## 1grdea2019002

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### Executive summary — overview
- Fourth pilot Climate Change Policy Assessment (CCPA) for Small States, joint IMF and World Bank initiative to assist small states to manage economic impact of climate change while safeguarding long-run fiscal and external sustainability.
- Reviews Grenada’s plans to mitigate and adapt in line with Grenada’s Nationally Determined Contribution (NDC) under the Paris Agreement and provides recommendations to strengthen policies within a sustainable macroeconomic framework.

### Key climate risks and impacts
- Existential risks: increasing frequency and intensity of coastal storms, increased risk of coastal flooding, and drought.
- Hurricane Ivan (2004) caused damages of over 200 percent of GDP.
- Hurricane Ivan caused damages to an estimated 80 percent of Grenada’s electricity distribution system, leaving three quarters of its residents without power.
- Recent flooding caused significant damage to agricultural production.
- Coastal concentration of population and major economic infrastructure increases exposure to sea level rise and coastal erosion.
- Climate projections and statistics:
  - Regional Climate Model (RCM) projections: increase ranging from 2.4 ̊C to 3.2 ̊C in mean annual temperatures by the 2080s in the higher emissions scenario.
  - General Circulation Model (GCM) projections of rainfall by 2080 range from -40 to +7 mm per month (most projections tend toward decreases).
  - Projected sea surface temperature increases range from +0.9 ̊C to +3.1 ̊C by the 2080s.
  - Of 182 countries in the Climate Risk Index, Grenada was in the top 2 percent for losses to climate-related natural disasters as a percent of GDP during 1997–2017 and in the top 5 percent of climate-related disaster fatalities.
  - Grenada’s annual average loss from wind-related events and floods averages just under US$20 million, or 1.7 percent of GDP (includes total direct and indirect losses public and private sector, on average any given year).
    - Of that US$20 million, roughly US$12 million is estimated replacement values associated with direct, physical damage.
    - Of that US$12 million, the government will experience direct damage to its own assets amounting to about US$3.5 million (0.3 percent of GDP).
    - Once every 100 years, on average, these costs are expected to exceed US$386 million, or more than 35 percent of GDP (i.e., a 1 percent probability in any year that a disaster will impose direct and indirect losses of more than 35 percent of GDP).
  - Monthly average sea level increased between 1993 and 2015 at roughly 0.3 mm/month or 3.6 mm/year.
  - Key vulnerabilities to a 1 meter sea level rise:
    - 73 per cent of all major tourism resorts affected,
    - 40 per cent of all seaport lands affected.

### Macro-economic impacts and modeling
- Empirical estimate (WEO 2017): increase in temperature by 1 degree Celsius estimated to decrease real GDP per capita by 1.4 percent on impact for Grenada (using 1950–2014 data).
- DSGE model (middle scenario temperature change) long-run estimates:
  - real GDP falls by about 5 percent,
  - private investment falls by about 5 percent,
  - private employment falls by about 6 percent,
  - out-migration increases by around 5–6 percent,
  - interest rates increase by around 5–6 percent,
  - moderate deterioration in tax revenues and fiscal balances.
- DSA (2019) large natural disaster scenario (assuming 10 percent of GDP shock with interactions: real GDP growth shock of 15pp and exports growth shock of 25pp) would delay attainment of the debt-to-GDP threshold over the 10–year horizon and mean Grenada would be unable to achieve the regional debt reduction target.
- Model caveats: main transmission is intensification of wind-related disasters; does not fully capture sea level rise impacts on harbors and beaches; results sensitive to linearization and constant population growth assumptions.

### General preparedness and institutions
- Progress made:
  - Ambitious NDC, costed National Adaptation Plan (NAP), establishment of the Ministry of Climate Resilience (MoCR) in 2017.
  - National Development Plan under development with climate change central.
- Constraints:
  - Implementation capacity is a major constraint given tight fiscal constraints.
  - NaDMA should consist of 11 staff but currently has 6 staff and 2 interns; under-resourced and underfunded.
  - Emphasis on preparedness, response, and recovery rather than on ex-ante risk reduction and financing.
- Data and legislation gaps:
  - Good systems for high-intensity events but lack detailed reporting across ministries for high-frequency, low-intensity events (example: August 2018 floods lacked a final national report).
  - No overarching DRM/DRF legislation finalized; proposed Comprehensive DRM Act not finalized.
- Recommendation: develop a Disaster Resilience Strategy (DRS) to synthesize existing plans and CCPA recommendations.

### Mitigation — NDC, clean energy, and pricing instruments
- NDC targets:
  - Reduction in CO2 equivalent emissions by 30 percent below 2010 levels by 2025 with an indicative reduction of 40 percent below 2010 levels by 2030 (conditional on external finance).
- Sectoral targets (selected):
  - Electricity: Reduce CO2 30% by 2025 (10% from renewables, 20% from energy efficiency).
  - Transport: Reduce CO2 20% by 2025.
  - Waste: Reduce methane by ≥90%.
  - Forestry: Double carbon storage in protected areas.
- Current renewable generation: about 1 percent each from grid and off-grid (rooftop solar).
- Feasibility constraints:
  - Regulatory uncertainty (Electricity Supply Act amended 2017; regulations still need implementation).
  - Land tenure issues for solar sites; limited wind opportunities on main island.
- Investment estimate for mitigation:
  - Preliminary assessment: cumulative investment costs US $161 million to 2025 (no sectoral breakdown).
  - If US$100 million financed by private sector, remaining government share spread evenly over ten years implies annual cost around 0.5 percent of 2018 GDP.
- Fuel/carbon taxation proposal:
  - Considered trajectory: ECD 95 (USD 35) per ton of CO2 in 2025; ECD 190 (USD 70) per ton of CO2 in 2030.
  - Emission factors: combusting an imperial gallon of gasoline and diesel produces 0.0104 and 0.0121 tons of CO2 respectively.
  - Estimated price impacts of ECD 95 carbon tax:
    - ECD 1.0 per imperial gallon for gasoline in 2025 and ECD 2.0 per gallon in 2030. Current gasoline prices ECD 14.3 per gallon, including an excise of ECD 5.5 per gallon.
    - ECD 1.1 per imperial gallon for diesel fuel in 2025 and ECD 2.3 per gallon in 2030. Current diesel prices ECD 13.1 per gallon, including an excise of ECD 5.5 per gallon (applying to road diesel).
    - ECD 0.06 per kilowatt hour (kWh) in 2025 and ECD 0.12 per kWh in 2030. Current electricity prices are ECD 0.90 per kWh. Fuel (variable) cost component currently ECD 0.4 per kWh.
  - Revenue and emissions impacts:
    - Extra revenues of 0.6 percent of GDP in 2025 (above BAU) and 1.0 percent in 2030.
    - Economywide CO2 reductions estimated 5 percent below BAU levels in 2015 and 9 percent in 2030.
    - Modeling assumption: each 1 percent increase in fuel price reduces fuel consumption by around 0.5 percent.
- Feebates:
  - Sliding scales of fees/rebates shifting demand to more energy-efficient vehicles and products; can be designed revenue-neutral and integrated into excise framework.
  - Advantages over standards: flexibility, harmonization across product categories, potentially stronger price incentives (footnote: feebates can provide five times the price incentive as the carbon tax).
  - Package impacts (feebates + renewables expansion + carbon taxation):
    - Cut economy-wide CO2 emissions by an estimated 15 percent (below BAU) in 2025 and 24 percent in 2030.
    - Boost energy efficiency by about 20 percent above 2015 levels by 2025 and 30 percent by 2030.
    - Raise revenues by 0.4 and 0.65 percent of GDP in 2025 and 2030 respectively.
    - Reduce the oil import bill below BAU levels by 14 percent in 2025 and 23 percent in 2030.

