NIS reform informed by actuarial reviews.
  - Design public sector pension reform consistent with NIS reforms.
  - Maintain spending discipline and prudent management of CBI inflows while strengthening revenue administration and compliance.
  - Expand improved eligibility mechanism (designed by authorities and the World Bank) to other social assistance areas to better target transfers.
  - Monitor and limit fiscal contingent liabilities by establishing the Fiscal Responsibility Oversight Committee and strengthening recording and monitoring of financing and debt statistics.
- Institutional sequencing:
  - Prioritize establishment of the Fiscal Responsibility Oversight Committee.
  - Re-activate/redesign SOE Advisory Committee to minimize fiscal risks.
  - Strengthen public financial management practices and debt management systems.

### Debt Sustainability Assessment and Stress Tests — Baseline and Downside Scenarios
- DSA rating: remains “in debt distress” due to unresolved arrears to official bilateral creditors.
- PV of total PPG debt expected to fall to 61.8 percent of GDP in 2017 from 69.8 percent in 2016.
- Baseline public sector debt (percent of GDP sequence reported): 101.8, 91.7, 83.4, 71.8, 65.8, 60.4, 54.9, 49.8, 46.3, 46.3, 44.2.
- Gross financing need (percent of GDP sequence reported): 22.3, 17.3, 15.8, 13.7, 11.7, 11.2, 10.2, 10.0, 10.9, 11.7, 9.0.
- Key shocks/scenarios analyzed:
  - Natural Disaster scenario.
  - Shocks to import prices, particularly fuel.
  - One-time 30 percent real depreciation.
  - Increased other debt-creating flows (e.g., 10 percent of GDP increase in 2018).
- Sensitivity analysis finds historical lax fiscal policy, natural disasters, large depreciation, and weaker primary balances produce the most adverse outcomes and could reverse gains in debt metrics.
- Policy implication: restoring and maintaining debt sustainability depends on strict fiscal discipline under the FRA and swift implementation of debt restructuring.

### Annex III — Retrospective on the 2014-17 ECF-Supported Program (selected lessons)
- Background:
  - Prior Fund-supported programs (2006-10 and post-2010) were unsuccessful in fully restoring fiscal sustainability due to shocks, policy loosening, overambitious reform agendas, and weak ownership.
- Macro situation up to 2013:
  - Annual real GDP contracted on average by 0.7 percent (2008-13).
  - Negative output gap about 3 percent of GDP.
  - Unemployment 33.5 percent (55 percent for youth).
  - Central government primary and overall deficits increased to 3.7 and 7.1 percent of GDP respectively.
  - Public debt increased from 84 to 108 percent of GDP.
  - Domestic arrears 10.7 percent of GDP in 2013; external arrears 15.3 percent of GDP in 2013.
- Program outcomes:
  - ECF three-year arrangement equivalent to SDR 14.04 million (120 percent of quota, about US$21.9 million).
  - Growth under the program averaged about 5 percent, higher than anticipated.
  - Central government primary balance improved by 9.6 percentage points of GDP in 2013-16; two thirds revenue driven.
  - By late 2015, NPV of debt obligations reduced by about 16 percentage points of GDP.
- Structural and institutional reforms implemented: new PFM and procurement laws, Fiscal Responsibility Act, public wage bill management measures, tax reforms, SOE oversight, investment law, energy sector reforms, initial pension reform steps.
- Financial sector:
  - Banks’ NPLs decreased to average 7 percent; banking sector returned to profitability.
  - Provisions for impaired assets averaged 54 percent.
  - Bank credit contracted; credit unions filled part of the credit gap.
  - Recommendation: strengthen regulatory framework for credit unions; develop non-bank supervision.
- Implementation notes:
  - Social partner engagement helped garner public support and safeguard social spending.
  - Technical assistance from IMF, CARTAC, CDB, World Bank, Commonwealth Secretariat, and bilateral donors used effectively.
  - Capacity constraints limited pace of structural reform implementation; focus now on implementing new laws and reforms to raise potential output.

*International Monetary Fund — cr17131*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Extended Credit Facility (ECF) Arrangement
- The arrangement was approved on June 26, 2014 and the fifth review completed on December 14, 2016.
- Disbursements equivalent to SDR 12.04 million (about US$17.5 million) have been made to Grenada so far under the arrangement.
- The equivalent of SDR 2 million (about US$2.7 million) will be made available upon Executive Board completion of the Sixth Review.

### Program Performance
- Overall program implementation for the sixth ECF review was strong.
- All continuous and end-December 2016 performance criteria and structural benchmarks were met.
- The end-March 2017 structural benchmarks related to management of the public sector wage bill were implemented, one with a short delay.
- Staff confirmed that the fiscal program for 2017 is consistent with the Fiscal Responsibility Act, as agreed during the Fifth Review.
- Follow-up on remaining debts to be restructured indicates these now amount to about 15 percent of total restructurable debt.

### Perspective and Outlook
- Under the ECF-supported program, fiscal adjustment, debt restructuring and reduction, and legislative reforms have been noteworthy.
- The authorities met the core objectives under the ECF-supported program of restoring fiscal sustainability, strengthening the financial sector, and setting the stage for sustained growth.
- While prospects for debt sustainability have vastly improved, public debt is still high and Grenada is vulnerable to shocks.
- The authorities need to persevere with Grenada’s new fiscal policy framework to meet medium term debt targets.
- Additional priorities highlighted:
  - Reduce unemployment.
  - Improve the efficiency of the public service.
  - Lower the cost of doing business.
  - Re-invigorate the agriculture sector.

### Mission and Administrative Details
- Discussions took place in St. George's during March 15 -22, 2017.
- The mission team comprised Nicole Laframboise (head), Wayne Mitchell, Gregorio Impavido (all WHD), Klaus Hellwig (SPR) and Jemma Lafeuillee (local IMF economist).
- The team was joined by Nancy Horsman and Mike Sylvester (OED) and representatives from the Eastern Caribbean Central Bank and the Caribbean Development Bank.
- Approved By: Trevor Alleyne (WHD) and Bob Traa (SPR).
- Date on document: May 9, 2017.

### Recent Economic Developments
- In 2016, the economy expanded by about 3.9 percent.
  - Growth was underpinned by tourism-related construction activity and steady tourism demand.
  - Growth was partially offset by a contraction in agriculture output caused by drought followed by excessive rains.
- Above average growth over the past three years has led to a positive output gap of about 3 percentage points, despite a fiscal contraction that helped dampen aggregate demand pressures.

### Labor Market
- Unemployment remains elevated.
- After a protracted recession and steady climb, unemployment declined gradually during the program, from over 35 percent (estimated) in 2012 to 28.6 percent in 2016.
- The modest decline in unemployment is due largely to structural factors, notably a skills mismatch that affects in particular the youth.
- Incentive effects from remittances and wage setting mechanisms that are delinked from productivity have both contributed to unemployment.

*International Monetary Fund — EXECUTIVE SUMMARY (cr17131)*

### 1.7 percent in 2016: core inflation contributed more than 2 percentage points due mainly to a

### cr17131 - 1.7 percent in 2016: core inflation contributed more than 2 percentage points due mainly to a

### Inflation and sectoral growth
- Headline inflation: 1.7 percent in 2016; core inflation contributed more than 2 percentage points due mainly to a jump in telecom prices in June 2016 (and September 2015) after two telecom service providers were merged.
- Contribution to real growth by sector, 2016: (chart referenced, sources: IMF staff projections).

### External sector and tourism
- Stayover tourist arrivals growth: 2.6 percent in 2016, down from 5.1 percent in 2015.
- Cruise-ship passenger arrivals growth: 12.3 percent in 2016, down from 19.3 percent in 2015.
- Significant decline in tourists from Europe and Venezuela.
- Current account deficit: estimated at 14.6 percent of GDP in 2016, slightly lower than in 2014 and 2015, financed mostly by non debt creating inflows.
- Real effective exchange rate (tourism weighted): depreciated by 3.5 percent (y/y) in 2016.
- Note: ECCB to release new BoP data in 2017 based on improved methodology expected to show a much lower current account deficit.

### Credit, banking sector, and financial indicators
- Overall credit to the private sector: grew by 2.7 percent in 2016.
- Shift of lending from banks to credit unions:
  - Credit union sector assets grew by 13 percent in 2016.
  - Credit union share rose from 17 percent to 24 percent of total credit during the program.
- Banks’ liquidity and lending:
  - Liquidity coverage ratio: around 45 percent of deposits.
  - Lending rates: fell by 34 basis points (y/y) in 2016.
  - ROAA (return on average assets): 0.4 percent.
  - Provisions for impaired assets increased; at 54 percent of non-performing loans (NPLs), they are relatively low.
- Asset quality:
  - NPL ratio decreased from a peak of 13.8 percent of gross loans in 2013 to 6.7 percent (and from 11.3 to 3.9 percent of GDP).
- Capital adequacy:
  - Average CAR: about 14 percent.
  - Average T1R: about 12.5 percent.
  - Both comfortably above the 8 percent regulatory minimum.

