## cr18236-grenadabundle ## Source details **Canonical URL:** [cr18236-grenadabundle](https://www.imf.org/-/media/files/publications/cr/2018/cr18236-grenadabundle.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2018/cr18236-grenadabundle.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2018/cr18236-grenadabundle.pdf.json) --- ### ECCU Balance of Payment Data Revision - ECCB published revised BOP estimates in July 2017 with improved tourism surveys, wider coverage, and transition to BPM6 methodology; data revised for 2014-16. - Revisions for 2014-16: - Current account improved strongly due to a better services balance, partially offset by a deteriorating income account. - Balance on goods trade was barely affected. - Improvement in services balance mainly due to inclusion of expenditure by nonresident students enrolled in the off-shore medical school. - Deterioration in income account reflected higher estimated business services imports and dividends paid to foreign direct investors. - Overall, current account was revised upward by more than 10 percent of GDP for 2014-16. - Remaining uncertainty: - An April 2018 TA mission concluded nonresident students’ expenditure may have been overestimated and a future revision could worsen the current account. ### Economic and political context; recent macro indicators - Program outcomes and macro performance: - Fiscal adjustment: 9½ percent of GDP. - Public debt reduced from 108 percent of GDP to below 71 percent of GDP in four years. - Average growth since 2014: 5½ percent. - Potential growth estimated below 3 percent. - 2017 developments: - Real GDP growth: 4.5 percent (2017 estimated). - Tourism expanded by over 8 percent (2017). - Unemployment: 23.6 percent (2017). - Inflation: fell below 1 percent (2017); CPI (average) 0.9 percent (2017). - Primary fiscal surplus: 5¾ percent of GDP (2017). - Capital outlays constrained to 50 percent of budget projections (2017). - Public debt: 70.8 percent of GDP (end-2017). - 2018Q1 fiscal balance: 1.4 percent of GDP. - One-time public sector payment March 2018: 0.07 percent of GDP. - Financial sector and credit: - Bank credit stagnated in 2017; credit union lending grew by almost 20 percent in 2017 and now makes up a quarter of total credit. - Banking indicators: solid capital buffers, improving asset quality, robust deposit expansion, ample liquidity, falling interest rates. - Reserves: - International reserves at 180 percent of the IMF’s reserve adequacy metric for credit-constrained economies. ### External position and competitiveness assessment - EBA-lite: cyclically adjusted current account is 4¾ percent of GDP below the current account norm. - After accounting for FDI and capital transfers: staff’s estimated current account gap reduces to 2.5 percent of GDP. - External sustainability: current account about 2 percent of GDP below level needed to bring NIIP to -60 percent of GDP within 20 years. - Real effective exchange rate model: Grenada around 8 percent undervalued. - Policy implication: continue prudent fiscal position and contain nominal wage growth to resolve competitiveness gap. - Data gaps inject uncertainty into these assessments. ### Outlook and projections (baseline assumptions: continued compliance with FRL; CBI/external financing used to reduce public debt; authorities’ electoral promises not in baseline) - Short- and medium-term projections: - 2018-19: economy projected to grow by 3½ percent. - Inflation: edge up in 2018 then stabilize at 2 percent thereafter. - Primary fiscal surplus: remain around 5½ percent of GDP through 2020. - Current account deficit: rise moderately in 2018 then decline. - Bank credit: expected to grow in 2018. - 2020-23: growth expected to ease to 2¾ percent. - Once public debt ratio falls below 55 percent of GDP (projected for 2020), FRL would allow lower primary surpluses and slower debt reduction; reduced surpluses forecast to slightly add to current account deficit in outer years. - Selected projections (series preserved exactly): - Real GDP growth (percent): 2017: 4.5; 2018: 3.6; 2019: 3.6; 2020: 2.9; 2021: 2.7; 2022: 2.7; 2023: 2.7 - Inflation (percent, average): 2017: 0.9; 2018: 2.6; 2019: 1.8; 2020–2023: 2.0 (each year) - Primary fiscal balance (percent of GDP): 2017: 5.7; 2018: 5.6; 2019: 5.3; 2020: 5.5; 2021: 3.6; 2022: 2.1; 2023: 1.6 - Public sector gross debt (percent of GDP): 2017: 70.8; 2018: 65.0; 2019: 59.6; 2020: 52.9; 2021: 51.3; 2022: 50.7; 2023: 50.3 - External current account balance (percent of GDP): 2017: -6.7; 2018: -7.4; 2019: -7.5; 2020: -6.6; 2021: -6.4; 2022: -6.7; 2023: -6.6 - Credit to GDP ratio: 2017: 51.9; 2018: 51.5; 2019: 52.5; 2020: 53.3; 2021: 54.1; 2022: 54.9; 2023: 55.2 ### Risks to the outlook (two-sided; likelihood/time horizons preserved where noted) - External risks: - Uncertainty about U.S. growth, global financial conditions, cost of external financing, strength of CBI inflows. - Risk of loss of Petrocaribe financing (Relative Likelihood: High; Impact/Time Horizon: High/Short Term). - Domestic/sectoral risks: - Pressures on correspondent banking relationships; natural disasters (e.g., hurricanes). - Fiscal risks: - Adverse court judgment in Grenlec case. - Realization of Petrocaribe-related fiscal risks. - New initiatives on health care and pensions could challenge FRL spending growth rule, increase debt-to-GDP, and add to current account deficit. - Upside possibilities: - Continued investment in tourism and education-related projects; a recently-announced oil and natural gas discovery could bolster outlook. ### Policy anchor across risks - Consistent recommendation: carry through with prudent fiscal policies anchored by the FRL and pursue structural reforms to build buffers and improve productivity and competitiveness. ### Authorities’ views (summary) - Broadly shared staff’s outlook. - Consider potential growth estimates could be revised upward given reforms. - Cautious optimism about strengthening bank lending due to pipeline of non-FDI private sector construction projects. - Gross public debt expected to remain on a downward trajectory despite increases in external financing. - Authorities indicated fiscal risks from new initiatives (pensions, health care) would be managed within FRL parameters. ### Fiscal policy, FRL implementation, and recalibration - FRL contributions: - Anchored fiscal performance; kept public debt on downward path. - Underpinned advances in accountability and transparency: creation of Fiscal Responsibility Oversight Committee (FROC), improved 2018 budget presentation, publication of a statement of fiscal risks, and a fiscal compliance report. - 2017 FRL performance (Phase II metrics and outcomes): - Phase II Primary Balance Rule target: 3.5% of GDP surplus; 2017 outcome: 4.3 / 5.7 (staff noted primary fiscal surplus rose to 5¾ percent of GDP in 2017). - Primary Expenditure Rule target: 2% real growth cap; 2017 outcome: 2.0 / 0.6. - Wage Bill/GDP ceiling: 9% of GDP; 2017 outcome: 8.6 / 8.2. - Public Debt/GDP: 70.8 (2017). - Scope to strengthen FRL implementation; proposed adjustments include: - Clarify real primary spending calculations based on average CPI. - Adjustment requirement to reach 55 percent debt-to-GDP target within 3 years should kick in only after threshold reached for first time. - Clarify relationship between 55 and 60 percent debt thresholds. - Ensure consistency with National Transformation Fund regulations, PFM Act, constitutional and parliamentary procedures. - Remove ambiguities on tenure of FROC members and precise definition of public wage payments. - Staff cautioned against material changes to core FRL rules, notably the primary expenditure rule, early in implementation. - Going forward: staff recommended comprehensive review and IMF FAD technical assistance to map options for recalibration once 55 percent of GDP debt ratio achieved. - FRL phases (as summarized): - Phase I (2015-2016): Primary Balance Rule ECF targets; Primary Expenditure Rule 2% real growth cap; Wage Bill/GDP 9% ceiling. - Phase II (2017 until Debt/GDP reaches 55%): same as Phase I. - Phase III (After Debt/GDP reached 55%): Primary Balance Rule: 3.5% of GDP surplus; Primary Expenditure Rule: Revised real potential growth cap; Wage Bill/GDP: 9% ceiling. - Note: Debt-stabilizing primary balance estimated at 1 percent of GDP until 55% target reached. - Note: Excludes grants and NTF funded capital spending; expenditure rule of 2 percent based on potential output growth estimated in 2014; re-estimation every 5 years upon reaching phase III. ### Fiscal financing strategy, public investment, and implementation - Constraints and recommendations: - Bottlenecks to grant financing and limited external borrowing imply public investment may be kept low in 2018-20. - Greater grant-financing, including climate funds, would relieve restrictions on capital spending. - Improve expenditure efficiency and project- and grant-mobilizing efforts. - PIMA-based analysis (Annex IV): scope to improve project planning, allocation, and implementation. - Remove institutional obstacles: secure land titles; ensure technical and engineering support and personnel. - Public Investment Management (PIM) reforms: - Establish successor to GPRS (2014/18) with costings and measurable targets. - Restructure functions at Ministry of Finance and Ministry of Infrastructure Development. - Establish asset registry to facilitate asset management and disaster loss assessment. - Draft procedures manual to be finalized in 2018. - From 2017, line ministries explicitly required to consider climate adaptation impacts of major capital projects. ### Structural fiscal reforms — priorities and recommendations - Public service efficiency and wage bill: - Support FRL’s 9 percent of GDP wage bill ceiling via public sector management reform strategy (approved early-2017). - Establish framework for wage negotiations; facilitate capacity development and training. - Use quantitative performance targets and output indicators; functional review and job analysis to underpin staffing assessments. - Aging-related spending and pension reform: - Authorities considering pension top-ups and national health care; costs undetermined. - National Insurance Scheme (NIS) to administer initiatives. - 2012 actuarial review of NIS found actuarial imbalance of 117 percent of GDP (present value); recommend parametric reforms: raise retirement age from 60 to 65 and increase payroll contribution from 9 to 11 percent of wages. - Staff advised applying FRL Article 6: identify fiscal cost and find revenue or spending offsets for new programs. - Social assistance: - SEED achieved benchmark coverage in 2017 after administrative and IT improvements. - Deploy SEED framework to enhance targeting of other social assistance, using Grenada Living Conditions Index (update expected with Country Poverty Assessment later this year). - SOE reform: - Monitoring: 24 entities reported timely financials except Grenada Postal Corporation (GPC); three entities had marginal losses (0.05 percent of GDP). - Recommendations: reactivate oversight committee for SOEs; proceed with tariff reviews for cost recovery; restructure GCEPC and GPC; greater transparency; PDV Grenada Ltd. insolvent. - Operationalization of Public Utilities Regulatory Commission expected by end-2018. - Staff recommended annual fiscal risk assessments of all SOEs based on audited statements (CARTAC TA). - Public Financial Management (PFM): - Treasury restructuring planned to complete in 2019. - 2015 PEFA assessment: need to enhance internal audit for value-for-money audits and improve IT systems audits. - Establish and monitor physical asset registry. - Tax administration and policy: - Strengthen IRD and CED: address staffing shortages; improve HR, risk management, compliance, enforcement; reduce tax arrears timebound; replace outdated technologies. - CED to lead WTO Trade Facilitation Agreement implementation; deploy automated customs system. - Authorities considering PIT and CIT rate reductions by 5 percentage points (announced in 2018 budget speech); staff estimated annual loss around 0.6-0.7 percent of GDP from these cuts. - Staff indicated need for complementary base-broadening measures (tax foreign earned income, capital incomes, or provide personal/child tax credits). ### Transparency and CBI program - Recommended actions: - Strengthen FROC’s capacity (including MOU with Ministry of Finance). - Better account for public debt and contingent liabilities (SOEs and PDV Grenada). - Improve monitoring of proceeds of CBI inflows and record all flows through the Consolidated Fund on budget. - Operationalize saving portion of National Transformation Fund into dedicated natural disaster savings fund. - Authorities save 40 percent of CBI proceeds for disaster response (authorities’ practice). ### Debt regularization, DSA, and arrears - Debt restructuring 2013-17: face value reductions (50 percent where applicable), interest adjustments, maturity extensions. - Public debt fell from 108 percent of GDP (2013) to 70.8 percent of GDP (2017); PV public debt from 104 to around 63 percent (2017). - Remaining unresolved official bilateral arrears: US$15.7 million (1.4 percent of GDP); until these arrears are regularized, external debt risk rating remains “in debt