### Adaptation — NAP, public investment, and sectoral needs
- NAP scope: infrastructure sectors, land, agroforestry, agriculture, fishing, food security, water, mangrove, marine, coral, health, and zone management.
- Authorities estimate total climate policy cost around US$500 million (42.2 percent of 2018 GDP).
  - Adaptation investment at least US$340 million (28.6 percent of 2018 GDP).
  - Mitigation needs identified in the NDC: US$161.4 million (13.6 percent of 2018 GDP).
- Public investment in adaptation (budgeted figures):
  - Adaptation investments increased from EC$37.9 million, 1.2 percent of GDP in 2018 to EC$62.1 million, 1.8 percent of GDP in 2019.
  - Adaptation investments account for almost one-third of the overall 2019 capital budget.
  - Execution rate of adaptation investment budget was around 30 percent in 2018 (actual delivery lower than budget).
- Table highlights (selected, all in EC$ millions unless noted):
  - Total Capital Budget: Est 2018 outturn 118.9; 2018 Budget 171.3; Budget 2019 196.4.
  - Subtotal of Climate Resilience: Est 2018 outturn 11.6; 2018 Budget 37.9; Budget 2019 62.1.
  - Percent of GDP: Est 2018 outturn 0.4; 2018 Budget 1.2; Budget 2019 1.8.
- Sectoral constraints and examples:
  - Agriculture: Ministry has a Climate Smart Agriculture strategy but lacks human and financial resources; Grenada allocated USD 370,000 (EC$ 999,000) to an Emergency Relief Fund to help affected farmers.
  - Tourism and Civil Aviation: costed plan for airport resilience exists but constraints are financing and competing priorities across three airports.
  - Health: retrofit plans for hospitals constrained by lack of financing.
  - Coastal: Integrated Coastal Zone Management (ICZM) Act expected mid 2019; Coastal Zone Unit established and Coastal Zone Management Plan developed.
- Gaps in land use and enforcement:
  - No finalized comprehensive land use policy accounting for hazard risk; no updated, digitized geo-referenced cadaster.
  - Weak enforcement of building codes and drainage maintenance; only 3 building inspectors for the entire country with 2 nearing retirement.
- Recommended adaptation actions (selected):
  - Inventory public assets and power infrastructure linked to an updated geo-referenced cadaster.
  - Map infrastructure assets to vulnerable areas and implement resilience actions (land raising, segmentation of transmission lines, relocation, barriers).
  - Comprehensive agriculture risk management system supported by improved hydrometeorological information for farmers.
  - Draft and implement a nationwide vegetation management plan.
  - Strengthen enforcement of building codes and drainage maintenance.
  - Strengthen institutional and policy environment for coastal resilience and the blue economy.

### Financing needs, constraints, and scenarios
- Indicative financing summary (assumes implementation in 10 years):
  - Mitigation (NDC): Indicative cost US$161.4; o/w Private Sector US$100.0; Average Annual Cost US$6.1; Annual Cost/Percent of 2018 GDP 0.5.
  - Adaptation (NAP and latest updates): Indicative cost US$339.1; Average Annual Cost US$33.9; Annual Cost/Percent of 2018 GDP 2.9.
  - Total: Indicative cost US$500.6; o/w Private Sector US$100.0; Average Annual Cost US$40.1; Annual Cost/Percent of 2018 GDP 3.4.
  - Other line items: Water availability US$50.2 (Avg Annual US$5.0; 0.4 percent of 2018 GDP), Food security US$46.0 (Avg Annual US$4.6; 0.4 percent), Ecosystem resilience US$26.6 (Avg Annual US$2.7; 0.2 percent), Infrastructure and Land US$112.9 (Avg Annual US$11.3; 1.0 percent).
- Fiscal context and constraints:
  - Central government debt dropped from 108 percent of GDP in 2013 to around 63½ percent of GDP in 2018.
  - Primary surplus around 7 percent of GDP in 2018, assisted by Citizenship by Investment (CBI) revenues around 4.6 percent of GDP in 2018 (reported on a committed-amount basis).
  - FRL mandates maintenance of significant primary surpluses until public debt is reduced below 55 percent of GDP; grant-financed capital spending is exempt from primary expenditure growth cap.
- Financing strategy implications:
  - Maximizing grant financing is crucial; concessional loans, private sector participation, and domestic resource mobilization are also key.
  - If NAP-related scale-up financed entirely by new borrowing, debt dynamics up-trend despite positive growth effects—underscores need for grant financing and private sector participation.
- FRL revisions under consideration:
  - Proposed amendments would exempt climate-related investment from the expenditure rule and strengthen fiscal strategy process to build fiscal buffers.
- Macroeconomic benefits of resilient public capital (DSGE simulations):
  - Achieving a public capital stock that is 80 percent resilient implies steady state potential output 3 percent higher than without resilient investment.
  - Assuming 80 percent of annual public investment continually allocated to resilient public capital, by 2050 negative effects of climate change on most economic variables would be more than offset.
  - By 2100 modeled benefits could be reversed, highlighting long-horizon limits and need to incentivize resilience of private capital.

### Risk management and insurance
- Identified elements in place:
  - Contingency funds; participation in CCRIF parametric insurance; inclusion of a hurricane clause in debt restructuring agreements.
- Gaps:
  - Lack of comprehensive risk and contingent liability assessment and no framework defining government contingent liabilities in case of disaster.
  - Under-use of indemnity and catastrophe insurance in public and private sectors.
  - Absence of contingent lines of finance; fiscal buffers below prudent levels.
- Quantified fiscal risk estimates:
  - Annual average fiscal costs of natural disasters estimated in the range of 0.3-0.5 percent of GDP.
  - World Bank study: government would need to cover approximately USD 3.5 million (EC$ 9.5 million) annually — 0.3 percent of GDP — for contingent liabilities related to hydrometeorological events.
  - IMF assumptions put future fiscal cost of natural disasters at around 0.5 percent of GDP.
  - Average annual damage to public and private buildings: USD 10 million (EC$ 27 million) — 1.1 percent of GDP.
  - For any given year, Grenada has about a 1 percent chance of hurricane losses exceeding USD 246 million (EC$ 664 million) for the economy as a whole.
- Existing buffers (not fully ring-fenced or governed):
  - Budgetary contingency equal to 2 percent of revenues (in 2018 this was EC$15 million).
  - National Transformation Fund (NTF) Contingency Fund: current value around EC$40 million; FRL requires first 40 percent of CBI inflows be placed into a contingency fund while debt remains above 55 percent of GDP.
  - Sinking fund with the ECCB around EC$37 million (intended for debt reduction but freely available).
- CCRIF and debt-servicing hurricane clause:
  - Grenada member of CCRIF since 2007; has not yet qualified for a disbursement.
  - Debt-servicing hurricane clause (2015 debt restructuring): pause in debt service up to one year if CCRIF-triggered payout exceeds US$15 million; clause could release up to EC$45 million in the event of a major disaster.
- Private sector insurance:
  - Per capita property insurance spending in 2013 USD 310 (EC$ 837).
  - Life and non-life insurance penetration: 6.1 percent of GDP (Grenada) versus Pan-Caribbean 5.8 percent.
  - Non-life insurance penetration: 3.8 percent.
  - Market concentration: top 10 insurers wrote more than 90 percent of general insurance business in 2015.
  - Homeowner windstorm insurance coverage estimated 20 percent to 40 percent of homeowners.
- IMF estimate for optimal protection: overall amount of protection offered by layered financing instruments should be around 10 percent of GDP in Grenada; current buffers around 5 percent of GDP.
- Recommended risk management actions (selected, numbered):
  1. Formalize a national disaster risk financing strategy, including improving availability of data on losses from disaster, inventorying public assets, clarifying budget processes and engaging with development partners on financing modalities and focusing on building a comprehensive risk buffer.
  2. Clarify regulations for accessing the National Transformations Fund’s Contingency Fund in the event of a natural disaster.
  3. Optimize CCRIF coverage and broaden the use of property indemnity insurance.
  4. Enhance insurance coverage for public assets and incentivize private uptake; explore expanding traditional market for housing and socially-desirable services such as flood and agriculture insurance.
  5. Adopt parametric insurance policy to help protect the financial assets of coastal fishing communities (COAST initiative).