### Public debt, debt restructuring, and domestic debt management
- Restructuring progress:
  - Grenada has restructured 85 percent of the stock of restructurable debt.
  - Restructuring of all Paris Club debt completed with agreements with Russia and the United Kingdom; discussions with Algeria progressed.
  - Domestic restructurings include Petrocaribe Grenada, two domestic banks, and large portions of a bond; government guaranteed debt restructuring completed.
- Public debt stock: fell to US$866 million, or 83.4 percent of GDP at end-December 2016, compared to 91.7 percent of GDP at end-2015.
- T-bill market and interest rates:
  - Reservation yield lowered from 6 to 4 percent.
  - First auction under new approach in January resulted in a record yield of 2.4 percent against 4.5 percent a year earlier.
- Deposits and interest:
  - Deposits equivalent to 6.2 percent of GDP at end-January, earning an average interest rate of 0.9 percent.
- Recommendation noted by staff: pace of debt reduction could be speeded up, beginning with more costly privately placed T-bills.

### Program performance and fiscal outcomes (2016 and program period)
- Quantitative performance:
  - All end-December performance criteria were met for the Sixth Review.
  - Primary surplus in 2016: 5.4 percent of GDP, exceeding the adjusted quantitative PC by a significant margin due to higher-than-projected revenues and continued expenditure restraint.
- Fiscal adjustment over ECF-supported program (2014-2016):
  - Total fiscal adjustment amounted to 9.6 percent of GDP (9.1 percent excluding grants).
  - Adjustment exceeded original program intentions by 1.5 percent of GDP.
- Reclassification under new Chart of Accounts (CoA):
  - Reclassification shifted 3.5 percent of GDP of spending from capital to non-interest current expenditure.
- Public wage bill and employment:
  - Comparability affected by CoA reclassification; under old CoA public wage bill and employment were lower than monitoring targets due to attrition policy.
- Social programs:
  - SEED program disbursements fell short of the December indicative target by EC$0.4 million (US$150,000) in late 2016.
  - New beneficiary information system operational since Q3 2016.
- Other fiscal facts:
  - Budget prepared under new CoA contains CBI-related grant projections from the National Transformation Fund (NTF) of EC$32.4 million.
  - Contracting of new non-concessional external debt limited to financing from the Caribbean Development Bank within program envelope.
  - No new budget arrears or external arrears accumulated (outside of debt under negotiation).

### Structural reforms and institutional measures
- Structural benchmarks and deliverables:
  - Quarterly debt statistics bulletin published by end-December 2016 and again at end-March 2017 (with improvements).
  - CBI statistics for 2016 and Q1 2017 published.
  - Human resource registry (end-March benchmark) prepared by end-March with pilots completed; processes for backup, archive, and payroll consistency established.
  - Public Sector Management Reform Strategy finalized and approved by Cabinet in April (slight delay); four pillars include re-engineering the public service, strategic human resource management, wage bill reform, and an integrated IT platform. Timeline for consultation and phased implementation starting 2017 and concluding by 2019.
  - Continuous structural benchmarks met; remaining benchmarks met (one with delay) and implementation ongoing.

### 2017 fiscal outlook, wage settlement, and budgetary assumptions
- Wage settlement:
  - Unions agreed in March to wage increases of 3, 3, and 4 percent respectively for the triennium 2017-2019.
  - Increase estimated at EC$6.5m in 2017 and would yield a wage bill equivalent to 8.7 percent of GDP.
  - Staff baseline incorporates:
    - salary increment deferred from 2015 of EC$3.4 million and increments due in 2017 of EC$1.1 million;
    - wage increases of 3, 3, and 4 percent respectively from 2017-2019;
    - maintenance of controls on hiring by the DPA;
    - wage and fringe benefits lump-sum payment of EC$5.4 million (0.2 percent of GDP) covering 2014-2016.
- Public wage bill projection (2017, EC$m):
  - a. Wages & Salaries: 217.2 (2016) → 222.9 (2017)
    - o/w increments paid in December 2016 for 2014: 1.8
    - o/w wage increase for 2017: 6.5
    - o/w increment for 2017: 1.1
  - b. Increment outstanding for 2015: 3.4
  - c. Personnel allowances: 23.2 → 24.9
  - d. Lump sum payment negotiated for 2014-16: 5.4
  - Total wage bill (a+b+c+d): 240.4 → 256.6
  - % of GDP: 8.6% → 8.7%
- Budget capital spending and grants:
  - Budget assumes capital grants of 4.3 percent of GDP; staff use a more conservative estimate of 3.4 percent of GDP.
  - Controls: capital expenditures will not be undertaken until full financing secured.
- Tax policy changes and revenue impact:
  - Personal income tax (PIT) rate on annual income between EC$36,000 to EC$60,000 reduced from 15 to 10 percent.
  - Income tax on pensions removed.
  - Price of LPG gas reduced by 5 percent.
  - Staff estimated combined loss of EC$3.8 million, or 0.13 percent of GDP, from PIT reduction and removal on pensions.
  - PIT receipts for first two months higher than projected, suggesting wage increases in SOEs and private sector could offset losses.

### Arrears regularization and membership fees
- Negotiations underway with three bilateral creditors and commercial creditors to resolve remaining external arrears (Algeria, Libya, and Trinidad and Tobago).
- Authorities have reached agreement with some regional organizations to restructure obligations or established time-bound repayment plans; payments starting in 2017 to be completed by 2022.
- Payments made to each of the seven organizations with largest overdues, representing approximately 80 percent of outstanding overdues.

### Sustainability, medium-term outlook, and risks
- Debt and outlook:
  - By end-2017, public debt to GDP expected to decrease by 36 percentage points to around 72 percent.
    - Nominal GDP growth contributed about 50 percent of this decline.
    - Fiscal consolidation and debt restructuring contributed about 25 percent each.
  - Public debt expected to decline below 55 percent of GDP by 2020, assuming appropriate policies and only concessional borrowing.
  - External debt risk rating assessed to remain “in distress” due to unresolved arrears to external creditors.
- Growth projection:
  - Annual growth projected at 2.5 percent over the medium term, around estimated potential.
- Baseline drivers and assumptions:
  - Adherence to the new fiscal framework to produce higher public savings and restrain domestic demand.
  - External demand in 2017 expected to slow further as tourist arrivals from the United Kingdom moderate.
  - Increases in hotel rooms and new flight connections to the U.S., together with a slowdown in construction-related imports, will support gradual contraction in the current account deficit.
  - Structural reforms approved during the program expected to support growth and close the output gap towards the end of the forecast period.
- Contingency: Mandatory repurchase claim by Grenada Private Power (GPP)
  - GPP recently demanded government repurchase its shares in Grenlec within 30 days at an estimated price of EC$177 million (6 percent of GDP).
  - Staff uncertain about the estimated value or government’s legal recourse; if debt financed, public debt would not fall below 55 percent of GDP by 2020 unless deposits drawn down or a strategic investment partner found.
- Risks to outlook:
  - Upside sources: stronger US growth, hardening of U.S. foreign policy stance towards other destinations, higher CBI and FDI inflows from increased investor confidence.
  - Downside risks: uncertainty associated with U.S. immigration and trade policies, unforeseen forces in advanced economies hurting tourism demand or CBI revenues, hurricanes, possible fiscal policy slippages, fiscal contingencies from contractual issues with the monopoly energy provider or foreign tourism operator, unforeseen costs related to reform of the public sector pension system.

*International Monetary Fund — Country Report (selected excerpts).*

### introduction of a national health insurance scheme.

### introduction of a national health insurance scheme.

### Overview and actuarial findings
- The national insurance scheme (NIS) is due for reform. Recent actuarial reviews show that current revenues are not sufficient to pay for benefits going forward and assets will be depleted by 2035.
- Pension reform of the public sector should be undertaken in a manner consistent with any planned reforms of the national insurance scheme.
- Fiscal contingencies are present on the horizon related to various contractual issues and uncertainty about the costs of reform of the pension system and national health insurance scheme.

### Fiscal and macroeconomic context influencing NIS reform
- Success of reforms will hinge on sustained implementation of the fiscal framework and continued efforts to raise productivity.
- Policy vigilance is needed to safeguard gains, contain wage and election-related spending pressures, and push through structural reforms to strengthen competitiveness.
- Adherence to the Fiscal Responsibility Act (FRA) and full implementation of the governance and accountability framework for fiscal policy and public financial management are emphasized as priorities.

### Risks to sustainability and buffers
- Full debt sustainability is not yet secured and risks persist; public debt ratio is still high given the starting point in 2013.
- Grenada is vulnerable to shocks including natural disasters, swings in tourism markets, commodity price shifts, and potential volatility in CBI revenues—heightening the importance of lower debt and higher reserve buffers to mitigate shocks.
- Domestic fiscal risks include uncertainty about the costs of reform of the pension system and national health insurance scheme.

### Policy recommendations related to NIS and social protection
- Undertake NIS reform informed by actuarial reviews showing current revenues insufficient and assets projected to be depleted by 2035.
- Design pension reform of the public sector in a manner consistent with planned reforms of the NIS.
- Maintain spending discipline and prudent management of CBI inflows while strengthening revenue administration and compliance to preserve fiscal space for social protection reforms.
- Expand the improved eligibility mechanism (designed by the authorities and the World Bank) to other areas of social assistance where eligibility criteria can be defined, to better target social transfers.
- Monitor and limit fiscal contingent liabilities by:
  - Ensuring the Fiscal Responsibility Oversight Committee is established and operational as stipulated in the FRA, with responsibilities for monitoring compliance and raising government accountability.
  - Strengthening recording and monitoring of financing and debt statistics to better assess contingent liabilities associated with social insurance reform.