distress”. - Composition shifts: increased share of domestic debt (>30 percent) and reduced external share (below 70 percent). - Recent actions: restructuring with Russia and U.K. completed (2017); received 25 percent haircut on two international bonds (late-2017); domestic refinancing converted short-term T-bills into longer-term bonds. - Policy recommendations: - Fully regularize external arrears to improve DSA rating. - Continue public debt reduction via FRL rules-based framework and structural reforms. - Improve debt management capacity (data/IT); enhance monitoring and reporting of SOE non-guaranteed debt and government-guaranteed exposures. - Review medium-term debt strategy in light of increased concessional external financing and substantial CBI receipts; enhance asset/liability operations capacity. ### Balance of payments and financing (selected table highlights preserved exactly) - Current account (levels, US$ millions): 2014 -40.4; 2015 -38.3; 2016 -33.9; 2017 -74.7; 2018 -88.1; 2019 -93.6; 2020 -86.7; 2021 -89.2; 2022 -97.0; 2023 -100.4. - Exports of goods and services (levels): 60.2; 58.0; 56.1; 56.3; 56.3; 56.2; 56.0; 55.9; 55.9; 55.8 (percent of GDP series also provided). - Tourism (levels): 466.2; 493.0; 510.0; 545.5; 579.6; 612.3; 641.4; 671.9; 703.9; 737.7. - Imports of goods and services (levels): 536.9; 565.5; 553.0; 625.9; 670.9; 710.3; 733.3; 767.1; 809.0; 845.3. ### Monetary, financial sector, and financial stability - Monetary sector (selected levels, EC$ millions): - Net foreign assets (levels): 582.2; 852.5; 1,003.2; 1,097.9; 1,140.2; 1,225.6; 1,302.5; 1,354.8; 1,393.1; 1,442.2 (2014–2023). - Broad money (M2) (levels): 2,018.0; 2,122.4; 2,151.0; 2,236.2; 2,380.3; 2,519.5; 2,649.8; 2,783.3; 2,922.2; 3,067.9. - Credit to private sector (levels): 1,613.9; 1,552.4; 1,548.6; 1,558.5; 1,646.6; 1,777.5; 1,899.1; 2,024.0; 2,154.5; 2,275.5. - Interest rates (percent per year): ECCB policy rate: 6.5; 6.5; 6.5 ...; Weighted average lending rate: 9.0; 8.7; 8.4 ... - Financial sector indicators (2010–2017, selected): - Gross Loans (percent of GDP): 96.2; 95.8; 91.6; 82.0; 71.4; 61.8; 57.3; 54.9. - NPL Ratio: 7.5; 9.4; 11.8; 13.8; 14.6; 10.0; 6.7; 3.9 (2010–2017). - CAR: 16.5; 15.1; 13.9; 13.6; 13.0; 12.2; 13.0; 13.9. - Financial stability concerns and recommendations: - Rapid shift in credit provision from banks to credit unions requires regulatory response to control risks and data gaps. - Strengthen oversight of non-bank institutions: intensify regulation and supervision of credit unions, enforce 10 percent capital requirement, revamp reporting for granular loan data, enhance asset quality reviews, conduct stress tests of all credit unions and insurance companies. - Regional prudential regulations and IFRS9 (expected later this year) will likely raise provisioning requirements. - ECCU steps toward regional harmonization of regulations and oversight of non-bank sector; acceleration recommended. - AML/CFT and CBRs: ensure compliance, strict enforcement of due diligence in CBI program to preserve access to cross-border payments. ### Climate change preparedness and resilience (Box 3) - Institutional developments: - National Climate Change Policy (NCCP 2017) updates objectives, institutional gaps, and priority investments; aligns with UNFCCC (2011) and CARICOM resilience framework (2009). - 2018: establishment of a Ministry of Climate Resilience, the Environment, Forestry, Fisheries, Disaster Management & Information. - Planning tools: - Draft National Climate Change Adaptation Plan (NCCAP 2017) provides framework and costing of actions complementary to INDC 2015. - Draft National Land Use Policy and Natural Resource Management Bill (2017); building codes updated in 2016. - Systematic screening of public investment projects at design phase for climate risks introduced. - Financing and constraints: - High debt and limited planning/implementation capacity hamper financing. - Grenada accessed Green Climate Fund grants for pilot projects (about 1 percent of GDP). - Potential channels: PPP policy framework; receipts of CBI’s National Transformation Fund could be allocated to adaptation and public disaster fund. - Staff appraisal and policy implications: - Public debt ratio fell by around 11 percentage points of GDP in 2017. - FDI was 8½ percent of GDP in 2017. - Constraints: susceptibility to shocks and natural disasters; insufficient labor skills; high energy and other input costs; undiversified economy; unemployment 23½ percent. - Policy needs: reduce red-tape, address weaknesses in planning/execution/monitoring of public infrastructure spending, contain wage growth, reduce skills gaps. - Recommendations: maintain and implement NCCP 2017 and draft NCCAP 2017; prioritize review/update of Physical Development Plans (2003), Land Acquisition Act, Land Development Regulations, and draft Environmental Management Legislation; strengthen capacity to plan and implement projects; leverage Green Climate Fund, concessional financing, PPPs, and CBI receipts; continue systematic climate risk screening for public investments. ### Risk Assessment Matrix (RAM) — selected entries and policy recommendations - Retreat from cross-border integration: Relative Likelihood: Medium; Impact: Medium/Short to Medium Term; Policy: prudent fiscal policies anchored by FRL, structural reforms. - Weaker-than-expected global growth: Relative Likelihood: Medium; Impact: High/Short to Medium Term; Policy: same as above. - Policy and geopolitical uncertainties: Relative Likelihood: Medium; Impact: High/Short to Medium Term; Policy: same as above. - Loss of Petrocaribe financing: Relative Likelihood: High; Impact: High/Short Term; Policy: prudent fiscal policies anchored by FRL. - New pension/health initiatives and wage pressures: Relative Likelihood: Medium; Impact: Medium/Short to Medium Term; Policy: internalize aging costs in FRL, examine parametric pension reforms, maintain FRL anchor. - Hurricanes (severe damage): Relative Likelihood: Medium; Impact: High/Short to Medium Term; Policy: - Save CBI receipts to build buffers. - Increase natural disaster insurance with donor assistance. - Adhere to FRL fiscal rules. - Work with World Bank and donors to build resilience. ### Social and key socioeconomic indicators (selected exact figures) - Unemployment rate (2017): 23.6 percent. - Youth unemployment (2017): 40 percent (young); female unemployment: 27 percent. - Employment by education (unemployed shares, 2017, percent of total): None or Primary 44.33; Secondary 41.23; Post Secondary 4.72; Tertiary 9.24; Other 0.48. - GDP per capita (US$, 2017): 10,390. - Population (2016): 0.11 (millions). - Poverty headcount index (2008): 38. - Rank in UNDP Human Development Index (2016): 79 out of 179 countries. - Infant mortality rate per '000 births (2016): 9.9. - Life expectancy at birth (2014): 73 (years). ### Implementation and TA - Implementation of 2016 Article IV recommendations: mixed progress across fiscal policy, financial sector, growth policy; many items ongoing or partially implemented (selected exact items preserved in Annex I). - CARTAC technical assistance highlights (2016–2018): PFM, tax administration, financial stability and supervision, macro framework and statistics improvements. - Data and statistics: - BPM6-compliant BOP and IIP released July 2017 for 2014–16 and 2013–16. - Statistical shortcomings remain (e.g., underreporting of CBI receipts, donor-financed capital spending availability, private external debt incomplete). - Grenada participates in GDDS since March 2001; most metadata not updated since late 2002. *Source: IMF staff report excerpt (GRENADA) — cr18236-grenadabundle.* ### 1. ECCU Balance of Payment Data Revision _______________________________________________________ 5 ### 1. ECCU Balance of Payment Data Revision ### Economic and political context - The government’s economic program, supported by the ECF arrangement, achieved: - Fiscal adjustment of 9½ percent of GDP. - Public debt reduction from 108 percent of GDP to below 71 percent of GDP in four years. - Average growth of 5½ percent since 2014. - Growth potential and binding constraints: - Potential growth estimated below 3 percent. - Constraints: susceptibility to economic and natural disaster shocks, insufficient labor skills, high costs of labor, energy and intermediate inputs, relatively undiversified economy, red tape, inefficient public sector. - Unemployment remained chronically high and poverty is an important social concern. - Political environment: - Government headed by PM Mitchell returned to office in March 2018 with full control of the legislature. - Electoral promises include work on public pensions, instituting universal health care, and cutting taxes. - Surge in external financing and citizenship-by-investment (CBI) revenues could test resolve on structural reforms and fiscal prudence. ### Recent developments and macro indicators - 2017 performance: - Growth in 2017 estimated at 4½ percent. - Tourism expanded by over 8 percent. - Unemployment at 23.6 percent in 2017. - Inflation fell below 1 percent in 2017. - External sector: - Current account deficit widened; switch to BPM6 led to a 10 percent of GDP reduction in the deficit (largely reflecting unrecorded receipts from non-resident students). - Current account deficit rose by 3½ percent of GDP in 2017, with some increase financed by CBI inflows of some 4½ percent of GDP in 2017. - Fiscal developments: - Primary fiscal surplus rose to 5¾ percent of GDP in 2017. - Capital outlays constrained to 50 percent of budget projections due to shortfalls in grant financing and institutional bottlenecks. - Public debt fell to below 71 percent of GDP at end-2017 following the final phase of bond restructuring. - 2018Q1 fiscal balance was 1.4 percent of GDP. - One-time payment to public sector employees in March 2018 equal to 0.07 percent of GDP. - Financial sector and credit: - Bank credit stagnated in 2017; credit union lending grew by almost 20 percent in 2017 and now makes up a quarter of total credit. - Banking sector indicators noted solid capital buffers, improving asset quality, robust deposit expansion, ample liquidity, and falling interest rates. - Reserve position: - International reserves at 180 percent of the IMF’s reserve adequacy metric for credit-constrained economies. ### Box 1 — ECCU Balance of Payment Data Revision - ECCB published revised BOP estimates in July 2017; data collection enhancements included improved tourism surveys, wider coverage, and transition to BPM6 methodology. Data were revised for 2014-16. - Revisions for 2014-16: - Current account improved strongly due to a better services balance, partially offset by a deteriorating income account. - Balance on goods trade was barely affected. - Improvement in services balance mainly due to inclusion of expenditure by nonresident students enrolled in the off-shore medical school. - Deterioration in income account reflected higher estimated business services imports and dividends paid to foreign direct investors. - Overall, current account was revised upward by more than 10 percent of GDP for 2014-16. - Remaining uncertainty: - A technical assistance mission in April 2018 concluded that nonresident students’ expenditure may have been overestimated and a future revision could worsen the current account. ### External position and competitiveness assessment - External balance assessment (Annex III) findings: - EBA-lite suggests the cyclically adjusted current account is 4¾ percent of GDP below the current account norm. - After accounting for FDI and capital transfers, staff’s estimated current account gap reduces to 2.5 percent of GDP. - External sustainability approach indicates current account about 2 percent of GDP below level needed to bring NIIP to -60 percent of GDP within 20 years. - Real effective exchange rate model shows Grenada around 8 percent undervalued. - Data gaps inject uncertainty into assessments. - Policy implication: continued prudent fiscal position and contained nominal wage growth to resolve remaining competitiveness gap. ### Outlook and projections - Baseline assumptions: - Continued compliance with the FRL and progress on supply-side and structural fiscal reforms. - Authorities use new inflows of financing to reduce public debt through arrears clearance or active debt management. - Government electoral promises on pensions and health care not incorporated into baseline forecasts. - Short- and medium-term projections: - 2018-19: Economy projected to grow by 3½ percent. - Inflation to edge up in 2018 then stabilize at 2 percent thereafter. - Primary fiscal surplus to remain around 5½ percent of GDP through 2020 supporting rapid debt reduction. - Current account deficit to rise moderately in 2018 then decline as construction-related imports and energy prices moderate. - Bank credit expected to grow in 2018 after protracted weakness. - 2020-23: Growth expected to ease to 2¾ percent. - Once public debt ratio falls below 55 percent of GDP (projected for 2020), FRL would allow for lower primary surpluses and slower pace of debt reduction; reduced fiscal surpluses forecast to slightly add to the current account deficit in outer years. - Projection table (selected series, as reported): - Real GDP growth (percent): 2017: 4.5; 2018: 3.6; 2019: 3.6; 2020: 2.9; 2021: 2.7; 2022: 2.7; 2023: 2.7 - Inflation (percent, average): 2017: 0.9; 2018: 2.6; 2019: 1.8; 2020–2023: 2.0 (each year) - Primary fiscal balance (percent of GDP): 2017: 5.7; 2018: 5.6; 2019: 5.3; 2020: 5.5; 2021: 3.6; 2022: 2.1; 2023: 1.6 - Public sector gross debt (percent of GDP): 2017: 70.8; 2018: 65.0; 2019: 59.6; 2020: 52.9; 2021: 51.3; 2022: 50.7; 2023: 50.3 - External current account balance (percent of GDP): 2017: -6.7; 2018: -7.4; 2019: -7.5; 2020: -6.6; 2021: -6.4; 2022: -6.7; 2023: -6.6 - Credit to GDP ratio: 2017: 51.9; 2018: 51.5; 2019: 52.5; 2020: 53.3; 2021: 54.1; 2022: 54.9; 2023: 55.2 ### Risks to the outlook - Two-sided macro risks: - External: uncertainty about U.S. growth, global financial conditions (including U.S. dollar level), cost of external financing, and strength of CBI inflows. - Domestic/sectoral: pressures on correspondent banking relationships, natural disasters. - Upside possibilities: continued investment in tourism and education-related projects; a recently-announced oil and natural gas discovery could bolster the outlook. - Fiscal risks: - Adverse court judgment in the Grenlec power company case. - Realization of fiscal risks from the Petrocaribe arrangement. - New initiatives on health care and pensions, if not well-managed, could challenge the FRL’s spending growth rule, increase debt-to-GDP, and add to the current account deficit. ### Authorities’ views - Authorities broadly shared staff’s outlook. - They considered potential growth estimates could be revised upward given reforms. - Cautious optimism about strengthening bank lending due to pipeline of non-FDI private sector construction projects. - Gross public debt expected to remain on a downward trajectory despite increases in external financing, some of which may go towards debt refinancing. - Authorities indicated fiscal risks from new initiatives (pensions, health care) would be managed within the FRL’s parameters. ### Policy discussions — Fiscal policy and the FRL - FRL contributions: - Anchored fiscal performance and bolstered economic confidence. - Kept public debt on a downward path and strengthened framework credibility. - Underpinned advances in accountability and transparency: creation of Fiscal Responsibility Oversight Committee (FROC), improved 2018 budget presentation, publication of a statement of fiscal risks, and a fiscal compliance report. - Authorities committed to the FRL’s limit on growth in real primary spending and intend to monitor and adjust 2018 monthly budget allocations to adhere to the rule. - 2017 fiscal performance (phase II FRL metrics and outcomes): - Phase II target until Debt/GDP reaches 55%: Primary Balance Rule target: 3.5% of GDP surplus; 2017 outcome: 4.3 / 5.7 (table shows Phase II Fiscal Rule 2017 Target 3.5% of GDP surplus; 2017 Outcome 4.3 5.7 — staff noted primary fiscal surplus rose to 5¾ percent of GDP in 2017). - Primary Expenditure Rule: 2% real growth cap; 2017 outcome: 2.0 / 0.6 (table indicates target 2.0 and outcome 0.6). - Wage Bill/GDP ceiling: 9% of GDP; 2017 outcome: 8.6 / 8.2. - Public Debt/GDP: 70.8 (2017). - Scope to strengthen FRL implementation and supporting elements; authorities and FROC proposed adjustments to clarify operational issues, including: - Clarifying parameters and targets: - Real primary spending calculations should be based on average CPI. - The adjustment requirement to reach the 55 percent debt-to-GDP target within 3 years should kick in only after the threshold is reached for the first time. - Clarify relationship between the two envisioned debt thresholds of 55 and 60 percent of GDP. - Ensuring consistency with other laws and regulations: - National Transformation Fund regulations (operations of the Contingency Fund). - Public Financial Management Act (definition of PPPs). - Constitutional and Parliamentary procedures (timing of statement of progress toward compliance with fiscal rules). - Removing other ambiguities: - Tenure of FROC members. - More precise definition of public wage payments. - Staff position: - Agreed with proposals to address ambiguities or gaps and ensure consistency with PFM and Public Debt Management Laws. - Cautioned against material changes to core FRL rules, notably the primary expenditure rule, early in FRL implementation. *Source: IMF staff report excerpt (GRENADA).* ### 15. Going forward, a more comprehensive review and revision of the FRL would be in ### Going forward, a more comprehensive review and revision of the FRL would be in order. ### Fiscal Responsibility Law (FRL) recalibration and implications - Once the 55 percent of GDP debt ratio is achieved, the FRL envisions a recalibration of certain parameters that would significantly loosen the fiscal position. - The increase in available fiscal space would need to be well-managed to: - (i) create scope for high-quality spending on growth- and resilience-enhancing public infrastructure; - (ii) tie the spending path to realistic improvements in the authorities’ absorptive capacity; - (iii) find the right balance between revenue and expenditure policy adjustments; and - (iv) incentivize continued fiscal prudence even after the 55 percent of GDP limit is achieved in light of Grenada’s inherent debt-sustainability risks. - Staff recommended pursuing a comprehensive approach and engaging technical assistance from the IMF’s fiscal affairs department to map out options in recalibrating the FRL. - A comprehensive solution could give more fiscal space in the near-term to undertake high-quality infrastructure spending while containing the deficit in the outer years. - FRL framework summarized by phases: - Phase I (Period/Milestone: 2015-2016) - Primary Balance Rule: ECF-supported program targets - Primary Expenditure Rule: 2% real growth cap - Wage Bill/GDP: 9% of GDP ceiling - Phase II (Period/Milestone: 2017 until Debt/GDP reaches 55%) - Primary Balance Rule: ECF-supported program targets - Primary Expenditure Rule: 2% real growth cap - Wage Bill/GDP: 9% of GDP ceiling - Phase III (Period/Milestone: After Debt/GDP reached 55%) - Primary Balance Rule: 3.5% of GDP surplus - Primary Expenditure Rule: Revised real potential growth cap - Wage Bill/GDP: 9% of GDP ceiling - Note: Debt-stabilizing primary balance is estimated at 1 percent of GDP until the public debt-to-GDP target of 55 percent is reached. - Note: Excludes grants and NTF funded capital spending. The expenditure rule of 2 percent was based on potential output growth estimated in 2014. Under the FRL, upon reaching phase III and every 5 years thereafter, potential growth and the debt stabilizing primary balance are to be re-estimated or recalibrated. ### Fiscal financing strategy, public investment, and implementation - There is scope to improve the fiscal financing strategy and project implementation to lessen undue constraints on capital spending. - Bottlenecks to grant financing and limited external borrowing in the public debt strategy imply that public investment may be kept at relatively low levels in 2018-20. - Greater grant-financing, including access to climate funds, would relieve restrictions on capital spending while still adhering to the FRL. - Improving expenditure efficiency, including for project- and grant-mobilizing efforts, would lessen constraints on productive capital spending. - PIMA-based analysis (Annex IV) points to significant scope to improve project planning, allocation, and implementation. - Project implementation can be facilitated by removing institutional obstacles such as securing land titles and ensuring adequate support by technical and engineering services and personnel. ### Structural fiscal reforms — priorities and recommendations - Improving the efficiency and right-sizing the public service: - The FRL’s 9 percent of GDP wage bill ceiling should be supported by implementation of the public sector’s management reform strategy (approved in early-2017). - Progress made towards (i) establishing a framework for wage negotiations and (ii) facilitating capacity development through training. - Broadening the use of quantitative performance targets and output indicators of ministries would improve transparency, accountability, and efficiency. - The envisioned functional review and job analysis and evaluation should underpin strategic staffing needs assessments. - Addressing aging-related spending: - Authorities are considering initiatives to top-up pensions to public servants and provide national health care; costs yet to be determined. - The National Insurance Scheme (NIS) will administer both initiatives. - The 2012 actuarial review of the NIS pension scheme found an actuarial imbalance of 117 percent of GDP in present value terms, suggesting the need for urgent parametric reforms. - Recommended parametric reforms include raising the retirement age from 60 to 65 and increasing the payroll contribution rate from 9 to 11 percent of wages. - Staff advised applying FRL’s provision in Article 6 requiring the government to identify the fiscal cost and find revenue or spending offsets to finance new programs. - Strengthening social assistance programs: - Support for Education, Employment and Development (SEED) achieved its benchmark coverage in 2017 following administrative and IT improvements. - The SEED framework should be deployed to enhance targeting of other social assistance programs to the poor and vulnerable, drawing on the Grenada Living Conditions Index (to be updated with the Country Poverty Assessment expected later this year). - State-Owned Enterprises (SOEs) reform: - Monitoring continued in 2017 with all 24 entities except the Grenada Postal Corporation (GPC) providing timely financial reports. - Three entities had marginal losses (0.05 percent of GDP). - Authorities’ efforts to establish key SOE performance indicators are commendable; recommended re-activating the oversight committee for SOE operations and investment advice. - Second phase of reform—to review tariffs to reflect cost recovery and investment needs—is overdue and should proceed expeditiously. - Restructuring of the Concrete & Emulsion Production Corporation (GCEPC) and the GPC has not been completed; strategic partners are still being sought and greater transparency is needed. - PDV Grenada Ltd., a joint venture between entities controlled by Venezuela’s PDVSA and Grenada’s government is insolvent. - Operationalization of the Public Utilities Regulatory Commission is expected by end-2018. - Staff recommended elaboration of annual fiscal risk assessments of all SOEs based on audited financial statements (in line with CARTAC TA). - Public financial management (PFM) reforms: - Treasury Department restructuring operations and capacity enhancements are underway, planned to be completed in 2019. - 2015 PEFA assessment highlighted need to enhance internal audit function for value-for-money audits and improve IT systems audits. - Establishing and monitoring a physical asset registry would facilitate management of the public capital stock and assessment of losses after natural disasters. - Improving tax administration: - Strengthen IRD and CED by addressing staffing shortages and improving human resource and risk management, compliance, and enforcement systems. - Reduce the stock of outstanding tax arrears within a timebound period and replace outdated technologies. - CED should lead WTO Trade Facilitation Agreement implementation, increase communication with importers, and fully deploy the automated system for customs data. - Tax policy changes and revenue implications: - Authorities considering reduction in the rates on PIT and CIT by 5 percentage points (announced in the 2018 budget speech). - Staff estimated an annual loss of around 0.6-0.7 percent of GDP from these cuts. - Staff indicated the need for complementary measures to facilitate base-broadening and inclusive growth (consistent with earlier FAD advice). - Complementary measures could include taxing foreign earned income and capital incomes or providing personal or child tax credits. - Improving transparency: - Essential actions: (i) strengthen the FROC’s capacity (including envisaged MOU with the Ministry of Finance); (ii) better account for public debt and contingent liabilities (including SOEs and PDV Grenada); (iii) further improve monitoring of proceeds of CBI inflows and recording all flows through the Consolidated Fund on budget. - Envisioned saving of a portion of receipts from the National Transformation Fund into a dedicated natural disaster savings fund should be fully operationalized. ### Bilateral arrears and debt management - Grenada should urgently work to resolve its remaining bilateral arrears. - Upgrading the current “in distress” classification requires that bilateral arrears be regularized. - Staff encouraged authorities’ commitment to adhere to payment schedules for regularized arrears. - Staff advised redoubling negotiating efforts with the three creditors with which it has arrears and more actively pursuing asset-liability operations given substantial expected external financing inflows in the near term. ### Authorities’ views on fiscal policy and reforms - Authorities agreed the FRL was key to strong fiscal performance and committed to its rules, but noted a