### National processes, public investment management (PIM), and PFM
- Integration and institutional arrangements:
  - MoCR established in 2017 combining climate resilience, environment, forestry, fisheries, disaster management and information.
  - Twenty-five climate change focal points across ministries and utilities support coordination and project preparation.
  - Climate relevance is required in PSIP proposals; ministries use CCORAL for assessment; assessments reviewed by the National Climate Change Committee (NCCC) before PPCC screening.
- PIM performance and gaps:
  - Project execution rates: 2018: 50.0; 2017: 52.2; 2016: 40.8 (averaged less than 50 percent annually 2016–2018).
  - PIMA score: Grenada 4.6 compared to low income developing country average 4.3 (top score 10), indicating a considerable gap.
  - No comprehensive registration or valuation of public physical assets; depreciation of fixed assets not recorded in operating statements.
  - Procurement: open competitive bidding default; procurement website launched May 2018.
  - Cash-flow forecasts updated monthly; some donor funds outside the Single Treasury Account (TSA).
- PFM progress and remaining needs:
  - Since 2014 suite of PFM legislation and regulations established and operational: PFM Act and Regulations; Public Procurement and Disposal Act; Fiscal Responsibility Act; Public Debt Management Act; National Transformation Regulations.
  - Medium-term fiscal framework (MTFF) operational; COA largely compliant with GFSM 2014.
  - Gaps for climate-resilience integration:
    - Update COA and budget classification to track climate resilience expenditures and clearly differentiate capital and current spending.
    - Include macroeconomic analysis of natural disasters and climate change in MTFF and fiscal risk statements.
    - Finalize guidelines and implement NTF Contingency Fund regulations; establish NTF board.
    - Implement a physical asset registry.
- Recommended national process actions (numbered):
  1. Enhance technical capacity and coordination mechanisms within MoCR to mobilize climate finance and enhance project implementation capacity.
  2. Enhance the MTFF and fiscal risk analysis by including macroeconomic analysis of natural disasters and climate change.
  3. Develop more rigorous project prioritization criteria; establish NTF board to strengthen project screening.
  4. Improve COA and budget classification to identify and track mitigation and adaptation spending; ensure clear differentiation of capital and current budget and clean up current expenditures misclassified in capital budget.
  5. Strengthen staff capacity in public investment management and improve capital project preparation with a focus on large projects to ensure timely delivery.

### Priority needs and summary recommendations (selected, numbered as in source)
- General Preparedness
  1. Review and update the NDC to reflect developments since the Paris Accord, including revising its targets and further develop related implementation plans and cost estimates.
  2. Develop a comprehensive Disaster Resilience Strategy (DRS) in cooperation with IMF, World Bank and other development partners.
  3. Improve climate data collection and use including information collection on the costs of high and low intensity disasters, disaster response expenditure, and sources of financing.
  4. Finalize and enact the national overarching Disaster Risk Management (DRM) legislation and adequately resource NaDMA.
- Mitigation
  5. Consider a moderately scaled carbon tax applied across fossil fuels (including those currently exempt from excise).
  6. Progressively, and cost-effectively, expand renewable power generation and energy efficiency through integrated resource planning and finalize regulatory framework under the Electricity Supply Act.
  7. Consider creating a market for the private sector to scale renewable energy penetration through well-structured PPPs backed by clear regulations.
  8. Modify the excise tax system for vehicles to include a feebate with the implicit CO2 price rising over time, and an ad valorem component set to maintain revenue.
  9. Introduce a system of feebates for electricity-using products with the reward for energy efficiency rising over time and an ad valorem component set to maintain revenue.
- Adaptation
  10. Develop an inventory of public assets and power infrastructure linked to an updated geo-referenced cadaster and finalized land use policy.
  11. Map infrastructure to vulnerable areas and take resilience actions (land raising, segmentation, relocation, barriers).
  12. Implement a comprehensive agriculture risk management system supported by improved hydrometeorological information service delivery for farmers.
  13. Draft and implement a nationwide vegetation management plan.
  14. Strengthen enforcement of building codes and drainage maintenance.
  15. Advance enabling policy environment for coastal resilience and the blue economy.
- Financing
  16. Clarify remaining financing needs by updating the NAP.
  17. Prioritize maintenance of the foreign-financing pipeline, emphasizing timely utilization of available concessionality.
  18. Use available fiscal space, guided by an amended FRL, to increase investment in resilient infrastructure.
  19. Ensure policy and legal frameworks are in place for attracting private investment in the energy sector and other relevant sectors (e.g., sustainable tourism).
- Risk Management
  20. Formalize a national disaster risk financing strategy focusing on building a comprehensive risk buffer, improving data on losses, inventorying public assets, clarifying budget processes and engaging development partners on financing modalities.
  21. Clarify regulations for accessing the NTF’s Contingency Fund in the event of a natural disaster.
  22. Optimize CCRIF coverage and broaden use of property indemnity insurance.
  23. Enhance insurance coverage for public assets and incentivize private uptake.
  24. Explore options with private insurers for expanding traditional market and socially-desirable services such as flood and agriculture insurance, potentially requiring public sector involvement.
  25. Adopt parametric insurance policy to help protect financial assets of coastal fishing communities.
- National Processes
  26. Enhance technical capacity and coordination within MoCR to mobilize climate finance and enhance project implementation capacity.
  27. Enhance the MTFF and fiscal risk analysis by including macroeconomic analysis of natural disasters and climate change.
  28. Develop more rigorous project prioritization criteria and establish NTF board to strengthen project screening.
  29. Improve COA and budget classification to identify and track mitigation and adaptation spending; ensure clear differentiation of capital and current budget.
  30. Strengthen staff capacity in public investment management and improve capital project preparation focusing on large projects.

*Source: EXECUTIVE SUMMARY and selected chapters and annexes (1grdea2019002).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Overview
- This document is the fourth pilot Climate Change Policy Assessment (CCPA) for Small States, a joint initiative by the IMF and World Bank to assist small states to understand and manage the expected economic impact of climate change while safeguarding long-run fiscal and external sustainability.
- The CCPA reviews Grenada’s plans for mitigating and adapting to the effects of climate change in line with Grenada’s Nationally Determined Contribution (NDC) under the Paris Agreement, and gives recommendations to strengthen policies while maintaining a sustainable macroeconomic framework.

### Key climate risks and impacts
- Climate change poses existential risks to Grenada: increasing frequency and intensity of coastal storms, increased risk of coastal flooding, and drought.
- Hurricane Ivan (2004) caused damages of over 200 percent of GDP.
- Hurricane Ivan caused damages to an estimated 80 percent of Grenada’s electricity distribution system, leaving three quarters of its residents without power.
- Rising sea levels threaten a population that is mostly coastal and where almost all major economic infrastructure is located.
- Recent flooding caused significant damage to agricultural production.

### General preparedness
- Grenada has made significant strides: an ambitious NDC, a costed National Adaptation Plan (NAP), and the establishment of the Ministry of Climate Resilience in 2017 to mainstream adaptation.
- Implementation capacity is a major constraint, particularly given tight fiscal constraints.
- Post-disaster roles are well-articulated but require formalization and improved financing arrangements.
- Recommendation: develop a Disaster Resilience Strategy (DRS) that synthesizes existing plans and the CCPA recommendations.

### Mitigation
- Near-term focus: expand the share of renewable energy in power generation and adopt energy efficiency measures including in the transport sector.
- Progress has been slow; a finalized legal and regulatory framework is needed to provide incentives.
- Policy options suggested include:
  - Upstream fuel excise-based carbon taxation (consider distributional impacts, administrative efficiency, and competitiveness).
  - Feebates (tax-subsidy schemes integrated into existing excises) to reinforce mitigation incentives.
- Grenada will need to rely heavily on private investment to meet mitigation objectives.

### Adaptation
- The NAP covers infrastructure sectors, land, agroforestry, agriculture, fishing, food security, water, mangrove, marine, coral, health, and zone management.
- An estimated one-third of capital expenditures in the 2019 budget already go to resilience-building projects.
- Key constraints: capacity in investment project execution, implementation and enforcement of supporting policies and regulations (notably building codes and drainage maintenance).