### Implementation sequencing and institutional actions
- Prioritize establishing the Fiscal Responsibility Oversight Committee and providing it with requisite support to fulfill monitoring and accountability functions.
- Re-activate and possibly redesign the SOE Advisory Committee to ensure appropriate strategic guidance on SOE reforms and to minimize fiscal risks that could compete with resources for NIS reform.
- Strengthen public financial management practices and debt management systems developed over the past three years to secure fiscal sustainability while undertaking NIS reforms.

### Key statistics and timelines (as reported)
- Actuarial review finding: assets will be depleted by 2035.
- Youth unemployment is around 40 percent—relevant for labor market implications of social protection policy and fiscal space.
- Public debt targets and fiscal rules referenced: public debt-to-GDP target of 55 percent; expenditure rule of 2 percent real expenditure growth cap; wage bill not to exceed 9 percent of GDP.
- Program targets referenced: ECF-supported program targets 3.5% primary surplus; debt-stabilizing primary balance estimated at 1 percent of GDP until the public debt-to-GDP target of 55 percent is reached.

*Source: cr17131 - introduction of a national health insurance scheme.*

### 1.  Multilateral247.126.627.1280.031.028.5287.933.227.7

### 1.  Multilateral247.126.627.1280.031.028.5287.933.227.7

### External and Domestic Arrears
- Total arrears (selected years / entries):
  - 83.1 US$mln (33.1% of GDP)
  - 116.2 US$mln (12.7% of GDP)
  - 51.3 US$mln (7.8% of GDP)
  - 59.1 US$mln (6.0% of GDP)
  - 55.7 US$mln (5.4% of GDP)
  - 61.1 US$mln (6.2% of GDP)
  - 45.5 US$mln (4.5% of GDP)
  - 49.9 US$mln (5.1% of GDP)
- External arrears (selected entries):
  - 45.1 US$mln (22.2% of GDP)
  - 67.3 US$mln (7.4% of GDP)
  - 45.3 US$mln (3.4% of GDP)
  - 48.6 US$mln (4.9% of GDP)
  - 36.0 US$mln (3.9% of GDP)
  - 39.8 US$mln (4.0% of GDP)
  - 33.9 US$mln (3.2% of GDP)
  - 37.1 US$mln (3.8% of GDP)
- External arrears by creditor type (selected entries):
  - Bilateral arrears: 14.7 US$mln (1.5% of GDP); 16.2 US$mln (1.8%); 15.4 US$mln (2.9%); 18.3 US$mln (1.9%); 14.0 US$mln (3.4%); 17.4 US$mln (1.8%); 12.0 US$mln (2.7%); 14.6 US$mln (1.5%)
  - Paris Club: 3.8 US$mln (0.4%); 4.3 US$mln (0.5%); 4.8 US$mln (0.9%); 5.7 US$mln (0.6%); 1.4 US$mln (0.5%); 1.9 US$mln (0.2%); 0.0 US$mln (0.0%); 0.0 US$mln (0.0%)
  - Non-Paris Club (selected): 10.8 US$mln (1.0%); 11.9 US$mln (1.3%); 10.6 US$mln (2.0%); 12.6 US$mln (1.3%); 12.6 US$mln (2.9%); 15.5 US$mln (1.5%); 12.0 US$mln (2.7%); 14.6 US$mln (1.4%)
  - Unpaid contributions to organizations: 23.9 US$mln (0.0% of GDP entry appears anomalous in table)
- Domestic arrears and budget expenditure arrears (selected entries):
  - Budget expenditure arrears: 37.9 US$mln (10.9% of GDP); 48.9 US$mln (5.4%); 6.1 US$mln (4.4%); 10.5 US$mln (1.1%); 19.7 US$mln (1.6%); 21.3 US$mln (2.2%); 11.5 US$mln (1.3%); 12.8 US$mln (1.3%)
  - Supplier arrears: 29.2 US$mln (0.0% or 3.2% entries depending on year)
  - Domestic debt under restructuring (mem. item): 8.7 US$mln (10.9% of GDP) in one entry

### External Debt and Commercial Debt
- Commercial debt (table header): 202.4; 21.8; 22.2; 192.6; 21.3; 19.6; 178.5; 20.6; 17.2 (units: US$mln per table context)
- US$ 2040 Bonds 5/19 (selected entries): 3.5; 20.9; 21.2; 183.7; 20.3; 18.7; 170.2; 19.6; 16.4
- Other Bonds (selected entries): 8.9; 1.0; 1.0; 8.9; 1.0; 0.9; 8.3; 1.0; 0.8
- External arrears on interest (selected entries): 22.2; 2.4; 2.4; 3.4; 0.4; 0.3; 3.9; 0.4; 0.4

### Balance of Payments and Projections (2014–2022)
- Current account (US$mln): 
  - 2014: -159.9
  - 2015: -171.9
  - 2016: -151.3
  - 2017: -168.6
  - 2018: -171.3
  - 2019: -178.5
  - 2020: -180.2
  - 2021: -188.2
  - 2022: -204.1
- Trade balance for goods and services (US$mln):
  - 2014: -148.6; 2015: -149.9; 2016: -128.7; 2017: -156.6; 2018: -160.7; 2019: -168.1; 2020: -171.0; 2021: -180.5; 2022: -197.7
- Exports of goods and services (US$mln): 254.7; 267.6; 300.9; 307.4; 324.7; 342.7; 361.3; 380.8; 402.0
  - Tourism (US$mln): 160.5; 172.1; 215.9; 211.2; 223.3; 235.5; 248.0; 261.2; 275.2
  - Nutmeg (US$mln): 6.1; 4.9; 3.9; 3.8; 3.9; 4.0; 4.1; 4.2; 4.3
  - Student receipts (US$mln, Living expenses of international students at St Georges University): 26.3; 26.8; 60.0; 62.1; 63.8; 65.5; 67.2; 69.0; 70.9
- Imports of goods and services (US$mln): 403.2; 417.5; 429.6; 464.0; 485.4; 510.8; 532.3; 561.3; 599.7
  - Mineral fuels (US$mln): 77.5; 46.0; 40.8; 52.7; 56.5; 60.0; 63.9; 68.4; 73.4
  - Foodstuffs (US$mln): 77.4; 70.3; 70.7; 73.3; 74.2; 76.0; 77.7; 79.8; 82.0
- Net income (US$mln): -33.1; -39.6; -49.6; -38.1; -35.6; -35.4; -35.9; -36.2; -36.7
- Current transfers (US$mln): 21.7; 17.5; 27.1; 26.1; 25.1; 25.0; 26.8; 28.5; 30.3
- Capital and financial account (US$mln): 152.4; 111.9; 148.1; 162.7; 184.3; 189.9; 190.4; 196.7; 212.7
  - Capital transfers (US$mln): 111.9; 110.5; 74.6; 137.3; 91.5; 94.6; 95.9; 95.5; 95.5
    - o.w. debt forgiveness (US$mln): 17.2; 48.4; 4.5; 49.5; 0.0; 0.0; 0.0; 0.0; 0.0
  - Foreign direct investment (US$mln): 37.7; 97.4; 86.5; 93.8; 98.8; 109.1; 114.2; 119.8; 125.6
  - Public sector borrowing (net, US$mln): 40.1; -38.3; -31.0; -68.3; -13.3; -12.6; -19.6; -18.3; -22.4
  - NFA of commercial banks (US$mln): -62.2; -69.9; -32.9; -15.7; -8.0; -8.2; -8.9; -9.8; -10.3
  - Other private flows (US$mln): 25.0; 12.2; 50.9; 15.7; 15.4; 6.9; 8.8; 9.6; 24.3
    - o/w Petrocaribe (US$mln): 19.8; 9.1; 7.0; 8.9; 9.2; 9.4; 9.7; 9.9; 10.2
- Overall balance (US$mln): 36.2; 23.5; -3.2; -5.9; 13.0; 11.4; 10.2; 8.5; 8.9
- Financing items (selected):
  - Change in ECCB NFA: -22.9; -30.3; -3.8; -2.5; -8.4; -8.7; -8.4; -6.0; -6.4
  - Net use of Fund resources (US$mln): 0.0; 5.6; 5.6; 2.7; 0.0; 0.0; 0.0; 0.0; 0.0
  - Financing gap / Exceptional financing (US$mln): 0.0; 30.6; 15.6; 12.7; 0.0; 0.0; 0.0; 0.0; 0.0
- Memorandum items:
  - Gross external debt (percent of GDP): 143.0; 135.3; 129.0; 117.5; 113.0; 109.4; 105.2; 102.9; 100.7
  - External public and publicly guaranteed debt (percent of GDP): 67.7; 62.6; 57.9; 48.3; 44.8; 42.2; 38.9; 34.8; 32.6
  - Foreign liabilities of private sector (percent of GDP): 75.3; 72.7; 71.1; 69.2; 68.2; 67.3; 66.3; 68.1; 68.1
  - Nominal GDP (US$mln): 911.6; 984.1; 1,037.9; 1,091.9; 1,141.5; 1,192.2; 1,247.6; 1,308.6; 1,372.5