review is necessary to ensure fiscal parameters are not inhibitors to economic growth and are consistent with other laws and policies. - They welcomed possible technical assistance from the Fund. - Authorities noted planned pensions and health care expansions are critical to social dialogue; agreed costs need to fit within the FRL framework. - Authorities indicated PIT and CIT cuts were the only tax policy changes under consideration, with implementation expected in 2019 provided the FRL’s primary balance target is secured. - Authorities are actively working to regularize arrears with three remaining bilateral creditors but face difficulties (including inability to establish sustained communication with one creditor due to political circumstances). - Committed to honoring rescheduled debt obligations and exploring options for asset/liability operations and improvements in debt management capacity. - On structural reforms, authorities reaffirmed intention to continue progress with TA support; noted capacity constraints hamper public sector modernization. - World Bank to provide support for functional reviews and wage setting processes slated to be completed in 2020. - Ongoing restructuring of the Ministry of Works expected to improve project implementation and coordination; refocusing project planning at the Ministry of Finance to address public investment management shortcomings. - Authorities highlighted successes in SOE management and surveillance, commitment to advance tariff review phase, belief that fiscal risks from PDV Grenada Ltd. would be limited. - Plan to address revenue mobilization leakages at IRD and CED and strengthen compliance; sought a broad stock-taking of tax system design by FAD experts. ### Financial stability — evolving risks and oversight - Rapid shift in credit provision from banks to credit unions should be matched by timely actions to control risks to financial stability and growth. - Banks have undergone multi-year restructuring and deleveraging; NPL disposal facilitated by economic growth, improved insolvency framework, and rising property values. - Banks are well-placed to exploit new business opportunities but have been moving gradually to expand; credit unions have moved to fill the gap in mortgage and personal loans provision. - Shift in lending activity raises financial stability concerns, including regulatory arbitrage, due to weaker oversight and availability of data on credit union activities. - Regional prudential regulations on valuation and provisioning and introduction of IFRS9 (expected later this year) will likely raise provisioning requirements for domestic financial institutions. - Need to continually re-assess regulatory and supervisory framework for the entire financial system. - ECCU taking steps toward regional harmonization of regulations and oversight of the non-bank financial sector; acceleration of this process would help reduce potential financial stability risks in Grenada. - Scope to upgrade system oversight, especially of non-bank financial institutions: - Banks: priority to better understand links between banks, credit unions and insurance companies, particularly through deposits, and to closely cooperate with the ECCB on AML/CFT aspects of bank supervision (an MOU has been agreed between the ECCB and GARFIN). - Non-bank institutions: local regulator should be strengthened to better monitor risks—intensify regulation and supervision of credit unions, proactively enforce the 10 percent capital requirement, revamp reporting for more granular loan data, enhance asset quality reviews, and conduct stress tests of all credit unions and insurance companies. Ongoing CARTAC TA supports these efforts. - Correspondent banking relationships (CBRs) and AML/CFT: Grenadian banks have not had a meaningful loss of CBRs but non-bank financial institutions may lose access to banks based on AML/CFT concerns. Ensuring compliance with AML/CFT regulations and strict enforcement of the due diligence process of the CBI program are critical for continued stable access to cross-border bank payments. ### Authorities’ views on financial oversight - Authorities agreed rapid lending growth in credit unions warranted close monitoring. - Steps being taken: improve data collection and dissemination, update financial stability indicators, start regular stress testing. - Authorities confident in ongoing AML/CFT efforts, including information exchange and joint inspections with the ECCB. - Committed to maintaining integrity of the CBI program. - Hopeful that legislation to formalize annual registration of entities for AML/CFT purposes would be passed soon. ### Supply-side reforms to raise potential growth and resilience - Raising potential growth hinges on improving productivity and increasing resilience to shocks. - Recent growth and investment strength has been driven in significant measure by temporary factors (e.g., increases in construction of several resorts); long-term productivity growth has been weak. - Productivity should be enhanced through improving the business environment and product market regulation and implementing well-designed sectoral strategies. - Close attention to competitiveness is needed to avoid FDI and CBI inflows overheating the economy and accelerating wage growth beyond productivity gains. - Significant potential for further employment gains to spread benefits of growth more broadly. - Greater resilience to natural disasters would cushion the detrimental impact of shocks on output. - Staff stressed policy priorities: - Business environment and productivity: - Gaps remain in property registration, ease of paying taxes, and investor protection despite progress in investment promotion and insolvency processes. - Actions: enhance corporate governance and transparency, facilitate business-friendly tax and customs procedures, develop a credit registry, improve property rights and registration (e.g., land bank). - Labor market: - Address skills mismatches by upgrading education and training: - (i) focus school-level education to improve math and English scores; - (ii) prioritize vocational education; - (iii) maximize opportunities offered by St. George’s university; - (iv) develop flexible training programs to mirror dynamic employment structure. - Labor market context and statistics (Box 2): - Unemployment rate declined from 32½ percent in 2013 to 23½ percent in 2017 but remains high. - Employment grew briskly in 2017; temporary factors (seasonal public sector-related jobs) contributed. - Unemployment is particularly high among the young (40 percent) and women (27 percent). - High unemployment is primarily structural and related to skill mismatches: 50 percent are out of work for over 12-months; secondary or lesser-educated account for 90 percent of the unemployed. - Improving education attainment and training should reduce unemployment and boost female employment. - Sectoral policies — capitalize on comparative advantages: - Tourism: enhance links with other sectors (medical tourism, agri-tourism, sports and maritime tourism). - Agriculture: introduce better land use policies, invest in infrastructure and logistics, enhance market access (including to hotels and ports). - Energy: recent oil and natural gas discovery, if significant, would require suitable framework to manage resources; accelerate renewable energy projects (wind, geothermal, solar) and incentivize through facilitating entry and suitable regulation. - Inclusive growth: - The 2014-18 Growth and Poverty Reduction Strategy is set to expire; successor medium-term plan should operationalize progress toward the 2030 Development Plan with strategic direction and specific time-bound deliverables. - Climate resilience: - Authorities took proactive steps: creation of a new Ministry dedicated to climate resilience, adoption of several key policy documents, success in securing financing from the Green Climate Fund, and planned participation in the IMF’s Climate Change Policy Assessment initiative. *International Monetary Fund — Country Report excerpt* ### Box 3. Climate Change Preparedness and Resilience to Natural Disasters ### Box 3. Climate Change Preparedness and Resilience to Natural Disasters ### Climate policy and institutional developments - National Climate Change Policy (NCCP 2017) builds on the prior 2007 long-term action plan. - Identifies (i) updated objectives and remaining institutional gaps and (ii) priority investments for critical infrastructure, land use, and food security. - Accommodates Grenada’s commitment to the UN’s Framework Convention on Climate Change (UNFCCC 2011) and CARICOM’s framework for resilience to climate change (2009). - In 2018 a Ministry of Climate Resilience, the Environment, Forestry, Fisheries, Disaster Management & Information was established to improve planning, coordination, and implementation. ### Adoption of supportive policies and planning tools - The NCCCP will be aligned with other policies and plans. - A National Climate Change Adaptation Plan (draft NCCAP 2017) provides: - A framework for building climate resilience with guidance on managing risks and responses. - Costing of actions that complement Grenada’s Intended Nationally Determined Contributions (INDC 2015) report to the UNFCCC. - Other legislative and planning developments: - National Land Use Policy and Natural Resource Management Bill were drafted in 2017. - Building codes were updated in 2016 and are being implemented. - Physical Development Plans (2003), the Land Acquisition Act, Land Development Regulations, and the draft Environmental Management Legislation and Regulations still need to be reviewed and updated. - Public investment screening: - Introduction of systematic screenings of public investment projects at the design phase for climate change risks. ### Access to financing and implementation constraints - Key bottlenecks: - High debt and limited capacity to plan and implement projects hamper financing. - Recent financing developments: - Grenada accessed the Green Climate Fund grants for pilot projects (about 1 percent of GDP) aimed at strengthening water resource management. - Applied for financing to build capacity at the National Designated Authority for climate change adaptation. - Developing a funding instrument to bundle small-scale community adaptation projects. - Potential financing channels: - Grenada’s PPP policy framework could be leveraged for well-designed adaptation projects. - Receipts of the CBI’s National Transformation Fund could be allocated towards adaptation projects and building up a public disaster fund. ### Staff appraisal — links to broader economic context and risks - Growth and fiscal context referenced in the assessment: - Economic and fiscal performance continued to exceed expectations in recent years. - Public debt ratio fell by around 11 percentage points of GDP in 2017 reflecting strong growth, improved fiscal position, and completion of the final phase of bond restructuring. - FDI was 8½ percent of GDP in 2017. - Constraints on potential growth that interact with climate vulnerability: - Susceptibility to economic shocks and natural disasters. - Insufficient labor skills. - High energy and other input costs. - A relatively undiversified economy, red tape, and an inefficient public sector. - Unemployment at 23½ percent and persistent poverty. - Implication: action is needed to reduce red-tape and bureaucracy, address weaknesses in planning, execution and monitoring of public infrastructure spending, ensure contained wage growth, and reduce skills gaps to strengthen resilience. ### Authorities’ views and planned priorities - Authorities prioritized raising potential growth through pro-growth reforms and public sector efficiency, re-examining fiscal and other constraints that hold back investment. - Plans highlighted: - Improve the business environment, including more efficient and business-friendly tax and customs procedures. - Boost youth employment with a focus on results-based education and training, particularly in vocational areas. - Boost infrastructure and resilience-related investment, exploring options for new projects financed by grants and concessional loans. - Use the planned climate change policy assessment to prioritize and catalyze resilience work. ### Policy implications and operational needs - Maintain and implement updated climate policies (NCCP 2017, draft NCCAP 2017) and align them with existing development plans and UNFCCC commitments. - Prioritize review and updating of Physical Development Plans (2003), the Land Acquisition Act, Land Development Regulations, and draft Environmental Management Legislation and Regulations. - Strengthen capacity to plan and implement projects to overcome financing bottlenecks and better leverage: - Green Climate Fund grants and other concessional financing. - PPP policy framework for adaptation projects. - CBI’s National Transformation Fund for adaptation and a public disaster fund. - Continue and expand systematic climate risk screening for public investments to improve resilience outcomes. *Source: Box 3. Climate Change Preparedness and Resilience to Natural Disasters — cr18236-grenadabundle* ### 34. Staff recommends that the next Article IV Consultation with Grenada be held on the ### 34. Staff