### Financing needs and constraints
- Authorities estimate financing needs at about US$500 million, equivalent to over 40 percent of 2018 GDP.
- Of this, required adaptation investment is at least US$340 million.
- The fiscal constraint makes financing adaptation challenging; proposed reforms to the Fiscal Responsibility Law (FRL) may open limited space for increased revenue and loan-financed resilient investment, but maintaining a safe debt level will limit scope.
- Maximizing grant financing is crucial; concessional loans, private sector participation, and domestic resource mobilization are also key.
- Grenada has begun accessing global climate financing but availability may be limited and needs to be supplemented.

### Risk management
- Grenada has identified disaster and climate risks but lacks a comprehensive risk and contingent liability assessment.
- Elements in place: contingency funds, participation in regional parametric insurance schemes, inclusion of a hurricane clause in debt restructuring agreements.
- Gaps: under-use of indemnity and catastrophe insurance in public and private sectors, absence of contingent lines of finance, fiscal buffers below desirable levels.
- Recommendation: formalize a National Natural Disaster Risk Financing Strategy as part of the broader DRS.

### National processes and public investment management
- Establishment of the Ministry of Climate Resilience has improved mainstreaming of climate projects.
- Climate resilience is a screening element in the public sector investment program framework, but weighting in prioritization and selection is unclear.
- Weak project management capacity and the need for an asset registry to underpin insurance and disaster loss assessment are highlighted.

### Priority needs
- Use as much grant and concessional financing (including contingent financing for natural disasters) as possible to preserve debt sustainability.
- Create space for private sector participation and increase domestic resource mobilization where feasible.
- Expand insurance coverage while recognizing it cannot substitute for resilient infrastructure investment.
- Capacity building is critical for public investment management, completing the DRS, moving toward carbon taxation, and implementing sectoral adaptation plans.

### Recommendations — Summary (numbered)
- General Preparedness
  1. Review and update the NDC to reflect developments since the Paris Accord, including revising its targets and further develop related implementation plans and cost estimates.
  2. Develop a comprehensive Disaster Resilience Strategy (DRS) in cooperation with IMF, World Bank and other development partners.
  3. Improve climate data collection and use including information collection on the costs of high and low intensity disasters, disaster response expenditure, and sources of financing.
  4. Finalize and enact the national overarching Disaster Risk Management (DRM) legislation and adequately resource the National Disaster Management Agency (NaDMA).
- Mitigation
  5. Consider a moderately scaled carbon tax applied across fossil fuels (including those currently exempt from excise).
  6. Progressively, and cost-effectively, expand renewable power generation and energy efficiency through integrated resource planning and finalize regulatory framework under the Electricity Supply Act.
  7. Consider creating a market for the private sector to scale renewable energy penetration through well-structured public private partnerships (PPPs) backed by clear regulations.
  8. Modify the excise tax system for vehicles to include a feebate with the implicit CO2 price rising over time, and an ad valorem component set to maintain revenue.
  9. Introduce a system of feebates for electricity-using products with the reward for energy efficiency rising over time and an ad valorem component set to maintain revenue.
- Adaptation
  10. Develop an inventory of public assets and power infrastructure in Grenada that follows an updated and finalized land use policy and links to an updated geo-referenced cadaster.
  11. Map infrastructure assets to areas that are vulnerable to climate risks and natural and take actions to enhance resilience such as land raising, segmentation of transmission lines, relocation of assets, and building barriers.
  12. Put in place a comprehensive agriculture risk management system, including mechanisms to mitigate, reduce, or transfer risk and increase coping capacity supported by improved hydrometeorological information service delivery for farmers.
  13. Draft and implement a nationwide vegetation management plan.
  14. Strengthen the enforcement of building codes and draining maintenance.
  15. Strengthen institutional and further advance enabling policy environment for building coastal resilience and promoting the blue economy.
- Financing
  16. Clarify remaining financing needs, by updating the NAP.
  17. Prioritize the maintenance of the foreign-financing pipeline, with emphasis on timely utilization of available concessionality.
  18. Use available fiscal space, guided by an amended FRL, to increase investment in resilient infrastructure.
  19. Ensure all relevant policy and legal frameworks are in place for attracting private investment in the energy sector and other relevant sectors (e.g., sustainable tourism).
- Risk Management
  20. Formalize a national disaster risk financing strategy focusing on building a comprehensive risk buffer. This should include improving availability of data on losses from disaster, inventorying public assets, clarifying budget processes and engaging with development partners on financing modalities.
  21. Clarify regulations for accessing the National Transformations Fund’s Contingency Fund in the event of a natural disaster.
  22. Optimize Caribbean Catastrophe Risk Insurance Facility (CCRIF) coverage and broaden the use of property indemnity insurance.
  23. Enhance insurance coverage for public assets and incentivize private uptake.
  24. Explore with private insurers the options for expanding the traditional market, both for housing and socially-desirable services such as flood and agriculture insurance, which may require public sector involvement.
  25. Adopt parametric insurance policy to help protect the financial assets of coastal fishing communities.
- National Processes
  26. Enhance technical capacity and coordination mechanisms within the Ministry of Climate Resilience (MoCR), to mobilize climate finance and enhance its project implementation capacity.
  27. Enhance the medium-term fiscal framework (MTFF) and fiscal risk analysis by including macroeconomic analysis of natural disasters and climate change.
  28. Develop more rigorous project prioritization criteria to better align public investment with policy priorities. Establish National Transformation Fund (NTF) board to strengthen project screening.
  29. Improve COA and budget classification to identify and track mitigation and adaptation spending. Ensure they clearly differentiate capital and current budget and continue cleaning up the current expenditures existing in capital budget.
  30. Strengthen staff capacity in public investment management and improve capital project preparation with a focus on large projects to ensure timely delivery of capital projects.

*Source: EXECUTIVE SUMMARY (1grdea2019002)*

### 3.      For easy reference, the report broadly replicates the recommended structure of the

### 1grdea2019002 - 3.      For easy reference, the report broadly replicates the recommended structure of the

### Climate Change Risks and Preparedness — overview
- Grenada is one of the small states highly vulnerable to climate change and natural disaster risks.
- Projected climate impacts include increases in temperature, intensified extreme weather, lower agriculture output, depressed labor productivity, worse human health, and threats to coastal infrastructure and settlements from sea level rise.
- Losses to GDP from such impacts would threaten prospects for debt sustainability.

### A. Impact of Climate Change Risks on the Macro-Framework/Long-Term Outlook

How vulnerable is the economy to climate change?
- Grenada is vulnerable to a wide range of exogenous shocks, exacerbated by adverse climate change impacts and overall climate variability.
- Climate change projections for Grenada predict:
  - an increase in average annual temperature,
  - reduced average annual rainfall,
  - potential for an increase in the intensity of tropical storms,
  - increased Sea Surface Temperatures.
- Regional Climate Model (RCM) projections: increase ranging from 2.4 ̊C to 3.2 ̊C in mean annual temperatures by the 2080s in the higher emissions scenario.
- General Circulation Model (GCM) projections of rainfall by 2080 range from -40 to +7 mm per month (most projections tend toward decreases).
- Projected sea surface temperature increases range from +0.9 ̊C to +3.1 ̊C by the 2080s.
- Of the 182 countries in the Climate Risk Index, Grenada was in the top 2 percent for losses to climate-related natural disasters as a percent of GDP during 1997–2017 and in the top 5 percent of climate-related disaster fatalities.
- Grenada’s annual average loss from wind-related events and floods averages just under US$20 million, or 1.7 percent of GDP (includes total direct and indirect losses public and private sector, on average any given year).
  - Of that US$20 million, roughly US$12 million is estimated replacement values associated with direct, physical damage.
  - Of that US$12 million, the government will experience direct damage to its own assets amounting to about US$3.5 million (0.3 percent of GDP).
  - Once every 100 years, on average, these costs are expected to exceed US$386 million, or more than 35 percent of GDP (i.e., a 1 percent probability in any year that a disaster will impose direct and indirect losses of more than 35 percent of GDP).
- The majority of infrastructure and settlements are located on or near the coast (including government, health, commercial and transportation facilities), increasing exposure to coastal erosion and inundation.
- Key vulnerabilities to a 1 meter sea level rise:
  - 73 per cent of all major tourism resorts affected,
  - 40 per cent of all seaport lands affected,
  - at-risk areas include the main hotel belt in Grand Anse, sections of the coastline close to the Point Salines International Airport, the Eastern Main Road leading out of Grenville and passing through Soubise and Marquis, and the front streets in Hillsborough and Harvey Vale in Carriacou.
- Between 1993 and 2015, the monthly average sea level has increased at a rate of roughly 0.3 mm/month or 3.6 mm/year.
- Climate-change-driven impacts (temperature increase, precipitation variability, more extreme events) threaten forest ecosystems: potential loss of forest zones, migration to higher elevations, increased fire risks, soil erosion, and hurricane damage to forest infrastructure.