### Monetary Sector and Summary Accounts (2015–2022, EC$ unless noted)
- Net foreign assets (EC$mln): 852.5; 951.4; 1,000.6; 1,045.9; 1,094.5; 1,147.2; 1,196.0; 1,247.2
  - ECCB net imputed reserves (EC$mln): 509.0; 519.1; 525.8; 549.5; 576.1; 604.7; 627.0; 650.4
  - Commercial banks (net) (EC$mln): 343.5; 432.3; 474.8; 496.4; 518.4; 542.5; 569.0; 596.8
- Net domestic assets (EC$mln): 1,269.9; 1,288.6; 1,355.9; 1,417.7; 1,478.5; 1,545.3; 1,628.1; 1,714.9
  - Credit to private sector (EC$mln): 1,552.4; 1,616.2; 1,659.9; 1,735.3; 1,812.4; 1,896.5; 1,989.2; 2,086.4
  - Public sector credit, net (EC$mln): -232.3; -229.8; -242.4; -254.5; -266.8; -272.1; -277.9; -284.0
    - Central government (EC$mln): -65.9; -28.3; -35.8; -43.4; -50.9; -51.0; -51.1; -51.2
    - National Insurance Scheme (EC$mln): -92.0; -97.0; -102.1; -106.7; -111.4; -116.6; -122.3; -128.3
- Broad money (M2) (EC$mln): 2,122.4; 2,240.0; 2,356.5; 2,463.6; 2,573.0; 2,692.5; 2,824.1; 2,962.1
  - Money (EC$mln): 543.0; 612.9; 644.8; 674.1; 704.0; 736.7; 772.7; 810.5
  - Quasi-money (EC$mln): 1,579.4; 1,627.1; 1,711.7; 1,789.5; 1,869.0; 1,955.7; 2,051.3; 2,151.6
- Annual percentage changes (selected):
  - Net foreign assets: 46.4; 11.6; 5.2; 4.5; 4.6; 4.8; 4.3; 4.3
  - Broad money (M2): 5.2; 5.5; 5.2; 4.5; 4.4; 4.6; 4.9; 4.9
  - Credit to private sector: -3.8; 4.1; 2.7; 4.5; 4.4; 4.6; 4.9; 4.9
- In percent of GDP (selected):
  - Broad money (M2): 79.9 for 2015–2022 entries
  - Private sector credit, net: 58.4; 57.7; 56.3; 56.3; 56.3; 56.3; 56.3; 56.3
  - Public sector credit, net: -8.7; -8.2; -8.2; -8.3; -8.3; -8.1; -7.9; -7.7
- Interest rates (percent per year):
  - ECCB policy rate: 6.5; 6.5 (table shows repeated entry)
  - US policy rate: 0.1; 0.4
  - Time deposit rate: 1.6; 1.3
  - Demand deposit rate: 0.3; 0.1
  - Weighted average lending rate: 8.7; 8.4

### Indicators of Capacity to Repay the Fund (2014–2022)
- Existing Fund credit (stock):
  - In percent of quota: 174.3; 180.8; 131.3; 110.1; 89.0; 76.8; 68.5; 57.4; 42.8
  - In millions of SDRs: 20.4; 21.2; 21.5; 18.1; 14.6; 12.6; 11.2; 9.4; 7.0
  - In millions of US$: 29.7; 29.3; 29.0; 24.3; 19.7; 17.0; 15.1; 12.7; 9.5
  - In percent of GDP: 3.3; 3.0; 2.8; 2.2; 1.7; 1.4; 1.2; 1.0; 0.7
- Proposed Extended Credit Facility (stock) (projections):
  - In percent of quota: 0.0; 0.0; 0.0; 12.2; 12.2; 12.2; 12.2; 12.2; 11.0
  - In millions of SDRs: 0.0; 0.0; 0.0; 2.0; 2.0; 2.0; 2.0; 2.0; 1.8
  - In millions of US$: 0.0; 0.0; 0.0; 2.7; 2.7; 2.7; 2.7; 2.7; 2.4
  - In percent of GDP: 0.0; 0.0; 0.0; 0.2; 0.2; 0.2; 0.2; 0.2; 0.2
- Outstanding Fund credit (end of period):
  - In percent of quota: 174.3; 180.8; 131.3; 122.3; 101.2; 89.0; 80.7; 69.6; 53.8
  - In millions of SDRs: 20.4; 21.2; 21.5; 20.1; 16.6; 14.6; 13.2; 11.4; 8.8
  - In millions of US$: 29.7; 29.3; 29.0; 27.0; 22.3; 19.7; 17.8; 15.4; 11.9
  - In percent of exports of goods and services: 11.7; 11.0; 9.6; 8.8; 6.9; 5.7; 4.9; 4.0; 3.0
  - In percent of debt service: 24.5; 27.2; 53.1; 48.0; 37.7; 33.6; 32.5; 27.6; 20.1
- Fund obligations based on existing credit (selected):
  - Repurchases and repayments (US$mln): 1.8; 3.2; 3.6; 3.2; 3.5; 2.0; 1.4; 1.8; 2.4
- Memorandum items:
  - Exports of goods and services (US$mln): 254.7; 267.6; 300.9; 307.4; 324.7; 342.7; 361.3; 380.8; 402.0
  - Debt service (US$mln): 121.3; 107.7; 54.6; 56.3; 59.2; 58.5; 54.8; 55.8; 59.1
  - GDP (US$mln): 911.6; 984.1; 1,037.9; 1,091.9; 1,141.5; 1,192.2; 1,247.6; 1,308.6; 1,372.5
  - Imputed Net International Reserves (US$mln): 158.3; 188.5; 192.3; 194.8; 203.5; 213.4; 224.0; 232.2; 240.9
  - Quota (SDR mln): 11.7; 11.7; 16.4; 16.4; 16.4; 16.4; 16.4; 16.4; 16.4

### Financial Sector Indicators (selected, various years)
- Balance sheet (percent or absolute as reported):
  - Total assets (2010–2016): 136.0; 137.2; 128.8; 122.4; 114.8; 113.2; 112.2
  - Gross loans (2010–2016): 96.2; 95.8; 91.6; 82.0; 71.4; 62.7; 58.3
  - NPLs (o/w) (2010–2016): 7.3; 9.0; 10.8; 11.3; 10.4; 6.2; 3.9
  - Provisions for NPLs: 2.1; 2.5; 3.6; 4.0; 4.1; 2.7; 2.0
  - Deposits: 115.1; 114.9; 108.5; 107.1; 104.1; 102.5; 99.2
  - Capital: 2.4; 2.4; 2.4; 2.2; 2.1; 1.9; 1.8
- Profitability and efficiency (selected ratios):
  - Net Interest Income/Total Income: 54.1; 50.6; 51.5; 54.5; 51.4; 58.0; 58.6
  - Operating Expenses/Total Income: 45.6; 46.4; 43.0; 58.5; 67.4; 52.8; 59.3
  - ROAE: 0.3; 2.3; -2.3; 0.8; -3.7; 8.0; 4.9
  - ROAA: 0.1; 0.3; -0.1; -0.3; -0.1; 0.8; 0.5
- Capital adequacy (selected):
  - CAR: 16.5; 15.1; 13.9; 13.6; 13.0; 12.2; 13.9
  - T1R: 15.0; 13.6; 13.2; 12.2; 11.7; 10.2; 11.4
- Asset quality and liquidity (selected):
  - NPL Ratio: 7.6; 9.4; 11.8; 13.8; 14.6; 10.0; 6.7
  - Provisions/NPL: 28.6; 28.4; 33.2; 35.8; 39.3; 42.9; 49.9
  - Liquid Assets/Total Assets: 20.7; 22.9; 22.9; 27.7; 32.8; 37.5; 40.8
  - Liquid Assets/Total Deposits: 24.4; 27.4; 27.2; 31.7; 36.2; 41.4; 46.1

### Schedule of Disbursement Under the Extended Credit Facility (SDR millions / percent of quota)
- June 26, 2014: 2.040 SDR million (12.439 percent of quota) — Executive Board approval of the arrangement
- September 30, 2014: 2.000 SDR million (12.195 percent of quota) — Observance of continuous and end-June 2014 performance criteria and completion of the first review
- March 31, 2015: 2.000 SDR million (12.195 percent of quota) — Observance of continuous and end-December 2014 performance criteria and completion of the second review
- September 30, 2015: 2.000 SDR million (12.195 percent of quota) — Observance of continuous and end-June 2015 performance criteria and completion of the third review
- March 31, 2016: 2.000 SDR million (12.195 percent of quota) — Observance of continuous and end-December 2015 performance criteria and completion of the fourth review
- September 30, 2016: 2.000 SDR million (12.195 percent of quota) — Observance of continuous and end-June 2016 performance criteria and completion of the fifth review
- March 31, 2017: 2.000 SDR million (12.195 percent of quota) — Observance of continuous and end-December 2016 performance criteria and completion of the sixth review
- Total: 14.04 SDR million (85.61 percent of quota)
- Note: Quota increased from SDR 11.7 million to SDR 16.4 million, effective March 23, 2016.