recommends that the next Article IV Consultation with Grenada be held on the standard 12-month cycle. ### Recent economic developments - Growth momentum in 2017 was strong and above its estimated potential. - Growth was increasingly helped by external tailwinds and a pick-up in tourism demand and related activity in construction. - Continued weather-related weakness in agriculture offset some growth gains. - After a pick-up from a jump in telecom prices in 2016, inflation moderated in 2017. - Fuel price adjustments continue to reflect world oil price trends. - Real GDP growth (selected years from Table 1): 2014: 7.3; 2015: 6.4; 2016: 3.7; 2017: 4.5; projections 2018–2023: 3.6, 3.6, 2.9, 2.7, 2.7, 2.7. - Consumer prices, end of period (Table 1): 2014: -0.6; 2015: 1.1; 2016: 0.9; 2017: 0.5; projections 2018–2023: 3.0, 2.0, 2.0, 2.0, 2.0, 2.0. ### Labor market and unemployment - Unemployment has been declining but remains high; unemployment rate (2017) 23.6 (Table 1). - Youth unemployment has been well above average but fell substantially in 2017. - Labor force participation has been receding slightly. - Employment rate depends on level of education; high unemployment among the less-educated suggests a need for skill upgrading. - Unemployed by education level (2017, percent of total): None or Primary 44.33; Secondary 41.23; Post Secondary 4.72; Tertiary 9.24; Other 0.48. ### External sector and external financing - The real effective exchange rate has been declining. - The current account deficit in 2018–19 is expected to stay at the higher level observed in 2017. - Current account balance (Table 1): 2014: -4.4; 2015: -3.8; 2016: -3.2; 2017: -6.7; projections 2018–2023: -7.4, -7.5, -6.6, -6.4, -6.7, -6.6 (percent of GDP). - The current account deficit is more than fully financed by FDI and capital transfers, despite sizable portfolio outflows. - Net foreign asset position is gradually improving; imputed reserves remain at around 4 months of imports (imputed reserves, months of imports from Table 1: 2014: 3.4; 2015: 4.1; 2016: 3.9; 2017: 3.5; projections 2018–2023: 3.4, 3.4, 3.3, 3.2, 3.1, 3.0). - External debt (gross, percent of GDP, Table 1): 2014: 143.0; 2015: 133.2; 2016: 126.3; 2017: 116.4; projections 2018–2023: 108.4, 107.2, 100.8, 98.9, 97.4, 95.9. ### Monetary and banking developments - The banking deleveraging cycle is ending in a context of ample liquidity. - Bank credit to the private sector has been weak; private sector credit growth (Table 1): 2014: -5.1; 2015: -3.8; 2016: -0.2; 2017: 0.6; projections 2018–2023: 5.6, 8.0, 6.8, 6.6, 4.6, 5.6 (annual percent change). - Loan and deposit rates have steadily declined; selected interest rates (Figure 4): Policy Rate (ECCB), Lending Rate (Grenada), U.S. Bank Prime Rate, Deposit Rate (Grenada), Interbank Rate (ECCB) show downward trends through 2017. - Excess liquidity continues to be placed abroad and in unremunerated excess reserves at the central bank. - Imputed reserves (US$ m) and import coverage: imputed reserves series and months of imports shown in Figure 3 indicate coverage around 3–4 months. ### Fiscal developments and public finances - Fiscal deficit reduction in 2017 was larger than envisaged. - Tax revenue overperformed partially because of robust economic growth; total tax revenue (percent of GDP, Table 1): 2014: 18.2; 2015: 19.0; 2016: 21.1; 2017: 21.7; projections 2018–2023: 21.3, 20.8, 20.8, 20.7, 20.7, 20.6. - Spending was kept under control in part due to government’s attrition policy that helped keep wage spending in check. - Capital expenditure declined significantly in 2017 (Table 1: capital expenditure percent of GDP 2014: 9.2; 2015: 8.3; 2016: 4.2; 2017: 2.7; projections 2018–2023: 3.3, 3.3, 3.0, 4.8, 6.2, 6.5). - Stronger fiscal position together with high GDP growth and debt restructuring reduced public debt: public debt (incl. guaranteed, percent of GDP, Table 1) 2014: 101.8; 2015: 90.1; 2016: 82.0; 2017: 70.8; projections 2018–2023: 65.1, 65.0, 59.6, 52.9, 51.3, 50.7, 50.3 (note: Table 1 includes projections 2018–2023). - Central government operations (Table 2a, selected 2017 actual and 2018 budget figures in EC$ million): - Total revenue and grants (2017 Est.): 602.8; 2018 Budget: 658.5. - Total expenditure and net lending (2017 Est.): 717.6; 2018 Budget: 690.6. - Primary balance (2017 Est.): -27.6 (EC$ million); 2018 Budget: 57.8 (EC$ million). - Overall balance (2017 Est.): -114.8 (EC$ million); 2018 Budget: -32.2 (EC$ million). - Public Debt (EC$ million, year-end): 2017 Est.: 2,504.5; 2018 Budget (proj): 2,425.4. ### Financial sector - Banks continue to strengthen balance sheets and build up provisioning levels. - Nonperforming loans have declined across commercial, foreign, and indigenous banks (Figure 6). - Provisions to nonperforming loans have increased (provisions for loan losses to non-performing loans, percent). - Ample liquidity is maintained but is being placed in low-yielding assets. - Profitability declined moderately in 2017; capital remains well above the regulatory minimum (Total capital/Risk-weighted assets series above regulatory minimum in Figure 6). ### Key indicators and social statistics (selected) - Rank in UNDP Human Development Index (2016): 79 out of 179 countries. - Infant mortality rate per '000 births (2016): 9.9. - Adult illiteracy rate (2004): 4 (percent). - Life expectancy at birth (2014): 73 (years). - Poverty headcount index (2008): 38. - GDP per capita in US$ (2017): 10,390. - Population (2016): 0.11 (millions). - Unemployment rate (2017): 23.6 (percent). *Source: IMF staff report, Grenada country chapter (figures, tables and text as provided).* ### 1. Multilateral280.031.228.1288.233.327.3293.937.326.4 ### 1. Multilateral280.031.228.1288.233.327.3293.937.326.4 ### External and Domestic Financing Composition (selected lines) - Multilateral: CDB 134.7; IDA 77.7; IBRD 14.9; IMF 29.3; Other Multilateral 23.4. - Official bilateral: Total 97.0. - Paris Club 1/ 10.8. - France 4.5. - Russian Federation 0.2. - U.S. 3.0. - U.K. 3.2. - Other 86.2. - Kuwait 17.0. - Taiwan Province of China 2/ 19.4. - Trinidad and Tobago 32.9. - Venezuela 10.0. - Other Bilateral 6.9. - Commercial debt: Total 188.1. - US$ 2040 Bonds 5/ 179.2. - Other Bonds 8.9. - External arrears on interests: 3.4. - Overdue membership fees: 22.8. - Central-government guaranteed (external?): 20.6. ### Domestic Debt and Instruments (selected lines) - Domestic debt total: 286.4. - A. Central Government: 266.6. - Treasury bills: 117.9. - RGSM 3/3 5.9. - 3 month initial maturity 13.0. - 1 year initial maturity 23.0. - Private placements 82.0. - National Insurance Scheme 14.8. - Petrocaribe Grenada 34.8. - Other private placements 32.4. - Bonds (total): 111.4. - EC$ 2040 Bonds 5/6 8.9. - Private Placements 37.9. - Other Bonds 4.6. - Domestic arrears on interests: 4.4. - Compensation claims: 14.8. - Commercial Bank Loans: 7.0. - Overdraft: 0.00. - Supplier arrears: 0.00. - Other 4/: 11.1. - B. Central-Government Guaranteed (domestic?): 19.8. - Memorandum item: Nominal GDP 997.0; 1056.2; 1113.3 (series indicated). *Sources: Grenadian authorities and Fund staff estimates.* --- ### Table 4 — External and Domestic Arrears, 2016–2017 (year-end, US$ mln unless noted) - Total arrears (2016): 50.7 (5.4% of GDP); (Q4 2017 prel.) 56.2 (5.6% of GDP); 45.4 (4.5% of GDP) [other years listed]. - External arrears (2016): 37.0 (3.9%); 40.9 (4.1%); 33.9 (3.2%) [others]. - Multilateral: 0.00. - Bilateral (2016): 14.0 (3.4%); 17.4 (1.7%); 11.9 (2.7%). - Paris Club 1.4 (0.5%). - Non-Paris Club 12.6 (2.9%). - Algeria 3/ 1.9 (0.0%). - Libya 5.0 (0.0%). - Trinidad and Tobago 4.6 (2.6%). - Venezuela 1.1 (0.3%). - Commercial: 6.9 (0.5%). - Unpaid contribution to organizations: 16.1 (0.0%); 16.1 (1.5%). - Budget expenditure arrears: 13.7 (1.6%). - Domestic debt 1/: 13.7 (1.6%). - Domestic debt under restructuring 2/: 13.7 (1.6%). - ECCB: 0.00. - Supplier arrears: 0.00. --- ### Table 5 — Balance of Payments Summary, 2014–2023 (US$ millions and percent of GDP projections) - Current account (levels): 2014 -40.4; 2015 -38.3; 2016 -33.9; 2017 -74.7; 2018 -88.1; 2019 -93.6; 2020 -86.7; 2021 -89.2; 2022 -97.0; 2023 -100.4. - Trade balance for goods and services (levels): 11.4; 12.9; 39.5; 1.2; -3.6; -5.0; 5.8; 7.4; 3.9; 6.2. - Exports of goods and services (levels): 60.2; 58.0; 56.1; 56.3; 56.3; 56.2; 56.0; 55.9; 55.9; 55.8 (percent of GDP series also provided). - Tourism (levels): 466.2; 493.0; 510.0; 545.5; 579.6; 612.3; 641.4; 671.9; 703.9; 737.7. - Nutmeg (levels): 6.1; 4.9; 4.6; 3.8; 4.3; 4.4; 4.5; 4.6; 4.7; 0.0. - Imports of goods and services (levels): 536.9; 565.5; 553.0; 625.9; 670.9; 710.3; 733.3; 767.1; 809.0; 845.3. - Mineral fuels (levels): 79.3; 59.1; 50.8; 49.8; 65.0; 67.2; 66.8; 67.2; 68.3; 70.0. - Foodstuffs (levels): 79.2; 83.0; 81.5; 93.2; 100.5; 105.2; 106.7; 108.1; 111.1; 114.1. - Net Income (levels): -56.3; -58.2; -61.2; -64.5; -68.7; -72.7; -76.5; -80.3; -84.3; -88.5. - Current transfers (levels): 4.6; 7.1; -12.2; -11.3; -15.8; -15.8; -16.1; -16.3; -16.6; -18.1. - Capital account (levels): 65.1; 89.4; 36.9; 96.8; 59.8; 62.1; 64.0; 66.1; 68.1; 70.2. - o.w. debt forgiveness 1/: 17.2; 48.4; 4.5; 49.5; 0.0; 0.0; 0.0; 0.0; 0.0; 0.0. - Financial account (levels): -9.4; 30.4; -1.0; 30.8; -48.4; -47.2; -32.5; -28.9; -36.4; -51.9. - Foreign direct investment: -58.4; -88.6; -90.8; -95.1; -101.8; -114.1; -120.0; -126.0; -132.3; -138.9. - Portfolio investment (net): -1.7; 123.1; 66.1; 69.3; 73.3; 77.2; 80.6; 84.2; 87.9; 91.7. - Other investment (net): 50.7; -4.1; 23.6; 50.1; -12.2; -3.9; 10.8; 14.5; 10.0; 4.4. - o/w Petrocaribe: 0.4; 0.5; 0.5; 0.5; 0.5; 0.6; 0.6; 0.6; 0.7; 0.7. - Errors and omissions: 1.1; 1.1; -0.9; 0.0; 0.0; 0.0; 0.0; 0.0; 0.0; 1.0. - Overall balance (levels): 35.3; 21.8; 3.1; -14.9; 12.5; 9.3; 5.9; 4.2; 5.5; 12.6. - Overall financing mirrors overall balance and financing components (detailed line items include changes in ECCB NFA, use of Fund resources, World Bank, CDB). - Memorandum items: - Gross external debt (percent of GDP): 143.0; 133.2; 126.3; 116.4; 108.4; 107.2; 100.8; 98.9; 97.4; 95.9. - External public and publicly guaranteed debt: 67.7; 61.4; 56.9; 48.0; 47.1; 43.8; 39.2; 38.9; 39.0; 39.2. - Foreign liabilities of private sector 2/: 75.3; 71.8; 69.4; 68.4; 61.3; 63.4; 61.7; 60.1; 58.4; 56.8. - Nominal GDP (levels): 911.5; 997.0; 1056.2; 1113.3; 1185.0; 1254.3; 1319.1; 1385.6; 1454.8; 1527.3. --- ### Table 6 — Summary Accounts of the Monetary Sector, 2014–2023 (EC$ millions; selected lines) - Net foreign assets (levels): 582.2; 852.5; 1,003.2; 1,097.9; 1,140.2; 1,225.6; 1,302.5; 1,354.8; 1,393.1; 1,442.2. - ECCB: 427.3; 509.0; 543.7; 526.1; 546.5; 563.8; 574.4; 578.7; 584.1; 608.6. - Commercial banks (net): 154.8; 343.5; 459.5; 571.8; 593.7; 661.9; 728.1; 776.1; 809.0; 833.6. - Assets (levels): 672.7; 855.9; 966.8; 1,092.6; 1,083.7; 1,137.3; 1,198.2; 1,244.7; 1,271.4; 1,290.0. - Net domestic assets (levels): 1,435.8; 1,269.9; 1,147.8; 1,138.3; 1,240.1; 1,293.9; 1,347.3; 1,428.5; 1,529.1; 1,625.7. - Public sector credit (net): -104.3; -166.4; -248.9; -231.1; -222.3; -250.7; -279.1; -295.1; -302.3; -307.9. - Central government: 17.6; -65.6; -58.8; -120.6; -111.3; -167.7; -215.6; -251.1; -281.5; -307.9. - ECCB: 25.1; 8.3; 0.0; 0.0; 0.7; -12.0; -24.0; -36.0; -48.0; -60.0. - Commercial banks: 86.2; 67.9; 72.6; 63.4; 45.7; 36.8; 31.2; 25.6; 19.6; 13.7. - Credit to private sector: 1,613.9; 1,552.4; 1,548.6; 1,558.5; 1,646.6; 1,777.5; 1,899.1; 2,024.0; 2,154.5; 2,275.5. - Broad money (M2) (levels): 2,018.0; 2,122.4; 2,151.0; 2,236.2; 2,380.3; 2,519.5; 2,649.8; 2,783.3; 2,922.2; 3,067.9. - Money: 466.5; 543.0; 577.9; 625.1; 683.6; 762.1; 833.4; 894.9; 957.0; 1,027.1. - Currency in circulation: 124.1; 131.5; 135.7; 151.4; 165.5; 184.6; 201.8; 216.7; 231.8; 248.7. - Quasi-money: 1,551.5; 1,579.4; 1,573.1; 1,611.2; 1,696.7; 1,757.4; 1,816.4; 1,888.4; 1,965.1; 2,040.8. - Time deposits: 287.1; 271.4; 242.6; 215.6; 227.0; 235.1; 243.0; 252.7; 262.9; 273.1. - Savings deposits: 1,167.9; 1,160.5; 1,174.7; 1,216.3; 1,280.9; 1,326.7; 1,371.2; 1,425.6; 1,483.5; 1,540.7. - Foreign currency deposits: 96.4; 147.4; 155.9; 179.3; 188.8; 195.6; 202.1; 210.2; 218.7; 227.1. - Growth rates and percent of GDP series are provided (e.g., Net foreign assets percent changes, Broad money growth: 4.1; 5.2; 1.3; 4.0; 6.4; 5.8; 5.2; 5.0; 5.0; 5.0). - Interest rates (percent per year) listed: - ECCB policy rate: 6.5; 6.5; 6.5 ... - US policy rate: 0.1; 0.1; 0.4 ... - Interbank market rate: 6.0 N.A. N.A. - Time deposit rate: 2.0; 1.6; 1.3 ... - Demand deposit rate: 0.3; 0.3; 0.1 ... - Weighted average lending rate: 9.0; 8.7; 8.4 ... --- ### Table 7 — Indicators of Capacity to Repay the Fund, 2014–2023 (SDR and US$ where noted) - Existing Fund credit (stock): - In percent of quota: 174.3; 180.8; 131.3; 110.1; 101.2; 89.0; 80.7; 69.6; 53.8; 36.6. - In millions of SDRs: 20.4; 21.2; 21.5; 18.1; 16.6; 14.6; 13.2; 11.4; 8.8; 6.0. - In millions of US$: 29.7; 29.3; 29.0; 24.3; 22.3; 19.7; 17.8; 15.4; 11.9; 8.1. - In percent of GDP: 3.3; 2.9; 2.7; 2.2; 1.9; 1.6; 1.4; 1.1; 0.8; 0.5. - Outstanding Fund credit (end of period) mirrors existing credit series (detailed percent of quota, SDRs, US$, percent of exports, percent of debt service, percent of GDP, percent of Imputed