What impact could climate change have on macro-sustainability?
- Empirical estimate: using 1950–2014 data, World Economic Outlook (2017) estimates that for Grenada an increase in temperature by 1 degree Celsius is estimated to decrease real GDP per capita by 1.4 percent on impact.
- Large natural disasters affect debt sustainability by:
  - decreasing economic growth and revenue on impact,
  - increasing expenditure for post-disaster recovery and reconstruction,
  - increasing debt levels and adversely affecting debt sustainability.
  - External grants mitigate negative effects; reconstruction can support recovery of growth.
- Debt Sustainability Analysis (2019 DSA) projection for a large natural disaster scenario (assuming 10 percent of GDP shock with interactions: real GDP growth shock of 15pp and exports growth shock of 25pp) would delay attainment of the debt-to-GDP threshold over the 10–year horizon and mean Grenada would be unable to achieve the regional debt reduction target.
- DSGE model estimates (middle scenario temperature change) indicate long-run effects:
  - real GDP falls by about 5 percent,
  - private investment falls by about 5 percent,
  - private employment falls by about 6 percent,
  - out-migration increases by around 5–6 percent,
  - interest rates increase by around 5–6 percent,
  - moderate deterioration in tax revenues and fiscal balances.
- Model caveat: negative effects are probably understated as the model’s main transmission is intensification of wind-related natural disasters and does not include other effects such as sea level rise impacting main harbor and beaches.
- Results are sensitive to assumptions (e.g., linearization around a steady state, constant population growth); estimated levels of output for 2050–2100 should be interpreted with caution.

### B. General Preparedness

Is the climate response strategy consistent with broader development goals?
- Yes. Grenada is mainstreaming climate adaptation into broader development plans.
  - The NDC was based on the 2014–2018 Growth and Poverty Reduction Strategy.
  - NDC sets an ambitious agenda for increased usage of renewable energy to achieve carbon emission targets; adaptation actions included but not detailed or costed.
  - National Climate Policy and National Adaptation Plan provide direction for sectoral plans and climate action.
  - Establishment of the Climate Resilience Ministry with mandate to coordinate adaptation actions.
  - National Development Plan under development has climate change at its center.

Disaster resilience strategy (DRS) and institutional readiness
- Grenada has institutions and plans to deal with natural disasters but lacks a comprehensive disaster resilience strategy (DRS).
  - Authorities planned to develop a DRS in 2019 with IMF, World Bank and development partners; the DRS would synthesize and prioritize policies for resilience, covering infrastructure/investments, financial arrangements for response, and institutional arrangements for effective response.
- Current disaster management architecture:
  - National Emergency Relief Organization (NERO) formalized disaster management in 1985 and produced a National Disaster Plan.
  - Post-Hurricane Ivan revisions mainstreamed DRM: National Disaster Plan revised in 2005; National Emergency Advisory Council became National Disaster Management Council (NaDMAC).
  - NaDMAC meets at least once per month and includes representatives from ministries, police, transport, utilities, relief agencies, community organizations, churches, and private sector.
  - NaDMA coordinates disaster management but is under-resourced:
    - NaDMA should consist of 11 staff but currently has 6 staff and 2 interns (Director, Technical officer, Communications Officer, IT Officer, Receptionist, Public Information Officer, and 2 youth employment interns).
    - NaDMA is underfunded and not fully staffed; capacity to respond to a major disaster without major outside support is limited.
  - Emphasis in Grenada is on preparedness, response, and recovery rather than on risk reduction or financing.
  - NaDMA’s operations show strong engagement with NGOs, civil society, and private sector, but more strategic private-sector engagement is recommended for mobilizing financial and technical resources for prevention and mitigation.

Data, reporting, and legislative framework
- Systems for collecting and reporting damage and losses:
  - Grenada has good systems for high-intensity events but lacks detailed reporting across ministries for high-frequency, low-intensity events.
  - Example: no final national report had been prepared yet regarding the August 2018 floods, partially due to lack of coordination on assessment.
  - Recommendation: develop a new database in line with the standard damage and loss assessment (DaLA) methodology across ministries, with guidelines on how and when to enter information.
  - Discussions with the MoF suggest NaDMA could maintain and update the database if appropriate funding were obtained.
  - A comprehensive database would support recovery planning, reconstruction and retrofitting of infrastructure, and backing financing requests to donors (for example, the Climate Investment Fund).
  - Initiative could be launched in the short term though full completion may take time.

Box: Priorities for DRM Data Collection
- Priority hazards: meteorological and geological hazards (regularly occurring, severe, and likely to be exacerbated by climate change).
- Major data and systems needs for hazard, vulnerability and exposure assessment to inform adaptation:
  - large scale topographic mapping,
  - wind, rainfall and discharge measurements,
  - detailed vegetation classification,
  - geotechnical information on soils,
  - multi-hazard mapping.
- Much existing information is over 40 years old and was collected for large-scale agriculture; modernization and mainstreaming of data, information products, systems, and technical capacity are vital.
- Applications: disaster response information products, impact-based forecasting and climate data products, coastal and landslide modelling and forecasting, spatial analysis.
- To translate data into benefits requires mainstreaming systems and skills and modernization of public service processes and decision support systems.

Legislative framework
- There is no overarching legislation on Disaster Risk Financing (DRF) or Disaster Risk Management (DRM), causing uncertainty and gaps in coverage.
- Historical policy instruments:
  - Hazard Mitigation Policy (2003) and Hazard Mitigation Plan (2006) aimed to mainstream DRM into national development planning; the plan proposed a Comprehensive DRM Act to institutionalize a National Disaster Management Fund and strengthen insurance-sector capacity.
  - The proposed Comprehensive DRM Act has not yet been finalized.

### Priority policy and institutional implications highlighted in the content
- Develop and finalize a comprehensive Disaster Resilience Strategy (DRS) to consolidate plans for infrastructure investment, financial arrangements, and institutional response.
- Strengthen NaDMA staffing and funding to provide adequate ex-ante multi-hazard preparedness and post-disaster response capacity.
- Improve data collection and reporting for damages and losses, including creation of a DaLA-consistent national database maintained by NaDMA with MoF support.
- Prioritize meteorological and geological hazard data improvements: topographic mapping, wind/rainfall/discharge measurements, vegetation classification, geotechnical soil data, and multi-hazard mapping.
- Finalize overarching DRM/DRF legislation, including provisions for a National Disaster Management Fund and insurance-sector engagement in hazard mitigation.

*GRENADA — INTERNATIONAL MONETARY FUND (excerpt).*

### 16.      Deeper integration with regional bodies would strengthen disaster response capacity.

### 16.      Deeper integration with regional bodies would strengthen disaster response capacity.

### Disaster response capacity and regional integration
- Given Grenada’s size, capacity to both manage and prepare against climactic events and respond to a major disaster without outside support is infeasible.
- Regional technical organizations supporting these efforts include:
  - Caribbean Institute of Meteorology and Hydrology (CIMH)
  - Caribbean Disaster Emergency Management Agency (CDEMA)
  - Seismic Research Center (SRC) at the University of the West Indies
- Deeper integration with these regional bodies will increase the technical and operational capacity of NaDMA and DRM agencies in the region, which do not operate in isolation.