### Financial, Fiscal and Business-Oriented Legal Reforms (selected entries and status)
- Fiscal Policy Framework and Public Financial Management Reforms:
  - Fiscal Responsibility Act 2015 and Fiscal Responsibility (Amendment) Act 2016 — entered into force; program-related noted
  - Public Debt Management Act 2015 and Public Debt Management (Amendment) Act 2016 — entered into force; program-related
  - Public Finance Management Act 2014, 2015 — entered into force; program-related
  - Public Procurement and Disposal of Property Act 2014 — entered into force; program-related
- Tax Administration and Tax Incentive Reforms:
  - Income Tax (Amendment) Act 2014; Income Tax (Amendment) Act 2015 and 2016 — entered into force; program-related
  - Value Added Tax (Amendment) Act 2014 and Order 2014; Value-Added Tax (Amendment) Act 2015 and 2016 — entered into force; program-related
  - Tax Administration Act 2015 — entered into force; program-related
  - Mutual Exchange of Information on Taxation Matters (Amendment) Act 2014, 2016 — entered into force
- Business Environment; Energy and Labor Reforms:
  - Investment Act 2014; Investment (Amendment) Act 2016; Investment (Priority Sectors) Regs. — entered into force; program-related
  - Property Transfer Tax (Amendment) Act 2015 and 2016 — entered into force; program-related
  - Bankruptcy and Insolvency Act 2016 — entered into force
  - Electricity Supply Act 2016 — entered into force
- Financial Reforms:
  - Banking Act 2015 — entered into force
  - Eastern Caribbean Asset Management Corporation Act 2016 — entered into force
  - Eastern Caribbean Central Bank (Amendment of Schedule) Order 2016 — entered into force
- Governance and Security:
  - Integrity in Public Life (Amendment) 2015 and 2016 — entered into force
  - Electronic Crimes (Amendment) Act 2014; Proceeds of Crime (Amendment) Act 2014 — entered into force
- Implementation notes:
  - Entries marked “” indicate entered into force; “+” indicates approved by Parliament but not entered into force; “**” indicates applicable and pending.

### Quantitative Program Targets (selected)
- Performance criteria (selected, EC$ mn where indicated):
  - A. Cumulative floor on central govt. primary balance (EC$ mn) (from end-December of previous year): examples include -28 (Act.Status), 37 (Met), 58 (Met), 84 (Met), 94 (Met), 95 (Met), 148 (Met)
  - B. Cumulative ceiling on central govt. primary spending (EC$ mn): examples include 630 (Act.Status), 281 (Met), 601 (Met), 285 (Met), 526 (Met), 604 (Met), 603 (Met)
  - C. Ceiling on stock of central govt. budget expenditure arrears (EC$ mn): 79 (Met), 53 (Met), Not met, 0 (Met), 0 (Met), 0 (Met), 0 (Met)
  - D. Ceiling on accumulation of external debt arrears (continuous): 0 (Met) entries
  - E. Ceiling on contracting of non-concessional external debt by the central govt. (continuous, US$ mn): 10 (Not met), 0 (Met), 0 (Met), 0 (Met), 15 (Met), 0 (Met), 25 (Met)
- Indicative targets and monitoring (selected):
  - F. Cumulative ceiling on net change in central govt. and central govt. guaranteed debt (EC$ mn): 48 (Met), -30 (Met), -67 (Met), -85 (Met), 15, -5, -99 (Met)
  - G. Floor on social spending by central govt. (EC$ mn): 11.4 (Not met); 5.4 (Not met); 11.8 (Not met); 7.0 (Met); 14.0; 14.0; 13.6 (Not met)
  - H. Wage bill target (EC$ mn): 219 (Met); 109 (Met); 215 (Met); 105 (Met); 219; 219; 216 (Met)
  - I. Public employment target (nominal number): 7,515 (Met); 7,096 (Met); 7,003 (Met); 6,810 (Met); projected nominal targets include 7,000; 7,000; 6,758 (Met)
- Memorandum item:
  - Projected new concessional external debt (US$ mn): 8; 10; 10

*Sources: Grenadian authorities and Fund staff estimates.*

### 1.  Reach agreement with each organization to restructure overdue membership obligations,

### 1.  Reach agreement with each organization to restructure overdue membership obligations,

### Payment plan and execution (membership contributions)
- Objective: Reach agreement with each organization to restructure overdue membership obligations, or present a time-bound plan to clear overdue obligations with payments starting in 2017 and being completed by 2022.
- Objective: Make at least one payment to each of the seven organizations with the largest overdue amounts.
- Table of Membership Contributions Outstanding and Payment Plan (In millions of EC Dollars)
  - TOTAL outstanding: 58.85
  - Payments Jan-April 2017: 8.41
  - 1 University of the West Indies — 20.03; Payments Jan-April 2017: 2.00; Payment terms: Agreed March 2017. Quarterly payments for 8 years commencing 2018.
  - 2 Regional Security System (RSS) — 9.35; Payments Jan-April 2017: 1.87; Payment terms: Agreed March 2017. Quarterly payments for 10 years commencing 2018.
  - 3 OECS Secretariat — 9.12; Payments Jan-April 2017: 2.00; Payment terms: Agreed March 2017. Monthly payments for 8 years commencing 2018.
  - 4 Caribbean Community (CARICOM) — 5.21; Payments Jan-April 2017: 0.50; Payment terms: No agreement. Government will pay quarterly for 5 years commencing 2018.
  - 5 Eastern Caribbean Supreme Court — 3.38; Payments Jan-April 2017: 0.25; Payment terms: Agreed March 2017. Quarterly payments for 7 years commencing 2018.
  - 6 Caribbean Institute for Meteorology & Hydrology — 2.20; Payments Jan-April 2017: 0.31; Payment terms: Agreed April 2017. Annual payments for 5 years commencing 2017.
  - 7 United Nations Development Programme (UNDP) — 1.00; Payments Jan-April 2017: 0.17; Payment terms: No agreement. Government will pay annually for 5 years commencing 2018.
  - 8 International Civil Aviation Organization (ICAO) — 0.68; Payments Jan-April 2017: 0.18; Payment terms: Agreed March 2017. Annual payments for 10 years commencing 2018.
  - Others (consists of 53 organizations) — 7.88; Payments Jan-April 2017: 1.14; Payment terms: Quarterly payments for 6 years commencing 2017.
- Note: The stock of contributions outstanding to 8 of the organizations are 86.6 percent of the total at end-2016.
- Source for table: Grenadian authorities.

### Structural benchmarks and program implementation (selected items)
- Prior Actions for the Sixth Review: Met.
- Selected structural benchmarks and milestones (status and deadlines as reported)
  - Parliamentary approval of the revised Investment Promotion Act — November 30, 2014 — Met.
  - Parliamentary approval of 2015 budget consistent with program commitments — December 31, 2014 — Not met, corrective action taken.
  - Parliamentary approval of 2016 Budget consistent with program commitments and Fiscal Responsibility Legislation — December 31, 2015 — Not met, corrective action taken.
  - Parliamentary approval of fiscal adjustment measures for 2016 — December 31, 2015 — Met.
  - Parliamentary approval of 2017 Budget consistent with parameters of the FRA and realistic CBI program-related revenue projections — December 31, 2016 — Met.
  - Parliamentary approval of the revised PFM legislation — August 31, 2014 — Met.
  - Cabinet approval of a strategic plan for the statutory bodies — October 31, 2014 — Met in February 2015.
  - Parliamentary approval of the revised legislation on tax incentive regime — November 30, 2014 — Met in June 2015.
  - Parliamentary approval of the legislation for the fiscal policy framework — December 31, 2014 — Met in June 2015.
  - Minister of Finance approval of regulations for the National Transformation Fund — February 28, 2015 — Met in August 2015.
  - Parliamentary approval of a public debt management law — March 31, 2015 — Met in June 2015.
  - Minister of Finance approval of regulations for the revised PFM legislation — June 30, 2015 — Met in September 2015.
  - Publication of all citizenship-by-investment statistics on a quarterly basis — Quarterly, beginning July 31 — Met.
  - Parliamentary approval of a tax administration act — November 30, 2015 — Met in February 2016.
  - Implementation of the new Chart of Accounts for the 2016 Budget — December 31, 2015 — Not met, action taken.
  - Establishment and operationalization of the LMTS and Small Taxpayers Service Units — December 31, 2015 — Met in January 2016.
  - Signing into force of the new tax incentive regime and Investment Act 2014 — December 31, 2015 — Met.
  - Cabinet approval of a strategic plan to modernize the public sector — March 31, 2016 — Not met, rephased and revised.
  - Parliamentary approval of the revised GIDC Act, with amendments — June 30, 2016 — Met in November 2016.
  - Parliamentary approval of a new Grenada Labor Code — August 31, 2016 — Met in November 2016.
  - Cabinet approval of a focused reform plan to manage the public sector wage bill — September 30, 2016 — Not met, rephased and revised.
  - Publication of the debt statistics bulletin on a quarterly basis — Quarterly, beginning December 31, 2016 — Met.
  - Cabinet approval of a comprehensive public sector wage bill management reform strategy — March 31, 2017 — Met in April.
  - Complete and make functional the human resource registry for the public service — March 31, 2017 — Met.