Net International Reserves). - In percent of exports of goods and services: 5.4; 5.1; 4.9; 4.3; 3.3; 2.8; 2.4; 2.0; 1.5; 1.0. - In percent of debt service: 24.5; 27.2; 53.1; 48.1; 46.3; 41.1; 38.9; 33.3; 24.7; 15.6. - Fund obligations based on existing and prospective (levels and percent metrics) and projected net use of Fund credit (e.g., Net use of Fund credit: 2.3; 0.8; 0.4; -1.2; -3.2; -2.0; -1.4; -1.8; -2.6; -2.8). - Memorandum items: - Exports of goods and services (US$ millions): 548.3; 578.3; 592.6; 627.1; 667.3; 705.3; 739.1; 774.6; 812.9; 851.5. - Debt service (US$ millions): 121.3; 107.7; 54.6; 56.1; 48.3; 47.8; 45.8; 46.2; 48.1; 51.8. - GDP (US$ millions): 911.5; 997.0; 1,056.2; 1,113.3; 1,185.0; 1,254.3; 1,319.1; 1,385.6; 1,454.8; 1,527.3. - Imputed Net International Reserves (US$ millions): 158.3; 188.5; 201.4; 194.9; 202.4; 208.8; 212.7; 214.3; 216.3; 225.4. - Quota (millions of SDR): 11.7; 11.7; 16.4; 16.4; 16.4; 16.4; 16.4; 16.4; 16.4; 16.4. --- ### Table 8 — Financial Sector Indicators, 2010–2017 (selected indicators) - Balance sheet (percent of GDP or percent as labelled): - Total Assets: 136.0 (2010); 137.2; 128.8; 122.4; 114.8; 111.7; 110.3; 112.2 (2017). - Gross Loans: 96.2; 95.8; 91.6; 82.0; 71.4; 61.8; 57.3; 54.9. - o/w NPLs: 7.3; 9.0; 10.8; 11.3; 10.4; 6.2; 3.8; 2.6. - Provisions for NPLs: 2.1; 2.5; 3.6; 4.0; 4.1; 2.6; 1.9; 1.4. - Deposits: 115.1; 114.9; 108.5; 107.1; 104.1; 101.1; 97.5; 97.7. - Capital: 2.4; 2.4; 2.4; 2.2; 2.1; 1.9; 1.8; 2.2. - Profitability and income shares: - Interest Income/Total Income: 87.8; 84.6; 82.3; 82.1; 77.9; 75.6; 77.6; 77.2. - Operating Expenses/Total Income: 45.6; 46.4; 43.0; 58.0; 67.4; 52.8; 59.2; 59.3. - ROAE 5/: 16.5; 3.2; 6.9; -28.7; -1.0; 31.3; 28.4; 17.2. - ROAA: 1.2; 0.2; 0.5; -1.9; -0.1; 1.5; 1.5; 1.1. - Capital adequacy: - CAR 5/: 16.5; 15.1; 13.9; 13.6; 13.0; 12.2; 13.0; 13.9. - T1R: 15.0; 13.6; 13.2; 12.2; 11.7; 10.2; 11.1; 11.4. - RWA/Assets: 66.2; 67.5; 70.8; 70.2; 68.4; 69.2; 65.9; 65.9. - Asset quality: - NPL Ratio: 7.5; 9.4; 11.8; 13.8; 14.6; 10.0; 6.7; 3.9. - Provisions/NPL: 28.6; 28.4; 33.2; 35.8; 39.3; 42.9; 49.9. - Liquidity and funding: - Liquid Assets/Total Assets: 20.7; 22.9; 22.9; 27.7; 32.8; 37.5; 40.8; 41.2. - Liquid Assets/Total Deposits: 24.4; 27.4; 27.2; 31.7; 36.2; 41.4; 46.1; 47.3. - LD Ratio: 83.6; 83.4; 84.5; 76.6; 68.6; 61.2; 58.8; 56.2. - Concentration and leverage: - C1 Borrower Loan/Capital Ratio: 15.8; 17.4; 18.4; 22.4; 21.4; 19.2; 17.0. - Government Assets/Assets: 9.5; 9.2; 5.6; 6.5; 7.7; 9.7; 11.6. - Government Liabilities/Liabilities: 9.7; 9.4; 5.7; 6.6; 7.9; 9.8; 11.8. *Sources: ECCB and Staff Estimations.* --- ### Annex I — Implementation of IMF Policy Recommendations of the 2016 Article IV Consultation (select recommendations and implementation status) - Fiscal Policy - Implement tax administration act. Implemented. - Broaden the tax base to include investment income and promote equity by lowering the PIT income threshold. Partial implementation: Income tax rates on the bottom tax category was reduced from 15 to 10 percent while income tax on pensions were removed in 2017. Elements to broaden the tax base have not been implemented. - Broaden the corporate income tax base by restricting deductions and taxing foreign-source interests, rents, royalties, and fees. No progress yet made. - Strengthen management of the public wage bill. Ongoing: Cabinet approved a comprehensive public wage bill management reform strategy in March 2017; implementation proceeding with delays. - Implement the regulations for the debt management act, finalize the medium-term debt strategy, and restructure the debt management unit. Implemented: Regulations passed in Q3 2016; medium-term debt strategy included for 2017 budget; debt management unit restructured and fully staffed in 2017. - Redouble efforts to launch the SEED beneficiary system to strengthen social spending effectiveness. Implemented: Beneficiary information system operational since Q3 2016. - Provide staffing for SOE monitoring and oversight and outreach on reporting, dividend policy and salary guidance; examine tariff reforms and private participation. Ongoing: Individuals identified within Macro Policy Unit; second phase tariff adjustments pending. - Financial Sector - Strengthen AML/CFT framework and financial sector supervision to minimize CBR withdrawals. Ongoing: ECCB responsible for AML/CFT supervision; government executed Intergovernmental Agreement with the United States and will soon enact FATCA legislation. - Strengthen regulation and oversight of non-bank financial sector. Ongoing: Cooperative Societies Amendment Act passed October 2017; GARFIN improved capacity for credit quality review, stress testing of credit unions, and off-site supervision of insurance companies; work ongoing on national crisis management plan. - Growth Policy - Strengthen investment processes through new Act for GIDC and improve labor relations and labor market flexibility by revising the Labor Code. Implemented: Achieved November 2016. - Accelerate structural reforms to improve business climate (property registration, corporate governance, customs, port charges, building quality control, regional credit registry). Ongoing: Property records automated; E-Systems established for permits and registrations; judicial system delay mitigation efforts; regional credit registry approved by ECCB monetary council but not established. - Revise and align education curriculum with labor market; provide technical and vocational training in collaboration with private sector. Ongoing: Youth skills training and apprenticeship program revamped; labor market information system established. *Implementation table headings: "Recommendations" and "Implementation Status" as provided in source.* *Sources: IMF staff and Grenadian authorities as cited in the original tables and annex.* ### Annex II. Risk Assessment Matrix ### Annex II. Risk Assessment Matrix ### Risk Matrix Summary - The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff). - Relative likelihood categories: "low" = probability below 10 percent; "medium" = probability between 10 and 30 percent; "high" = probability between 30 and 50 percent. - "Short term" = risk could materialize within 1 year; "medium term" = within 3 years. - Non-mutually exclusive risks may interact and materialize jointly. ### Identified Sources of Risk and Staff Assessment - Retreat from cross-border integration - Relative Likelihood: Medium - Impact/Time Horizon: Medium/Short to Medium Term - Channel: Lower tourist arrivals and FDI - Recommended Policy: Carry through with prudent fiscal policies anchored by the FRL and structural reforms to build buffers and improve productivity and competitiveness. - Weaker-than-expected global growth - Relative Likelihood: Medium - Impact/Time Horizon: High/Short to Medium Term - Channel: Lower growth and worsening of fiscal and external balances - Recommended Policy: Carry through with prudent fiscal policies anchored by the FRL and structural reforms to build buffers and improve productivity and competitiveness. - Policy and geopolitical uncertainties - Relative Likelihood: Medium - Impact/Time Horizon: High/Short to Medium Term - Channel: Lower consumption and investment - Recommended Policy: Carry through with prudent fiscal policies anchored by the FRL and structural reforms to build buffers and improve productivity and competitiveness. - Loss of Petrocaribe financing - Relative Likelihood: High - Impact/Time Horizon: High/Short Term - Channel: Worsening of fiscal and external balances - Recommended Policy: Carry through with prudent fiscal policies anchored by the FRL and structural reforms to build buffers and improve productivity and competitiveness. - New initiatives on pension and health care, higher than expected public sector wage increase and delays in public sector wage bill reforms - Relative Likelihood: Medium - Impact/Time Horizon: Medium/Short to Medium Term - Channel: Could push the expenditure above the FRA-mandated expenditure-growth ceiling; worsening fiscal balances - Recommended Policy: - Internalize future aging costs in the FRL based on robust costing assessments. - Examine parametric reform of the pension system. - Carry through with prudent fiscal policies anchored by the FRL and structural reforms to build buffers and improve productivity and competitiveness. - Hurricanes (severe damage to infrastructure and disruption of tourism flows) - Relative Likelihood: Medium - Impact/Time Horizon: High/Short to Medium Term - Channel: Lower growth and worsening of fiscal and external balances - Recommended Policy: - Build buffers by saving receipts from the citizenship by investment program. - Increase coverage of natural disaster insurance with donor assistance. - Adhere to the fiscal rules in the FRL. - Over the long-term, work with World Bank and donors to build resilience to climate change. ### Policy Anchor Referenced Across Risks - Consistent recommendation: carry through with prudent fiscal policies anchored by the FRL and pursue structural reforms to build buffers and improve productivity and competitiveness. *Source: cr18236-grenadabundle - Annex II. Risk Assessment Matrix* ### 1. Fi sca l Rules ### 1. Fi sca l Rules ### Appraisals and Project Selection - "The methodology for project appraisals inclusive of risk assessments and the criteria and procedures for project selection have yet to be published." - "The below average score reflects shortcomings in the budget process for capital and current spending as well as in appraisals of project proposals and in project selection." - "Initiatives have been implemented to address some of these shortcomings but they have only been in effect for a year." ### Institutional Framework and Budget Protection - "The institutional framework for implementation needs significant strengthening." - "The budget system is relatively disciplined and transparent but needs to establish safeguards more explicitly." - "Total project costs are identified in the annual budget and financing is often timely released with ongoing projects given priority in annual allocations." - "Financing for investment projects is protected since unspent appropriations for capital outlays can be carried over to subsequent years and the PFM Act prohibits the shifting of financing to current spending." - "Donor funds appear to be reasonably well-protected, although a few are outside of the Single Treasury Account (TSA)." ### Procurement and Transparency - "Most major projects are tendered competitively but information on procurement is not often made available to the public." ### Project Implementation and Monitoring - "Project costs and physical progress are centrally monitored during implementation but project management arrangements including inadequate staffing in line ministries and executing agencies has contributed to the government’s inability to meet conditions precedent to donor disbursements in a timely manner and causes realized investment to fall short of estimates." - "Rules and procedures for project adjustments or reviews of the rationale, costs and expected outputs are not standardized." ### Audits and Asset Management - "Ex-post audits are rare unless required by donors, and except for some equipment, there is no monitoring and management of public physical assets." *cr18236-grenadabundle - 1. Fi sca l Rules* ### 6. The reform momentum must continue to ensure that public investment is efficient, ### 6. The reform momentum must continue to ensure that public investment is efficient, provides growth dividends and ensures Grenada’s resilience to natural disasters. ### Public Investment Management (PIM) reforms and recommendations - Authorities have embarked on many initiatives to improve the institutional and legal framework for PIM; many are in the early stages of implementation and will likely improve future assessments and scores. - Establish a successor to the GPRS (2014/18) with costings and measurable targets for outputs and outcomes that: - Harmonizes policy direction and implementation, including the NAP, in the medium term. - Is anchored by the National Sustainable Development Plan 2030. - Restructure functions and operations at: - The Ministry of Finance. - The Ministry of Infrastructure Development. - Objective: improve planning, coordination and implementation capacities for projects. - Establish an asset registry to: - Facilitate management and disposal of physical assets. - Improve assessment of loss following natural disasters. - Procedural and climate adaptation steps: - A draft procedures manual has been prepared and should be finalized in 2018. - From 2017, line ministries are explicitly required to consider the climate adaptation impacts of their proposed major capital projects. ### Key macroeconomic and fiscal indicators (selection, 2015–2023; projections labeled "Proj.") - GDP at constant prices (annual percentage change): - 2015: 6.4 - 2016: 3.7 - 2017: 4.5 - 2018 (Proj.): 3.6 - 2019 (Proj.): 3.6 - 2020 (Proj.): 2.9 - 2021 (Proj.): 2.7 - 2022 (Proj.): 2.7 - 2023 (Proj.): 2.7 - GDP deflator (annual percentage change): - 2015: 2.8 - 2016: 2.2 - 2017: 0.9 - 2018–2023 (Proj.): 2.7, 2.2, 2.2, 2.2, 2.2, 2.2 (respectively) - Consumer prices, end of period: - 2015: 