### Recommendations for General Preparedness
- Review and update the NDC to reflect developments since the Paris Accord, including revising its targets and further develop related implementation plans and cost estimates.
- Develop a comprehensive Disaster Resilience Strategy (DRS) in cooperation with IMF, World Bank and other development partners.
- Improve climate data collection and use including information collection on the costs of high and low intensity disasters, disaster response expenditure, and sources of financing.
- Finalize and enact the national overarching Disaster Risk Management (DRM) legislation and adequately resource NaDMA.

### Contribution to mitigation: NDC targets and rationale
- Grenada’s NDC aims for a reduction in carbon dioxide (CO2) equivalent emissions (covering CO2 and methane from the energy, transport, waste, and forestry sectors) by 30 percent below 2010 levels by 2025 with an indicative reduction of 40 percent below 2010 levels by 2030. These targets are conditional on some level of external finance.
- Grenada’s contribution to global greenhouse gas emissions (GHGs) is minuscule (0.0005 percent), but progress on mitigation remains important for: credibility in international dialogue on the Paris process; leveraging external finance; mobilizing domestic revenues through carbon pricing; and reducing dependence on volatile international oil markets.

### NDC sectoral mitigation objectives and proposed actions (Table 1 summary)
- Electricity: Reduce CO2 30% by 2025
  - 10% from renewables (10 MW from solar, 15 MW from geothermal, and 2 MW from wind)
  - 20% from energy efficiency (20% efficiency increase for hotels and other existing buildings, 30% increase for new buildings)
  - Proposed actions: tax incentives for solar panels and water heaters; more efficient lighting in some government buildings; regulatory reforms to promote renewable and energy efficient investment; new building codes.
- Transport: Reduce CO2 20% by 2025
  - Proposed actions: Promote biofuels, raise gasoline/diesel taxes, fuel efficiency requirements.
- Waste: Reduce methane by ≥90%
  - Proposed actions: Capture methane and use for electricity; waste conservation.
- Forestry: Double carbon storage in protected areas
  - Proposed actions: Plant fast-growing species, reduce fire risk.

### Clean energy plans — feasibility and constraints
- Current renewable generation:
  - About 1 percent each from grid and off-grid (i.e., rooftop solar) generation.
- Feasibility actions and constraints:
  - Solar generation for the grid could be scaled up; feasibility studies have been conducted.
  - An ESIA study regarding geothermal, funded by the CDB, is expected to be completed by the end of the year.
  - Wind opportunities are limited on the main island (best sites privately owned); some opportunities in smaller islands (e.g., Caricou).
  - Uncertainty over future regulatory frameworks is holding up investment by GRENLEC. The 2016 Electricity Supply Act was amended in 2017, but regulations still need to be implemented to facilitate private investment in renewable plants.
  - Land acquisition for solar generation sites could be hindered by land tenure issues.
- Emissions context (2018):
  - Diesel plants account for all non-renewable generation supply and their emissions are estimated at 46 percent of nationwide (non-forestry) GHG emissions in 2018.
  - Gasoline for motor vehicles: 32 percent
  - Landfill methane emissions: 9 percent
  - Diesel emissions from road vehicles: 8 percent
  - Marine diesel use: 2 percent
  - Other sources (e.g., LPG used as a cooking fuel): 3 percent
- Impact of meeting a ten percent renewable target:
  - Would lower economywide GHG emissions about 4½ percent.
- Institutional recommendation:
  - Develop an Integrated Resource Plan (IRP) for the electricity sector to translate NDC targets into tangible investments, evaluate supply- and demand-side resources, identify the cost of each technology, prioritize them, and examine impacts on the electricity tariff.

### Quantitative evaluation, investment needs, and modeling
- Modeling tool:
  - A streamlined spreadsheet tool, parameterized to Grenada, projects fuel use by energy sector using GDP projections and assumptions about energy demand responsiveness and technological change. Annex I contains a description of the model and its parameterization for Grenada.
- Investment estimate:
  - Preliminary assessment for the NDC put cumulative investment costs for mitigation at US $161 million to 2025 (but without a breakdown by sector or technologies).
  - Some investments would be public (e.g., upgrading lighting for streets and public buildings) but much should be private.
  - Opportunity to investigate well-structured public-private partnerships (PPPs), requiring clear regulations and capacity to analyze project and macroeconomic risks.

### Fuel/carbon taxation: context, options, and modeled impacts
- Current price context:
  - Present fuel and electricity prices in Grenada are similar or somewhat higher than those in the majority of other Caribbean and Central American countries (comparison data for 2016 referenced).
- BAU emissions projections (IMF spreadsheet modelling):
  - Baseline fossil fuel CO2 emissions are 12 percent higher in 2025 than in 2010 and 15 percent higher in 2030 than in 2010.
  - NDC emissions target implies reductions below BAU levels in 2025 and 2030 of 37 percent and 48 percent respectively.
  - Growth in real GDP is projected to be 60 and 83 percent higher in 2025 and 2030 than in 2010 respectively.
  - Fuel tax revenues decline relative to GDP in BAU: from 1.85 percent of GDP in 2018 to 1.6 percent in 2025 and 1.5 percent in 2030.
  - Imported fuel bill in BAU declines in relative terms: from 4.4 percent of GDP in 2018 to 3.7 percent in 2025 and 3.4 percent in 2030.
- Options for tax-based carbon pricing:
  - A carbon tax is proposed as a promising option. Considered trajectory:
    - ECD 95 (USD 35) per ton of CO2 in 2025
    - ECD 190 (USD 70) per ton of CO2 in 2030
  - Implementation approach:
    - Carbon tax could be added to existing fuel excise taxes, or as a new excise for fuel currently exempt from excise—extra excise per imperial gallon equals carbon tax rate per ton CO2 times tons CO2 per gallon.
    - Combusting an imperial gallon of gasoline and diesel produces 0.0104 and 0.0121 tons of CO2 respectively.
  - Estimated price impacts of the ECD 95 carbon tax:
    - ECD 1.0 per imperial gallon for gasoline in 2025 and ECD 2.0 per gallon in 2030. Current gasoline prices are ECD 14.3 per gallon, including an excise of ECD 5.5 per gallon.
    - ECD 1.1 per imperial gallon for diesel fuel in 2025 and ECD 2.3 per gallon in 2030. Current diesel prices are ECD 13.1 per gallon, including an excise of ECD 5.5 per gallon (applying to road diesel).
    - ECD 0.06 per kilowatt hour (kWh) in 2025 and ECD 0.12 per kWh in 2030. Current electricity prices are ECD 0.90 per kWh. Fuel (variable) cost component currently ECD 0.4 per kWh.
  - Distributional and competitiveness concerns:
    - The ECD 95 carbon tax would have modestly affected energy prices if applied in 2016 and could have had some negative distributional and competitiveness concerns; compensating policy measures may be required.
- Revenue and emissions impacts of the proposed carbon tax:
  - The carbon tax described would raise extra revenues of 0.6 percent of GDP in 2025 (above BAU levels) and 1.0 percent in 2030.
  - Economywide CO2 reductions would be an estimated 5 percent below BAU levels in 2015 and 9 percent in 2030.
  - Typical modeling assumption: each 1 percent increase in the fuel price reduces fuel consumption by around 0.5 percent.
  - More aggressive carbon taxation would be more economically efficient for deeper emissions reductions but could be politically challenging and raise distributional concerns, requiring social safety net and transition measures.
- Alternative tax-based instrument — feebates:
  - Feebates are sliding scales of fees/rebates designed to shift demand toward more energy-efficient (and lower-emitting) vehicles and products.
  - They increase prices of low-efficiency products and decrease prices of high-efficiency products, providing incentives similar to higher energy prices.
  - Feebates forgo new revenue from higher energy taxes if designed so that fees balance rebates; they may be politically more acceptable and allow stronger incentives for improving energy efficiency without imposing a new tax burden on the average household.