### Debt Sustainability Assessment and macro framework
- DSA rating: Grenada’s DSA rating remains “in debt distress”.
- Key DSA projections and developments:
  - Present value of total PPG debt expected to fall to 61.8 percent of GDP in 2017 from 69.8 percent in 2016.
  - Present value of public external debt is expected to fall below Grenada’s country specific threshold for the first time in years.
  - Only one liquidity indicator (debt service to revenue) is breached for only one year (2017) as compared to three instances at the last review.
  - Due to remaining unresolved arrears to official bilateral creditors, the DSA rating is unchanged from the December 2016 DSA assessment.
- Additional debt-restructuring context and amounts:
  - Having completed debt restructuring with Russia and the United Kingdom in early 2017, the remaining restructurable official debt consists of US$52 million in debt to non-Paris Club official bilateral creditors, for which the authorities are seeking treatment comparable with the agreements with commercial creditors.
  - One external private creditor is seeking payment of its claims through the Grenadian court system; the government is servicing this debt according to: (i) the court judgment on one portion and (ii) the government’s proposed repayment terms.
  - On the domestic front, negotiations have been concluded with Petrocaribe Grenada, with two banks, and with the majority of holders of a domestic bond. The restructuring of government guaranteed debt has also been concluded.
- Macro framework highlights (selected figures from projections table)
  - Non-interest current account balance: historical -18.7; 5th Review -14.7; 6th Review -13.1; 2017-22 projection -14.3; 2023-36 projection -13.7.
  - Real GDP growth (in percent): historical 2.7; 5th Review 2.7; 6th Review 2.5; 2017-22 projection 2.7; 2023-36 projection 2.7.
  - Revenue and grants (percent of GDP): historical 23.6; 5th Review 24.3; 6th Review 26.5; 2017-22 projection 23.2; 2023-36 projection 24.5.
  - Primary (non-interest) expenditure (percent of GDP): historical 24.9; 5th Review 21.6; 6th Review 21.8; 2017-22 projection 24.2; 2023-36 projection 25.5.
  - 2016 Nominal GDP (in million USD): 5th Review 1,029.8; 6th Review 1,037.9.
- Staff assessment: Sustained strong efforts are crucial for fully restoring the sustainability of Grenada’s public debt. The debt restructuring achieved so far, stronger economic growth, and sizeable fiscal adjustment have placed debt dynamics on a downward trajectory, but unresolved arrears and remaining restructurable debt leave risks and the “in debt distress” rating in place.

### Risk matrix highlights relevant to fiscal and debt outcomes
- Risks with High relative likelihood and Short to Medium Term horizon:
  - Retreat from cross-border integration (protectionism) — recommended policy: Carry through with the programmed fiscal adjustment under the FRL and structural reforms to improve productivity and competitiveness.
  - Structurally weak growth in key advanced and emerging economies — recommended policy: Carry through with the programmed fiscal adjustment under the FRL and structural reforms to improve productivity and competitiveness.
  - Zika Virus — Time horizon: Near Term — recommended policy: Raise public awareness and urge proactive prevention measures by tourism facilities (e.g., regular mosquito fogging).
  - Policy and geopolitical uncertainties (U.S. policy two-sided risks, Brexit, major elections in Europe) — recommended policy: Build resilience by carrying through with the programmed fiscal adjustment; proceed with structural reforms to improve external competitiveness; consider regional approach.
- Risk: Higher than expected public sector wage increase and delays in public sector wage bill reforms could push the wage bill above the 9 percent of GDP FRA-mandated ceiling — Relative Likelihood: High — Recommended policy: Agree on reform strategy as per structural benchmark; agree on wage contracts prior to budget completion; carry through with programmed fiscal adjustment and structural reforms.
- Risk: Natural disasters, mainly hurricanes — Relative Likelihood: Medium — Recommended policy: Build buffers by saving receipts from the CBI program as per NTF rules; increase coverage of natural disaster insurance with donor assistance; adhere to the fiscal rules in the FRA; work with World Bank/donors to build resilience to climate change.

*Source: cr17131 - 1.  Reach agreement with each organization to restructure overdue membership obligations, cr17131.pdf*

### 3. The prospects for restoring Grenada’s debt sustainability are subject to downside risks.

### 3. The prospects for restoring Grenada’s debt sustainability are subject to downside risks.

### Baseline scenario and key assumptions
- Baseline assumes strict adherence to the Fiscal Responsibility Act (FRA) and completion of the debt restructuring as soon as possible.
- Public sector debt (sequence as reported): 101.8, 91.7, 83.4, 71.8, 65.8, 60.4, 54.9, 49.8, 46.3, 46.3, 44.2 (percent of GDP).
- Of public sector debt that is foreign-currency denominated (sequence as reported): 67.7, 62.6, 57.9, 48.3, 44.8, 42.2, 38.9, 34.8, 32.6, 30.6, 26.8 (percent of GDP).
- Gross financing need (sequence as reported): 22.3, 17.3, 15.8, 13.7, 11.7, 11.2, 10.2, 10.0, 10.9, 11.7, 9.0 (percent of GDP).
- Key macroeconomic assumptions (real GDP growth, sequence as reported): 7.3, 6.2, 3.9, 2.7, 3.3, 2.5, 2.3, 2.2, 2.5, 2.7, 2.7, 2.5, 2.7, 2.7, 2.7 (percent).
- Average nominal interest rate on forex debt (sequence as reported): 3.0, 3.7, 3.6, 2.7, 0.7, 3.2, 2.9, 2.7, 2.2, 2.5, 2.7, 2.7, 2.1, 1.9, 2.0 (percent).

### Downside risks and shock scenarios
- Historical scenario shows that a return to lax fiscal policies would put public debt quickly back on an unsustainable path.
- The tourism sector is exposed to macroeconomic conditions in advanced economies and to natural disaster risks.
- Customized shock scenarios analyzed:
  - Natural Disaster scenario (Figure A2.I and referenced tables/figures).
  - Shocks to import prices, particularly fuel prices.
  - One-time 30 percent real depreciation (used in bound tests).
  - Increased other debt-creating flows (e.g., 10 percent of GDP increase in 2018 in a bound test).
- Authorities reiterated commitment to the fiscal responsibility law and to concluding the debt restructuring as soon as possible.

### Debt dynamics and key indicators (selected)
- Automatic debt dynamics contribution (sequence as reported): -4.6, -4.1, -1.8, -1.7, -1.1, -1.0, -1.2, -1.2, -1.0, -1.1, -1.2 (percent of GDP).
- Contribution from average real interest rate (sequence as reported): 2.8, 1.9, 1.6, 0.0, 0.5, 0.4, 0.2, 0.2, 0.3, 0.3, 0.1 (percent).
- Contribution from real GDP growth (sequence as reported): -7.4, -6.0, -3.5, -2.1, -1.6, -1.4, -1.5, -1.5, -1.3, -1.2, -1.2 (percent).
- PV of public sector debt (selected series reported): 69.8, 61.8, 56.4, 51.3, 46.3, 42.1, 38.8, 37.7, 37.7 (percent of GDP) (values span projection years shown in the table).
- PV of public sector debt-to-revenue ratio (in percent, selected): 260.2, 233.7, 215.7, 198.1, 180.5, 166.4, 155.5, 151.2, 163.6 (sequence as reported).
- Debt service-to-revenue and grants ratio (in percent, sequence as reported): 86.6, 78.5, 78.7, 68.6, 61.3, 59.6, 57.0, 54.9, 53.1, 42.7, 30.5.

### External debt indicators (selected)
- External debt (nominal) and PPG external debt sequences are reported in Tables A2.2 and A2.4; selected PPG external debt (percent of GDP) projection series in Table A2.4 baseline: 38, 35, 33, 30, 27, 25, 22, 20 (percent).
- PV of PPG external debt (in percent of exports, selected): 152.6, 136.1, 124.3, 114.9, 104.8, 93.3, 86.0, 73.7, 67.6 (percent).
- Debt service-to-exports ratio and PPG debt service-to-exports ratios are reported across historical and projection years (examples: debt service-to-exports ratio values in Table A2.2 show variations including 6.8, 5.7, 5.6, 7.2, 6.5 and higher in earlier years).

### Sensitivity analysis and stress tests (high-level findings)
- Sensitivity analysis covers alternative scenarios A1–A4 and bound tests B1–B5 (Tables A2.3 and A2.4).
- Alternative scenarios include:
  - A1: Real GDP growth and primary balance at historical averages.
  - A2: Primary balance unchanged from 2017.
  - A3: Permanently lower GDP growth.
  - A4: Natural Disaster.
- Bound tests include:
  - B1: Real GDP growth at historical average minus one standard deviation (2018–2019).
  - B2: Primary balance at historical average minus one standard deviation (2018–2019).
  - B3: Combination of B1–B2 using one-half standard deviation shocks.
  - B4: One-time 30 percent real depreciation in 2018.
  - B5: 10 percent of GDP increase in other debt-creating flows in 2018.
- Results indicate:
  - The historical scenario and certain stress tests (e.g., Natural Disaster, one-time large depreciation, weaker primary balances) produce the most adverse outcomes and could reverse gains in debt metrics.
  - Table A2.3 and Table A2.4 report projected PV of Debt-to-GDP, PV of Debt-to-Revenue, and Debt Service-to-Revenue ratios under each scenario and bound test for 2017–2037, showing higher ratios under stress relative to the baseline.

### Policy implications and authorities’ stance
- Restoring and maintaining debt sustainability depends on continued strict fiscal discipline under the FRA and swift implementation of the debt restructuring.
- Key vulnerabilities to manage: exposure of tourism to external shocks, natural disaster risk, and shocks to import/fuel prices.
- Policy priorities implied by the analysis: adherence to the FRA, completion of debt restructuring, contingency planning for natural disasters and fuel price shocks, and measures to safeguard revenues and primary balance improvements.