1.1 - 2016: 0.9 - 2017: 0.5 - 2018–2023 (Proj.): 3.0, 2.0, 2.0, 2.0, 2.0, 2.0 - Credit to private sector (end period, percent change): - 2015: -3.8 - 2016: -0.2 - 2017: 0.6 - 2018–2023 (Proj.): 5.6, 8.0, 6.8, 6.6, 6.4, 5.6 - Broad money (M2, end period, percent change): - 2015: 5.2 - 2016: 1.3 - 2017: 4.0 - 2018–2023 (Proj.): 6.4, 5.8, 5.2, 5.0, 5.0, 5.0 ### Central government fiscal balances (in percent of GDP) - Revenue: - 2015: 24.5 - 2016: 26.4 - 2017: 25.9 - 2018–2023 (Proj.): 25.8, 25.2, 25.1, 24.9, 24.8, 24.6 - Expenditure: - 2015: 25.7 - 2016: 24.0 - 2017: 22.8 - 2018–2023 (Proj.): 22.4, 21.9, 21.4, 23.0, 24.3, 24.6 - Of which, capital expenditure: - 2015: 8.3 - 2016: 4.2 - 2017: 2.7 - 2018–2023 (Proj.): 3.3, 3.3, 3.0, 4.8, 6.2, 6.5 - Primary balance (includes 0.7% of GDP CBI-related non-tax revenue in 2015): - 2015: 2.1 - 2016: 5.2 - 2017: 5.7 - 2018–2023 (Proj.): 5.6, 5.3, 5.5, 3.6, 2.1, 1.6 - Overall balance: - 2015: -1.2 - 2016: 2.3 - 2017: 3.0 - 2018–2023 (Proj.): 3.4, 3.3, 3.6, 1.9, 0.5, 0.0 ### Public debt and external sector (key figures) - Public debt (incl. guaranteed), percent of GDP: - 2015: 90.1 - 2016: 82.0 - 2017: 70.8 - 2018–2023 (Proj.): 65.0, 59.6, 52.9, 51.3, 50.7, 50.3 - Domestic public debt (percent of GDP): - 2015: 28.7 - 2016: 25.1 - 2017: 22.7 - 2018–2023 (Proj.): 17.9, 15.8, 13.7, 12.4, 11.7, 11.1 - External public debt (percent of GDP): - 2015: 61.4 - 2016: 56.9 - 2017: 48.0 - 2018–2023 (Proj.): 47.1, 43.8, 39.2, 38.9, 39.0, 39.2 - Gross international reserves (millions of dollars): - 2015: 188.5 - 2016: 201.4 - 2017: 194.9 - 2018–2023 (Proj.): 202.4, 208.8, 212.7, 214.3, 216.3, 225.4 - GIR (in months of imports): - 2015: 4.1 - 2016: 3.9 - 2017: 3.5 - 2018–2023 (Proj.): 3.4, 3.4, 3.3, 3.2, 3.1, 3.0 - External debt (gross, percent of GDP): - 2015: 133.2 - 2016: 126.3 - 2017: 116.4 - 2018–2023 (Proj.): 108.4, 107.2, 100.8, 98.9, 97.4, 95.9 - Savings-Investment balance (percent of GDP): - 2015: -3.8 - 2016: -3.2 - 2017: -6.7 - 2018–2023 (Proj.): -7.4, -7.5, -6.6, -6.4, -6.7, -6.6 - Savings (percent of GDP): - 2015: 13.9 - 2016: 17.0 - 2017: 11.9 - 2018–2023 (Proj.): 11.8, 12.3, 12.9, 14.8, 15.9, 16.3 - Investment (percent of GDP): - 2015: 17.7 - 2016: 20.2 - 2017: 18.6 - 2018–2023 (Proj.): 19.2, 19.8, 19.4, 21.2, 22.6, 22.9 ### Social and demographic indicators (selected) - Rank in UNDP Human Development Index: 79 out of 188 countries (2016). - Infant mortality rate per '000 births (2016): 9.9. - Adult illiteracy rate in percent (2004): 4. - Life expectancy at birth in years (2014): 73. - Poverty headcount index (2008): 38. - GNI per capita in US$ (2017): 10,390. - Unemployment rate (2017): 23.6. - Population in millions (2016): 0.11. ### Fund relations, technical assistance, and institutional developments - IMF membership: Joined August 27, 1975; Article VIII. - Quota: SDR 16.40 (100.00 percent of quota). - Fund Holdings of Currency: SDR 15.23 (92.84 percent of quota). - Outstanding Purchases and Loans: ECF Arrangements SDR 19.46 (118.69 percent of quota). - Latest ECF arrangement: June 26, 2014 – May 26, 2017; Amount approved and drawn: 14.04 SDR Million. - Projected obligations to Fund (SDR Million, based on existing use of resources and present holdings of SDRs): - Principal: 2018: 2.88; 2019: 2.00; 2020: 1.35; 2021: 1.81; 2022: 2.61. - Charges/Interest: 2018: 0.06; 2019–2022: 0.09 each year. - Total: 2018: 2.94; 2019: 2.09; 2020: 1.44; 2021: 1.90; 2022: 2.70. - Safeguards Assessment (2016 update): ECCB maintains a governance framework with independent oversight; transparency in financial reporting maintained; external audit mechanism sound; internal audit restructured; independent risk management unit established. - Exchange arrangement: Member of ECCB; EC$ pegged to U.S. dollar at EC$2.70 per U.S. dollar since July 1976; ECCB operates like a quasi-currency board. - CARTAC technical assistance highlights (2016–2018): - Public Finance Management: SOE and statutory bodies reform, cash forecasting and commitment control, new chart of accounts consistent with GFSM2014, PEFA assessment, roadmap toward IPSAS Accruals, assistance on Public Service Pension Reform. - Tax Administration: Establishment of Large and Medium Taxpayer Unit and a Design, Planning and Monitoring Section at IRD. - Financial Stability and Supervision: Support to GARFIN for risk-based supervision and development of insurance sector indicators; capacity building on reinsurance. - Macroeconomic framework and statistics: Support for medium-term economic framework, GDP by expenditure improvements, quarterly GDP by activity, development of Producer Price Index, BPM6 BOP and IIP compilation improvements. ### Statistical issues and data adequacy for surveillance - General: Data provision has some shortcomings but is adequate for surveillance. - National accounts: - Rebasing to 2006 released in October 2010 improved coverage and methodology. - Weaknesses: GDP by expenditure not available at constant prices; current price series unreliable due to gross capital formation estimation; private final consumption expenditure estimated as a residual. - Delays in receiving and processing survey data (e.g., St. George’s University). - Quarterly GDP by production approach improved with CARTAC support. - Prices and high-frequency statistics: - Regular data on CPI, retail sales, agricultural production, motor vehicle registration, cargo handled, fish production and exports, industrial production, imports of construction material, water and electricity. - CPI rebased and re-referenced to January 2010 using 2007/08 HIES; recommendation to conduct HIES on a five-year cycle (current ten-year period). - Producer prices, export and import price indices not yet available; CSO intends to develop a PPI for certain sectors. - Labor statistics: - Annual Labor Force Survey introduced in 2013; rounds completed in 2014, 2015, and 2017. - Job Opening and Labor Turnover Survey (2015) results not finalized. - Population census completed in 2011. - Regular wage data not available except partial NIS data. - Government finance statistics: - Central government reporting improved; monthly data sent to ECCB/IMF with lags about 4–6 weeks in Fund economic classification format. - Challenges: receipts from the CBI program not comprehensively reported; donor-financed capital spending often not available until year-end. - New Chart of Accounts introduced in 2016 improved classification. - No consolidated public-sector accounts; coverage of public enterprises improved but limited. - PFM Act of 2015 requires public enterprises to submit annual financial statements within three months after fiscal year-end. - Monetary statistics: Compiled by ECCB monthly; issues with institutional coverage of other depository corporations and valuation incorporating accrued interest; commercial bank source data lack recommended MFS disaggregation. - Balance of payments: BPM6-compliant BOP and IIP released July 2017 for 2014–16 and 2013–16; efforts underway to compile 2017 statistics and revise series. - External and domestic debt statistics: Central government external debt database comprehensive; RGSM provides domestic securities data; limitations on future projection data, government-guaranteed debt, public enterprises, and no data on private external debt. - Participation in data standards: Grenada has participated in the Fund’s General Data Dissemination System since March 2001; most metadata not updated since late 2002. ### Debt sustainability assessment (LIC-DSA) — summary finding - External Debt Risk Rating: In Debt Distress. - Context and recent history: - Total public debt fell from 108 percent of GDP in 2013 to below 71 percent of GDP in 2017. - External public debt declined to 48 percent of GDP by 2017. - Reduction enabled by comprehensive public debt restructuring, fiscal consolidation, and robust economic growth. - Remaining vulnerabilities: - Unresolved arrears of US$15.7 million (1.4 percent of GDP) to official bilateral creditors. - As long as arrears remain, external debt risk rating remains “in debt distress”. - Policy implications: - Full regularization of arrears and continued fiscal discipline are needed to keep debt on a downward path and to withstand vulnerabilities to external shocks and natural disasters. *Prepared by IMF staff; content extracted from the chapter "6. The reform momentum must continue to ensure that public investment is efficient, provides growth dividends and ensures Grenada’s resilience to natural disasters."* ### 1. Debt regularization has progressed but arrears remain with a few bilateral creditors. ### 1. Debt regularization has progressed but arrears remain with a few bilateral creditors. ### Debt restructuring and arrears - Over 2013-17, the Government of Grenada undertook a comprehensive and collaborative debt restructuring in the context of the concurrent ECF-supported program. - Restructuring measures included face value reduction (50 percent) where applicable, interest rate adjustments, and maturity extensions. - Public debt declined from 108 percent of GDP in 2013 to 70.8 percent of GDP in 2017. - In PV terms, public debt to GDP declined from 104 in 2013 to around 63 percent in 2017. - In 2017, restructuring with Russia and United Kingdom was completed. - Official debt of US$15.7 million owed to non-Paris Club official bilateral creditors including Trinidad and Tobago, Algeria and Libya remain to be regularized. - The authorities are making payments on overdue membership fees in line with the revised schedule published in mid-2017. - In late-2017, Grenada received a 25 percent haircut on two international bonds. - Domestic debt refinancing included conversion of short-term T-bills into longer-term bonds. - There is overdue debt to a private creditor of around USD 2 million at end-2017; the authorities made significant (but partial) payments to this creditor in late-2017 and some of the remaining amount is pending court judgment. - Definition: Public debt in this DSA is defined as the sum of central government debt, government-guaranteed debt, overdue membership fees, and interest arrears. ### Composition of debt - Slight shift towards domestic debt financing in 2017 compared to 2016. - Share of external debt in central government debt has declined to below 70 percent. - Share of domestic debt has increased to over 30 percent. - Shares of multilateral and bilateral debt increased during 2017; share of commercial debt declined. - Domestic debt composition shifted significantly towards longer maturity bonds away from short-term treasury bills. - Central government guaranteed debt accounts for about 2.5 percent of total external debt. - Overdue payments of membership fees to international organizations were reduced in 2017; payments have been regularly made according to the schedule published in the sixth review of the ECF arrangement of May 2017. ### Debt management, SOE coverage, and borrowing strategy - The Fiscal Responsibility Law’s (FRL) medium-term public debt target is 55 percent of GDP; this is supported by FRL operational targets on the primary balance and spending growth and ongoing institutional reforms. - Debt management capacity needs further reforms, including data management and IT system enhancements. - The MoF is monitoring non-guaranteed debt of SOEs; monitoring and quality of information need to be further enhanced, formalized, and reported publicly. - Government's medium-term debt management strategy targets the proportions of external (up to 35 percent) and domestic debt in new issuances. - The strategy could be reviewed given increased availability of highly concessional external financing, including the US$30 million program loan from the World Bank approved in June 2018. - Substantial receipts under the Citizenship-by-Investment (CBI) program increase the need to enhance efficiency of asset management and capacity for asset/liability operations. - The authorities would have to undertake a payment to 2025 bond holders, due in 2018, of a portion of CBI receipts, since CBI receipts are estimated to have overperformed the key US$25 million threshold. ### Macroeconomic assumptions and outlook - Real GDP growth projections for 2018-23 are higher by about ½ percentage point due to vibrant construction and good tourism performance. - Long-term growth is projected to remain at 2¾ percent. - Compliance with the FRL has strengthened the credibility of the fiscal framework. - Primary surpluses are expected to continue to overperform the FRL’s 3.5 percent of GDP floor through 2020; thereafter the FRL would allow for lower primary surpluses. - Switch to BPM6 led to a 10 percent of GDP reduction in the current account deficit and invalidates historical comparisons of the current account deficit (new data available from 2014). - The current account deficit would average around 7 percent of GDP in the medium term (through 2023), but would rise longer-term partly reflecting higher public investment. ### DSA update and public debt trajectory - Total public debt declined to below 71 percent of GDP at end-2017—a reduction of about 11 percentage points compared to 2016. - A little less than one-half of the decline reflected principal reductions from successful debt restructuring. - The primary drivers of the