*Source: 16. Deeper integration with regional bodies would strengthen disaster response capacity. (1grdea2019002).*

### 29.      Compared with regulatory approaches, feebates for energy-using products can be

### 1grdea2019002 - 29.      Compared with regulatory approaches, feebates for energy-using products can be

### Feebates versus regulatory approaches
- Feebates offer greater flexibility compared with regulatory approaches such as energy-efficiency standards (e.g., fuel consumption rate averaged across cars sold by a dealer).
- Standards are difficult to design to provide uniform rewards across different product categories (cars, buses, trucks) and dealers.
- Feebates provide the same incremental reward for reducing energy consumption across different product categories and dealers and are straightforward to harmonize.
- IMF and World Bank advice internationally generally favors more cost-effective, flexible price-based instruments over regulatory approaches for meeting environmental objectives.
- Footnote: The incentive feebates create can be strengthened by product labelling requirements informing consumers about the lifetime energy costs of different models.

### Feebates versus current vehicle tax system
- Current excise component on imported vehicles is related to engine capacity and vintage:
  - Car excises vary from 5 percent on new vehicles with engine size less than 2,000 cc to 40–50 percent for used cars.
  - Truck excises vary from 7.5 percent on new vehicles with engine size 2,001–3,000cc to 32–45 percent for used trucks.
- Problems with current system:
  - The more successful the system is at shifting consumers toward low-tax vehicles, the less excise revenue is collected.
  - The current excise tax system does not reward a switch towards more fuel-efficient vehicles within an engine size/vintage category defined by a given tax rate (e.g., the tax rate is the same 7.5 percent for new cars with 2001 cc as for new cars with 3,000 cc and all vehicles in between).
  - Current excises are related to engine size rather than fuel consumption rates and thus do not encourage purchase of vehicles with attributes that reduce gasoline or diesel consumption rates (lighter body materials, reduced rolling resistance, smaller cabin size, better aerodynamics).
- Proposed structure combining revenue stability and efficiency incentives:
  - (i) a uniform percent tax on all vehicles with the rate set to meet revenue requirements; and
  - (ii) a feebate designed to be revenue neutral.
  - Under this design, as the feebate shifts people to more efficient vehicles there will be no revenue loss from the uniform tax component.
- Feebates provide continuous rewards for higher fuel efficiency within current tax rate categories.

### Limitations of feebates
- Feebates are less environmentally effective than raising energy prices because they do not encourage people to:
  - drive less;
  - switch off air conditioning and lighting; and so on.
- By lowering average energy costs per unit of product use, feebates may encourage greater use of energy-consuming products (the “rebound effect”); empirical studies suggest this effect is generally modest.
- Regulatory approaches may be administratively more suitable for promoting more energy-efficient buildings because building codes combine multiple requirements (walls, floors, ceiling insulation, windows, air leakage, duct leakage) rather than a single energy efficiency rating which is amenable to fees and rebates.
- Annex II provides more details on practical design issues for feebates.
- Footnote: Feebates can provide five times the price incentive as the carbon tax.

### Impacts of a comprehensive package (feebates + renewables expansion + carbon taxation)
- The combination of a comprehensive system of feebates applied to vehicles and electricity-using products, along with renewables expansion and carbon taxation, would:
  - cut economy-wide CO2 emissions by an estimated 15 percent (below BAU) in 2025 and 24 percent in 2030;
  - boost energy efficiency by about 20 percent above 2015 levels by 2025 and 30 percent by 2030 (though some of this increase occurs in the BAU);
  - raise revenues by 0.4 and 0.65 percent of GDP in 2025 and 2030 respectively;
  - reduce the oil import bill below BAU levels by 14 percent in 2025 and 23 percent in 2030.
- Deeper emission reduction targets in the NDC would require more radical penetration of zero-carbon technologies in the power and transport sectors.

### Feebates for forestry and other complementary pricing policies
- A feebate program targeted at marginal changes in sequestered forest carbon could provide nationwide incentives on private lands for carbon storage and other environmental objectives.
- Design features:
  - A sliding scale of subsidies for increases in sequestered carbon relative to a baseline year and taxes on carbon releases relative to baseline storage.
  - Feebates avoid limited effectiveness and higher transactions costs of project-based approaches and avoid large budgetary costs and complications posed by assessing ‘additionality’.
  - The first step is to develop carbon storage monitoring capacity under the REDD+ Readiness Program.
- Potential carbon sequestration example:
  - Increasing nationwide forest coverage in Grenada by 1 percent might sequester an extra 10,000 tons of CO2 per year (though changes in forest practice might add significantly to this).
  - 1 percent of land area in Grenada is about 1.3 square miles, or about 730 hectares.
  - In moist tropical regions new forests can sequester up to about 11 tons of CO2 per hectare per year in above-ground biomass and about another 3-4 tons below ground.
- Recommendation: More discussion of rationale and design is provided in Annex II.

### Regional carbon price floor
- Unilateral increases in energy taxes in Grenada raise concerns about competitiveness (tourism and agricultural exports) and burdens on vulnerable households.
- A regional carbon price floor arrangement (based on the model for Canadian provinces and territories) could help reinforce NDCs without incurring tax disadvantages.
- Regional policymakers should consider this possibility to support their NDCs.

### Recommendations for Reducing CO2 Emissions
- 1. Consider a moderately scaled carbon tax applied across fossil fuels (including those currently exempt from excise).
- 2. Progressively, and cost effectively, expand renewable power generation and energy efficiency through integrated resource planning and clarifying regulations under the Electricity Supply Act.
- 3. Consider creating a market for the private sector to scale renewable energy penetration through well-structured public private partnerships (PPPs) backed by clear regulations.
- 4. Modify the excise tax system for vehicles to include a feebate with the implicit CO2 price rising over time, and an ad valorem component set to maintain revenue.
- 5. Introduce a system of feebates for electricity-using products with the reward for energy efficiency rising over time and an ad valorem component set to maintain revenue.
- 6. Consider a feebate system to promote carbon storage in the forestry sector, following completion of the forest carbon inventory.
- 7. Discuss with other countries the possibility of introducing a carbon price floor arrangement for the Caribbean region to support the NDC process.

### Adaptation plans — progress and constraints
- Grenada has made good progress in developing adaptation plans and has begun executing some major projects, including significant support from the Green Climate Fund.
- Progress is hindered by capacity constraints, particularly in investment project execution.
- Progress is being made on supporting policies and regulations, but gaps remain in the agricultural sector on land use policy and with regard to social protection.
- The Ministry for Climate Resilience (MoCR), created in 2017, developed the National Adaptation Plan (NAP) (2017-2021):
  - The NAP is an umbrella document based mainly on prioritized climate change adaptation activities from existing sectoral and local area plans.
  - The NAP consists of 12 programs of action with 14 corresponding goals, and 20 indicators with each having costed initiatives associated.

### Sectoral highlights and constraints
- Agriculture:
  - The Ministry of Agriculture and Land has a Climate Smart Agriculture (CSA) strategy but lacks human and financial resources.
  - Agriculture has been severely impacted by two hurricanes; number of farmers is declining due to ageing farmers exiting and fewer young entrants.
  - Grenada has allocated USD 370,000 (EC$ 999,000) to an Emergency Relief Fund to help affected farmers.
  - Identified tools include increasing farmer access to hydrometerological information, improving climate smartness of agricultural extension, improving disaster-resilience of propagation stations, and pursuing agriculture risk insurance (technical capacity building needed).
- Tourism and Civil Aviation:
  - The Ministry has a well-documented and costed plan for increasing resilience of airports (runway resilience, buffering from sea level rise).
  - Constraints: lack of financing and competing priorities across three airports; lack of cohesive government priority on protecting state-owned tourism assets.
- Health:
  - The Ministry of Health and Social Security has a strategy to retrofit hospitals and some progress has been made, but further progress is constrained by lack of financing.
- Trade:
  - Ministry of Trade instituted a ban on single-use plastic and styrofoam imports, effective February 1, 2019.
  - Ministry limited by CARICOM regulations; can advocate for more climate change-responsive regional tariff policies.
- Social Development:
  - Implemented SEED program to reduce fragmentation and duplication in social safety nets, but inability to georeference beneficiaries and keep updated lists limits scaling up in response to hazards.
- Coastal and blue economy:
  - Grenada completed its integrated coastal zone policy in 2015 and is about to enact (expected in mid 2019) the Integrated Coastal Zone Management (ICZM) Act.
  - Efforts include establishing a Coastal Zone Unit and developing a Coastal Zone Management Plan.