*Source: IMF staff estimates and projections as presented in "3. The prospects for restoring Grenada’s debt sustainability are subject to downside risks."*

### Annex III. The 2014-17 ECF-Supported Program—A Retrospective

### Annex III. The 2014-17 ECF-Supported Program—A Retrospective

### A. Background
- Two earlier Fund-supported programs had been unsuccessful at restoring fiscal sustainability:
  - The 2006-10 ECF-supported program was completed, but hurricanes, commodity price increases, and the global crisis led to sharp deterioration in fiscal balances and debt was not reduced.
  - The second ECF arrangement went off-track soon after its first review in November 2010 due to policy loosening amid elections and a faltering economy.
- Causes of prior poor performance (ascribed in IMF 2014b) included:
  - Difficulties in forecasting the frequency and impact of major natural and economic shocks.
  - Overoptimistic growth projections.
  - An excessive number of structural reforms that exceeded Grenada’s implementation capacity.
  - Weak program ownership.

### B. The Macro Situation up to 2013
- Internal disequilibrium (2008-13):
  - Annual real GDP contracted on average by 0.7 percent.
  - Negative output gap of about 3 percent of GDP.
  - Unemployment reached 33.5 percent (55 percent for youth).
  - Central government primary and overall deficits increased to 3.7 and 7.1 percent of GDP, respectively.
  - Public debt increased from 84 to 108 percent of GDP.
  - Interest rate – growth differential of 300-400p.p. contributed to adverse automatic debt dynamics.
- Financial accelerator effects:
  - Negative net worth shock for the private sector reduced collateral values and access to bank financing.
  - Bank credit growth all but ceased in 2008-13, amplifying demand declines and output contraction.
- External disequilibrium:
  - External debt increased from 104 to about 151 percent of GDP in 2013.
  - Net foreign assets moved from negative 200 to about 300 percent of GDP (note: text indicates "lowered net foreign assets from negative 200 to about 300 percent of GDP").
  - Banks accumulated foreign liabilities via nonresident deposits and foreign bank borrowing.
- Financing constraints and restructuring:
  - Domestic arrears amounted to 10.7 percent of GDP in 2013.
  - External arrears rose to 15.3 percent of GDP in 2013.
  - Authorities defaulted on external debt obligations and announced a comprehensive debt restructuring plan.

### C. The 2014-17 Extended Credit Facility Arrangement
- Arrangement details:
  - Three-year ECF arrangement equivalent to SDR14.04 million (120 percent of quota, about US$21.9 million).
  - Approved by the IMF Executive Board on June 26, 2014.
  - SDR 2.04 million made available upon Board approval; remainder in six subsequent installments equivalent to SDR 2 million upon successful semi-annual reviews.
- Key objectives:
  - Restore debt sustainability via significant fiscal adjustment (flow imbalances) and comprehensive debt restructuring (stock imbalances).
  - Strengthen the financial sector.
  - Implement ambitious structural reforms to ensure fiscal discipline, regain a medium-term fiscal anchor, and sustain medium-term growth.
- Growth outcomes:
  - Growth under the program averaged about 5 percent, higher than anticipated, driven by strong external demand for tourism and exceptionally strong agriculture production in the first two years.

### Fiscal Adjustment, Revenue and Expenditure Measures
- Size of adjustment:
  - Central government primary balance improved by 9.6 percentage points of GDP in 2013-16.
  - Two thirds of the adjustment were revenue driven.
- Revenue measures implemented:
  - Reducing the personal income tax threshold.
  - Increase in petrol tax rates.
  - Increasing property tax rates.
  - Increasing custom service charges.
  - Broadening the VAT base by eliminating exemptions.
  - Improving tax administration and enforcement.
- Expenditure measures implemented:
  - Freeze of the nominal wage bill and reduction in personnel via strict attrition policy.
  - Reduction in spending on goods and services through savings on utility bills.
  - Freeze in other current spending.
  - Capital expenditure did not contribute to fiscal adjustment.
  - An 80 basis point cumulative increase relates to an increase in social expenditure classified as capital expenditure under the old chart of accounts and aimed to be protected.
- Other contributors:
  - Lower interest expenditure contributed to adjustment, explained by progress on debt restructuring and access to cheaper financing.

### Debt Restructuring and Public Debt Outcomes
- Arrears and clearing:
  - By end-2014, domestic suppliers’ arrears stood at 2.75 percent of GDP, below the program ceiling.
  - All budget expenditure arrears and supplier arrears were cleared by end-2015, including additional arrears to the NIS amounting to 0.4 percent of GDP that were previously unrecorded.
- Reduction in net present value of debt:
  - By late 2015, Grenada reduced the net present value of its debt obligations by about 16 p.p. of GDP.
- Creditor-specific outcomes:
  - Export-Import Bank of Taiwan Province of China agreed to a 50 percent haircut on principal outstanding equal to 1.0 percent of 2014 GDP.
  - Private creditors agreed to a 50 percent haircut on bond holdings equivalent to 14  percent of 2014 GDP (to be applied in two steps of 25 percent each: upfront and in November 2017, after successful completion of the ECF-supported program).
  - A Paris Club restructuring was agreed in late 2015 and arrears to Paris Club creditors were almost fully resolved in 2016.
  - As of April 2017, because arrears to Trinidad & Tobago, Algeria, and Libya were not regularized, public debt was still categorized in the IMF-World Bank debt sustainability assessment as “in distress”.
  - Grenada paid some overdue obligations to regional and international organizations during the program and developed a full payment plan by the Sixth Review.
- Overall public debt dynamics:
  - By 2017, public debt as a percentage of GDP will have fallen by 36 percentage points.
  - In June 2014, the public debt-to-GDP ratio was forecast to decrease by about 35 percentage points by 2017.
  - Contributions to the 36-percentage point drop in public debt as a share of GDP:
    - Nominal GDP growth explains about 19 percentage points.
    - Fiscal adjustment explains about 11 percentage points.
    - Debt restructuring explains another 13 percentage points.
    - Interest expenditure added some 6 percentage points.

### Structural Reforms and Financial Sector
- Fiscal and institutional reforms implemented:
  - New PFM and Public procurement legislation to strengthen budgetary discipline.
  - A new Fiscal Responsibility Act (FRA) with a fiscal rule providing operational guidance and a medium-term debt anchor.
  - Reforms to deliver sustainable management of the public wage bill.
  - Reform of the tax incentive regime to level the playing field and remove discretion from elected officials.
  - Stricter oversight of statutory bodies and SOEs and reforms to strengthen their financial positions.
  - Initial steps toward pension reform to consolidate public and private sector regimes and strengthen NIS financial viability.
  - New Investment Law to streamline the investment regime.
  - Reforms to the energy sector to lower energy costs.
- Banking sector outcomes:
  - Banks’ NPLs decreased to average 7 percent.
  - The banking sector returned to profitability after several years of losses.
  - Provisions for remaining impaired assets increased to an average of 54 percent.
  - Bank credit contracted during the program and remains weak.
  - Credit unions have filled the credit gap, capturing increasing market share and pushing overall credit growth into line with present real GDP growth.
  - Recommendation: Strengthen regulatory framework for credit unions by passing the cooperative societies act, develop relevant secondary regulation, and strengthen non-bank supervision to monitor underwriting standards and reduce probability of increased impaired assets.

### Program Implementation, Ownership, and Technical Assistance
- Program ownership and stakeholder collaboration:
  - Social partners (Committee of Social Partners and Home Grown Monitoring Committee) were heavily involved in monitoring program performance.
  - Their role helped garner public support for reforms and ensured social spending to protect vulnerable groups was maintained.
  - Authorities plan to continue consultation and collaboration post-program, seeking international best practice examples.
- Technical assistance and development partner support:
  - TA from IMF, CARTAC, Caribbean Development Bank, World Bank, Commonwealth Secretariat, and bilateral donors focused on tax reform, tax administration, legal drafting of fiscal legislation, public finance management, the CBI and NTF Act, debt management, and financial sector reform.
  - TA was effectively used by the authorities in close collaboration with Fund staff and partners.
- Capacity constraints:
  - Grenada’s micro-state size and capacity constraints limited the pace of structural reform implementation and caused delays in structural benchmarks and debt restructuring.
  - Despite bottlenecks, an impressive number of reforms were implemented; focus now must be on implementation of new laws and structural reforms to raise potential output and improve private sector productivity.

### Key Takeaways
- Growth was an important factor for debt sustainability but fiscal consolidation and debt restructuring also played important roles.
- The new fiscal framework, if adhered to, should ensure fiscal discipline and anchor medium-term fiscal policy to reduce the probability of fiscal and balance of payments crises going forward.
- Collaboration with social partners encouraged public support for the program and safeguarded social spending.
- Coordination with donors and other partners provided needed capacity and institution building.
- Capacity constraints caused delays, especially in debt restructuring and structural reforms aimed at increasing potential output in the medium term.

*Annex III. The 2014-17 ECF-Supported Program—A Retrospective (excerpts) — IMF staff compilation from the provided document.*

### 6.      Social spending under the program missed the December indicative target by a small

### 6.      Social spending under the program missed the December indicative target by a small margin.

### Social spending outcome
- Phasing-out of ineligible persons under the World Bank-supported SEED program exceeded the rate of inclusion of new applicants, so disbursements fell short of the December indicative target by EC$0.4 million (US$150,000).
- Floor on social spending by central govt. (EC$ mn): 11.4 Not met; 5.4 Not met; Not met; 11.8 Not met; 7.0 Met; 14.0 14.0 13.6 Not met. (As presented in the monitoring table.)