projected decline in PPG debt-to-GDP over the medium term are projected improvements in primary balances and GDP growth. - Contribution of the average effective interest rate to the reduction in the debt to GDP ratio is projected to moderate steadily over the medium term. - Projections assume continuing positive residuals in PPG debt dynamics, historically observed and partly reflecting broader coverage of public debt (including on-lending to SOEs and government-guaranteed debt of SOEs). - Projection is conservative in the medium term; residuals are expected to be higher than the historical average if more ambitious SOE-related investment plans are implemented. - External PPG debt is projected to trace a downward path and is lower than in previous DSA assessments. - Thresholds for the present value of PPG debt-to-GDP and the debt-to-exports ratio under the baseline scenario are no longer breached. - Due to remaining unresolved arrears to official bilateral creditors, Grenada’s DSA rating stands unchanged at “in debt distress” from the last assessment of May 2017. ### Risks, shock scenarios, and portfolio vulnerabilities - Downside risks remain substantial due to tourism exposure and external macroeconomic shocks (major tourist source markets: United States, Canada, United Kingdom). - Shocks to oil prices constitute an added risk. - Domestic risks include higher-than-expected pension and health care-related liabilities and natural disasters. - Continued strong commitment to the FRL is needed to manage risks. - Efforts to improve external statistics are ongoing to better assess risks from private external debt. - Shock scenarios show high vulnerability to exports (tourism sector) and natural disasters. - Breaches under stress tests for present value of debt-to-GDP and debt service-to-revenue ratios are similar to previous DSA; performance for debt service-to-exports is better partly reflecting higher measured exports under BPM6. - A natural disaster shock was calibrated based on estimated growth effects that the 2017 hurricane Maria had on Dominica; fiscal response assumes an increase of expenditures by a total of 5 percent in the two years following a hurricane or 2.5 percentage points in each year 2018-2019 to cover reconstruction costs. - Interest rate risk: average time to re-fixing is 7.8 years with 24.1 percent of the portfolio subject to change in interest rates in one year. - Domestic portfolio interest rate risk concentrated: 35.9 percent of domestic debt subject to re-fixing in one year due to substantial short-term treasury bills. - Refinancing risk: average time to maturity is 8.2 years, slightly exceeding the set target of greater than 8 years. - Foreign exchange risk is moderate given most foreign currency debt is denominated in US dollars to which the EC dollar is pegged. ### Policy implications and recommendations - Fully regularizing external arrears would help tangibly improve the country’s DSA rating. - Continue public debt reduction through: - Maintaining the FRL’s rules-based framework. - Pursuing structural fiscal reforms. - Further improving debt management capacity, including data management and IT enhancements. - Enhancing monitoring, formalization, and public reporting of SOE non-guaranteed debt and government-guaranteed exposures. - Review medium-term debt management strategy in light of increased concessional external financing. - Enhance efficiency of asset management and capacity for asset/liability operations given CBI receipts and large concessional flows. *cr18236-grenadabundle - 1. Debt regularization has progressed but arrears remain with a few bilateral creditors.* ### 11. The authorities agreed that gross public debt would remain on a downward trajectory. ### 11. The authorities agreed that gross public debt would remain on a downward trajectory. ### Authorities' commitments and actions - Committed to the Fiscal Responsibility Law (FRL) and to managing risks from new fiscal initiatives, including on pensions and health care, within the envelope defined by the FRL’s parameters. - Actively working to regularize arrears with the three remaining bilateral creditors; encountering difficulties, including being unable to establish sustained communication with one creditor country due to political circumstances. - Committed to fully honoring rescheduled debt obligations. - Exploring options for more active asset/liability operations and other steps to further improve debt management capacity. ### Recent fiscal and debt outcomes highlighted by the authorities - Public debt fell sharply to just below 71 percent of GDP at end-2017, a 37-percentage point reduction since 2013. - On track to reach the FRL debt target of 55 percent of GDP by 2020. - On track to reach the Eastern Caribbean Currency Union (ECCU) debt target of 60 percent of GDP ten years ahead of the 2030 deadline. ### Composition of central government debt (figures presented) - 2016: External Debt USD 586.68 (70.1%); Domestic Debt USD 250.40 (29.9%). - 2017: External Debt USD 523.51 (68.6%); Domestic Debt USD 239.66 (31.4%). ### Domestic debt by instrument type (2016) - Treasury Bills: 45.5% - Bonds: 46.5% - Compensation Claims: 6.0% - Commercial Bank Loans: 2.0% ### Foreign debt by creditor category (2016 and 2017) - 2016: Multilateral 48.0%; Official 15.7%; Bilateral 29.7%; Commercial Debt 0.6%; External Arrears on Interests 3.6%; Overdue Membership Fees 2.3% - 2017: Multilateral 54.7%; Official 16.5%; Bilateral 22.5%; Commercial Debt 0.7%; External Arrears on Interests 3.1%; Overdue Membership Fees 2.5% ### Diagnostic and forward-looking indicators (selected DSA highlights and projections) - External debt (nominal) and PPG share (table headline): external debt (nominal) values for historical years and projections are reported in the DSA tables; PPG portion noted as a substantial share of external debt across the projection period. - PV of external debt and PV of PPG external debt are reported in the DSA tables and are used in the staff estimates and projections for debt sustainability analysis. - Debt service indicators, gross financing needs, and other debt-service-to-exports and debt-service-to-revenue ratios are provided in the DSA tables for 2015–2038 and used to assess vulnerability under baseline and stress scenarios. ### Stress tests and scenario analysis (overview) - Tables present alternative scenarios and bound tests for key indicators of publicly guaranteed external debt for 2018–2038, including: - A1. Key variables at their historical averages in 2018–2038. - A2. New public sector loans on less favorable terms in 2018–2038. - A3. Alternative Scenario: Natural Disaster. - B1–B6. Bound tests including shocks to real GDP growth, export value growth, the US dollar GDP deflator, net non-debt creating flows, combinations of shocks, and a one-time 30 percent nominal depreciation in 2019. - Figures present indicators under baseline, historical scenario, and most extreme shock for 2018–2038 (e.g., PV of debt-to-GDP ratio, PV of debt-to-exports ratio, PV of debt-to-revenue ratio, debt service-to-exports ratio, debt service-to-revenue ratio). - The most extreme stress tests for many indicators correspond to an Exports shock in the DSA figures. *Source: IMF staff report material (extract): "11. The authorities agreed that gross public debt would remain on a downward trajectory."* ### 6.7 percent of GDP, driven largely by construction-related imports. Reserves of 3.7 months ### cr18236-grenadabundle - 6.7 percent of GDP, driven largely by construction-related imports. Reserves of 3.7 months ### External position and reserves - Current account deficit: 6.7 percent of GDP, driven largely by construction-related imports. - Reserves: 3.7 months of import are assessed as adequate for cushioning shocks and preventing disorderly market conditions. ### Financial sector developments and risks - Financial sector improvements continued during 2017, but emerging issues require close monitoring. - Authorities and staff assess the financial sector as relatively sound in terms of capital adequacy, asset quality, liquidity, and profitability. - Bank credit is picking up after years of stagnation. - Strong growth in credit union lending is welcomed, but associated risks warrant close monitoring. - Non-bank financial institutions, including credit unions, are increasingly important in deepening financial intermediation. ### Policy continuity and social cohesion - The authorities, recently re-elected, are committed to building on progress made through a Fund-supported program. - Commitment to strengthening social cohesion, including strengthening the Committee of Social Partners and youth participation. ### Fiscal and debt management - Maintaining Fiscal Discipline remains a top priority. - The Fiscal Responsibility Law (FRL) has provided an important anchor for sound fiscal policy and has contributed to a much stronger fiscal and debt position. - Authorities will continue to evaluate all spending decisions, including those related to pension and health care reform, within the context of the FRL. - Authorities view that the new fiscal framework should complement their integrated resilience-building approach and believe a review of the framework, including the FRL, is necessary to ensure parameters do not constrain critical climate-resilient investments. - Authorities look forward to Fund technical assistance to support the review process. - Authorities commend staff for additional analysis and policy advice relating to Public Expenditure Management (Annex IV) and concur that sustained reforms are necessary to ensure public investment is efficient, provides growth dividends, and ensures Grenada’s resilience to natural disasters. - Tackling remaining debt arrears remains a priority; authorities are committed to restoring full creditworthiness and will press ahead to regularize arrears with the three remaining creditors. ### Safeguarding financial sector soundness (policy actions and concerns) - Authorities have made important progress in reducing financial sector vulnerabilities and will continue reforms. - Rapid growth in lending by credit unions warrants close monitoring. - Authorities are working with the Eastern Caribbean Central Bank (ECCB) to enhance the regulation and supervision of non-bank financial institutions in Grenada and across the ECCU. - Ongoing concern about the risk of loss of correspondent banking relationships (CBRs); authorities note realization of this risk can be very disruptive and damaging to the economy. - Mitigation efforts: strengthen AML/CFT framework and pursue national and regional initiatives; authorities encourage the Fund to continue convening stakeholders to identify concrete solutions. - Authorities acknowledge CBI program concerns and possible implications for loss of CBRs and financial sector stability; maintain that the CBI program is an important source of revenues to help bolster resilience and support economic growth and will continue efforts to mitigate all risks associated with the program. ### Building resilience to climate change and disasters - Grenada is at the frontier of building resilience to climate change and natural disaster in the region. - Authorities currently save 40 percent of the CBI proceeds to help respond to natural disasters. - Authorities have incorporated disaster relief provisions (“hurricane clauses”) in some loan instruments. - Secured a loan of US$30 million from the World Bank to support climate and fiscal resilience. - Authorities will continue to accelerate climate-smart development policies and programs, including upscaling investments in climate-resilient infrastructure. - A dedicated Ministry with responsibility for building climate resilience has been established. - Authorities look forward to Fund support in conducting a Climate Change Policy Assessment (CCPA), which they believe will crystalize their resilience framework and act as a catalyst in mobilizing donor support. ### Supporting sustainable and inclusive growth - Continued implementation of structural reforms is indispensable for fostering more robust, inclusive, and job-rich growth. - Authorities will accelerate growth-friendly reforms to: - further improve the business climate; - reduce fiscal risks arising from SOEs and PPPs; - boost productivity in the labor market; - implement targeted sectoral policies, including in tourism, agriculture, and energy. - To promote diversification, authorities are pursuing initiatives to sustainably exploit the country’s vast marine space and are working with the World Bank and other partners to explore opportunities. - A medium-term agenda is being prepared, with TA from the World Bank, to anchor medium-term planning and strategic interventions to accelerate growth and poverty reduction. ### Conclusion - Authorities view the Grenadian economy as at an important juncture and see an unprecedented opportunity to continue economic transformation. - Commitments: sound macroeconomic management, structural reforms, and continued engagement with the Fund and other partners to support the paradigm shift. *Source: IMF staff report content provided in the supplied PDF excerpt.* --- _Source: https://www.imf.org/-/media/files/publications/cr/2018/cr18236-grenadabundle.pdf_