### Chart of Accounts (CoA) reclassification and comparability
- Reclassification occurred in January of 2016, changing from GFSM 1986 methodology to GFSM 2001.
- Spending equivalent to 3.5 percent of GDP was shifted from capital expenditure in the old CoA to non-interest current expenditure in the new CoA.
- Comparability of 2016 expenditure with monitoring targets and previous years is affected by this reclassification.

### 2017 fiscal targets and fiscal rule parameters
- Fiscal targets in the 2017 budget are aligned with the FRA and commitment to fiscal sustainability until the debt-to-GDP ratio reaches 55 percent.
- Key parameters of the fiscal rule (December 2016 structural benchmark):
  - A primary surplus of at least 3.5 percent of GDP.
  - A public sector wage bill of 8.8 percent of GDP (below the 9 percent ceiling mandated in the FRA). The 2017 wage bill includes payments for outstanding increments accrued in 2015 and a 3 percent wage increase agreed with public service unions.
  - Real primary expenditure growth (excluding grant-funded capital spending) under 2 percent.
  - An allocation for a reserve equivalent to 2 percent of recurrent revenue for contingency expenditure needs, consistent with the PFM Act and FRA.
  - Realistic projections of capital grants from the National Transformation Fund (NTF): for 2017 projected at $32.4 million from Citizenship by Investment (CBI) programme-related revenue, consistent with the new PFM Act (structural benchmark).

### Debt restructuring and regularization of arrears
- Public debt declined from 91.7 percent of GDP at end-2015 to 83.4 percent of GDP at end-2016.
- External debt arrears fell to 2.7 percent of GDP at end-April 2017 from 10.3 percent of GDP in 2013.
- Arrears to domestic creditors reduced to 1.6 percent of GDP by end-2016 and further to 0.5 percent of GDP by end-March 2017 from 5.5 percent of GDP at the start of the programme.
- Grenada has restructured debts equivalent to 85 percent of the total that was considered restructurable at the start of the programme and intends to conclude negotiations and regularize remaining arrears as soon as possible.

#### External debt restructuring (highlights)
- Private creditors: Servicing of the restructured 2025 bonds is current; claims by hold-out creditors being restructured on similar terms; ongoing negotiations with FICS with regular payments under court adjudicated amounts and a separate-payment stream.
- Official bilateral creditors: Bilateral agreement with Russia executed in March 2017 completed restructuring of Paris Club creditors; progress in discussions with non-Paris Club bilateral creditors (e.g., Algeria); current on obligations to Venezuela while negotiations continue.

#### Domestic debt restructuring (highlights)
- Early 2017: debt exchange agreements with Petrocaribe Grenada and two domestic banks signed; a debt owed to another bank cleared.
- Restructuring negotiations with remaining domestic creditors approaching conclusion.
- Restructuring agreement on government guaranteed debt owed by the Marketing and National Importing Board (MNIB) signed in December 2016.

### Regularization of unpaid membership contributions to international organizations
- As of April, agreements reached with six organizations representing 76 percent of total contributions outstanding at end-2016 on phased repayment terms.
- For remaining organizations, a payment plan ensures full payment by 2022 (prior action).
- Payments executed so far this year total EC$ 8.41 million, including to the seven organizations to which the largest amounts are due (prior action).

### Fiscal structural reforms and public financial management
- Debt Management Unit (DMU): capacity enhanced with comprehensive training and upgrade to CS-DRMS version 1.3; reconciling and updating database to include all T-bills; commenced data uploads for government-guaranteed debt and debt restructuring information into CS_DRMS; published second quarterly public debt statistics bulletin with data up to December 2016 (recurring structural benchmark).
- Tax administration: IRD implemented Corporate Strategic Business Plan; commenced Taxpayer Compliance Strategy and a registration amnesty followed by a filing amnesty for select tax types; taxpayer education drive underway; Tax Advisory Committee re-established.
- Customs (CED): Contract with UNCTAD for ASYCUDA upgrade including Single Window system, exemption module, e-payment services, and arrears/exemptions modules; field work began April 2017; improved risk management in some areas; Joint Risk Management Committee meetings commenced.
- CBI program: Continued publication of all CBI statistics on the Ministry of Finance’s website on a quarterly basis (recurring structural benchmark).
- Public finance management: 2017 Budget prepared in keeping with the 2015 PFM Act and medium-term fiscal framework (2017-2019) reflecting new CoA; efforts to strengthen PSIP IT infrastructure, cash forecasting, and commitment controls.

### Public sector wage bill management reform
- Public Service Management Reform strategy finalized and approved by Cabinet in April (end-March structural benchmark).
- Human resource registry: completed and made functional in March (structural benchmark); registry to be saved and archived at the end of each review period; work in the coming six months to fill incomplete data fields and align registry with payroll.
- Strategy pillars: (i) strategic human resource management, (ii) re-engineering of the public service, (iii) strategic compensation management, and (iv) ICT development.
- Committed action areas include:
  - A wage setting framework that is forward-looking and data driven; parameters to be agreed with labour organizations.
  - Functional review and job analysis to identify appropriate size and balance of the public service and align job descriptions with function.
  - Reform of the pay and grading system via comprehensive job evaluation to ensure pay relativities and to establish a rational system of increments, possibly performance-linked.
  - Reform and enforcement of the performance appraisal system.
  - Review and improvement in IT to support business delivery and efficiency gains.

### Structural reforms to support competitiveness and growth
- Doing Business improvements: increased awareness among World Bank survey respondents and public education to encourage use of online facilities.
- Investment facilitation: new tax incentives regime, GIDC restructuring and new Act to expedite investment facilitation and strategic investor search, with focus on “blue” and “green” growth (e.g., marinas/yachting) and youth entrepreneurship.
- Near- to medium-term priorities:
  - Advance second phase of SOE reform; discussions with strategic partners for Grenada Postal Corporation and Grenada Concrete and Emulsion Production Corporation; strengthened Ministry of Finance monitoring with revised quarterly reporting template.
  - NAWASA and Grenada Solid Waste Management Authority to undertake tariff structure reviews in 2017.
  - Complete streamlining and digitization for construction permits, property registration, and starting a business; implement Single Window Module of ASYCUDA World by mid-2017.
  - Explore renewable energy sources (geothermal, wind, solar) to lower energy costs.
  - Monitor revenue impact of tax incentives legislation and use Exemptions Module of ASYCUDA World to identify exempted imports and consider compensatory revenue measures.
  - Agriculture diversification and employment: focus on climate smart agriculture, resolve air cargo logistics and storage issues, finalize amendments to nutmeg and cocoa industry legislation, support agro-processing, organic shrimp production, poultry, and resuscitate coconut industry; address pest control, infrastructure, technology, financing, land bank, and land use policy.
  - Labor market: review education curriculum to address skills mismatch; National Training Agency to establish advisory committees; independent review of New IMANI programme; strengthen labor statistics.
  - GPRS and National Sustainable Development Plan 2030: appoint committee to monitor GPRS implementation; public consultations on draft NSDP 2030 scheduled for May to July; finalization expected by October 2017.
  - Financial stability: CARTAC technical assistance to GARFIN in 2017; finalize national crisis management plan; strengthen risk-based supervision for credit unions and insurers; legislative amendments to Cooperative Societies Act; support regional single regulatory frameworks.

### Key quantitative programme indicators and implementation status (selected)
- Central govt. primary balance (EC$ mn) cumulative floor: values shown in table (e.g., -28 Met; 37 Met; ... 148 Met).
- Central govt. primary spending (EC$ mn) cumulative ceiling: values shown in table (e.g., 630 Met; 281 Met; ... 603 Met).
- Ceiling on stock of central govt. budget expenditure arrears (EC$ mn): e.g., 79 Met; 53 Met; Not met; 0 Met; 0 Met; 0 0 0 Met.
- Ceiling on accumulation of external debt arrears (continuous): 0 Met; 0 Met; Met; 0 Met; 0 Met; 0 0 0 Met.
- Ceiling on contracting of non-concessional external debt by the central govt. (continuous, US$ mn): 10 Not met; 0 Met; Met; 0 Met; 15 Met; 0 25 25 Met.
- Cumulative ceiling on net change in central govt. and central govt. guaranteed debt (EC$ mn): 48 Met; -30 Met; Met; -67 Met; -85 Met; 15 -5 -99 Met.
- Wage bill target (EC$ mn): 219 Met; 109 Met; Met; 215 Met; 105 Met; 219 219 216 Met.
- Public employment target (nominal number): 7515 Met; 7096 Met; Met; 7003 Met; 6810 Met; 7000 7000 6758 Met.
- Projected new concessional external debt (US$ mn): 8 10 10 (mem. item).
- Adjustors: ceiling modified to include adjustors for debt instruments issued for debt restructuring and for borrowing from the CDB and WB up to cumulative maximums of US$30 million from each institution.

*Source: cr17131 — https://www.imf.org/-/media/files/publications/cr/2017/cr17131.pdf*

---


_Source: https://www.imf.org/-/media/files/publications/cr/2017/cr17131.pdf_