### Public investment in adaptation — budgeted figures and execution
- Adaptation investments increased from a budgeted EC$37.9 million, 1.2 percent of GDP in 2018 to EC$62.1 million, 1.8 percent of GDP in 2019.
- Adaptation investments account for almost one-third of the overall 2019 capital budget.
- Biggest components: resilient infrastructure, disaster risk management, sustainable natural resources.
- Execution challenges: execution rate of adaptation investment budget was around 30 percent in 2018, so actual investments may be lower than the budget.
- Table 3 summary (in EC$ millions):
  - Total Capital Budget: Est 2018 outturn 118.9; 2018 Budget 171.3; Budget 2019 196.4; Domestic & NTF 82.5; External Grants 104.3; Loan 9.7.
  - Climate Smart Agriculture: Est 2018 outturn 0.2; 2018 Budget 3.8; Budget 2019 8.3; Domestic & NTF 0.0; External Grants 8.3; Loan 0.0.
  - Disaster Risk Management: Est 2018 outturn 6.3; 2018 Budget 8.2; Budget 2019 11.3; Domestic & NTF 0.0; External Grants 11.3; Loan 0.0.
  - Human Resource Capacity: Est 2018 outturn 0.0; 2018 Budget 0.1; Budget 2019 0.1; Domestic & NTF 0.1; External Grants 0.0; Loan 0.0.
  - Resilient Infrastructure: Est 2018 outturn 2.5; 2018 Budget 11.7; Budget 2019 19.0; Domestic & NTF 1.5; External Grants 14.5; Loan 3.0.
  - Sustainable Energy: Est 2018 outturn 0.4; 2018 Budget 4.6; Budget 2019 7.6; Domestic & NTF 0.3; External Grants 7.3; Loan 0.0.
  - Sustainable Natural Resources: Est 2018 outturn 1.7; 2018 Budget 7.6; Budget 2019 14.1; Domestic & NTF 0.1; External Grants 14.0; Loan 0.0.
  - Other: Est 2018 outturn 0.5; 2018 Budget 2.1; Budget 2019 1.6; Domestic & NTF 0.0; External Grants 1.6; Loan 0.0.
  - Subtotal of Climate Resilience: Est 2018 outturn 11.6; 2018 Budget 37.9; Budget 2019 62.1; Domestic & NTF 2.1; External Grants 57.0; Loan 3.0.
  - Percent of GDP: Est 2018 outturn 0.4; 2018 Budget 1.2; Budget 2019 1.8; Domestic & NTF 0.1; External Grants 1.7; Loan 0.1.
- Source for table: Estimates of Revenue and Expenditure for the Year 2019; IMF staff estimates.

### Other public programs, land use, and enforcement issues
- Grenada lacks:
  - a comprehensive land use policy that accounts for hazard risk;
  - an updated, digitized and geolocated national cadaster.
- A national land use policy was submitted to Cabinet in 2018 led by the Ministry of Agriculture. There is no urban development policy.
- Enforcement challenges:
  - Weak enforcement of building codes and proper drainage maintenance due in part to staffing shortages.
  - Only 3 building inspectors for the entire country in the Physical Planning Unit; 2 are nearing retirement with no succession plan.
  - Drainage maintenance constrained by Ministry of Public Works' insufficient maintenance budget and lack of overall asset management to program routine maintenance.

### Financial sector preparedness
- The ECCU financial system has not been much involved with the climate change strategy; awareness of issues is relatively low.
- Local banks could support resilience investment by engaging with SMEs, mobilizing innovative financing, and supporting disaster preparedness.
- The indigenous financial system does not generally participate in innovative financing:
  - Some commercial banks may have infrastructure in their loan portfolio but mainly focus on consumer lending.
  - Nonbanks do not participate in big-project financing.

*Source: IMF staff report content provided in the supplied PDF extract.*

### 41.      Grenada has a comfortable level of imputed international reserves in the regional

### 41. Grenada has a comfortable level of imputed international reserves in the regional central bank (ECCB)

### International reserves and buffers
- Grenada’s net reserves at the ECCB have reached four and a half months of imports and some 26 percent of broad money, which are deemed adequate against the benchmarks of 3 months and 20 percent, respectively.
- For ECCU countries, the automatic availability of ECCB reserves has been a key and timely source of resilience after disasters in the past.

### Recommendations for adaptation (continued)
- Develop an Inventory of public assets and power infrastructure in Grenada that follows an updated and finalized land use policy and links to an updated geo-referenced cadaster.
- Map infrastructure assets to areas that are vulnerable to climate risks and natural disasters and take actions to enhance resilience such as land raising, segmentation of transmission lines, relocation of assets, and building barriers.
- To mitigate, reduce, or transfer risk and increase coping capacity supported by improved hydrometeorological information service delivery for farmers.
- Draft and implement a nationwide vegetation management plan.
- Strengthen the enforcement of building codes and draining maintenance.
- Strengthen institutional and further advance enabling policy environment for building coastal resilience and advancing the blue economy approach.

### Financing strategy for mitigation and adaptation programs — overview
- The overall cost of Grenada’s climate change policy is estimated to be around US$500 million, equivalent to 42.2 percent of its 2018 GDP.
- Increasing access to grant financing is crucial for Grenada to ramp up investment while ensuring long term fiscal sustainability.
- Increasing private sector participation will be important.

### A. Current state of financing — key findings
- Mitigation needs identified in the NDC: US$161.4 million, equivalent to 13.6 percent of 2018 GDP.
  - If US$100 million could be financed by private sector, and the rest can be spread evenly over ten years, the annual cost borne by government would be around 0.5 percent of 2018 GDP.
- Adaptation needs identified in NAP and updated by the MoCR: around US$340 million, equivalent to 28.6 percent of 2018 GDP.
  - Infrastructure and land, water availability, food security, ecosystem resilience, and coastal zone management consume more than 96 percent of total investments in the NAP.
  - Since establishment of the Ministry of Climate Resilience, government has added additional US$77 million investments.
  - Estimated average annual cost would be around 2.9 percent of 2018 GDP, assuming delivery in ten years (of which around 2¼–2½ percent of GDP would take place at the central government level).
- Grenada’s fiscal situation has improved: central government debt dropped from 108 percent of GDP in 2013 to around 63½ percent of GDP in 2018.
- Primary surplus of around 7 percent of GDP in 2018, assisted by Citizenship by Investment (CBI) revenues (around 4.6 percent of GDP in 2018, reported on a committed-amount basis).
- Further mobilizing external grant financing is crucial; grants need to be combined with enhanced domestic revenue mobilization and full utilization of concessional IFI financing.

### B. Institutional issues and progress
- Early-2018: secured a US$43 million grant from the Green Climate Fund (GCF) for a sustainable water project (some 4 percent of GDP), to be implemented with NAWASA over the next four years.
- Engaged with New York University’s program of climate-smart cities for St. George’s, financed by a GCF grant, seen as a prototype for other Caribbean and small island countries.
- The FRL mandates maintenance of significant primary surpluses until public debt is reduced below 55 percent of GDP and includes rules that help generate fiscal savings in good times.
  - Grant-financed capital spending is exempt from the primary expenditure growth cap.
  - FRL requires that 40 percent of the CBI revenue be allocated to the Contingency Fund.

### Financing needs (summary of Table 4, assumes plans implemented in 10 years)
- Mitigation (NDC): Indicative cost US$161.4; o/w Private Sector US$100.0; Average Annual Cost (US$ m) 6.1; Annual Cost/Percent of 2018 GDP 0.5
- Adaptation (NAP and latest updates): Indicative cost US$339.1; Average Annual Cost (US$ m) 33.9; Annual Cost/Percent of 2018 GDP 2.9
- Institutional improvement: Indicative cost US$0.3; Average Annual Cost (US$ m) 0.0; Annual Cost/Percent of 2018 GDP 0.0
- Policy development: Indicative cost US$0.7; Average Annual Cost (US$ m) 0.1; Annual Cost/Percent of 2018 GDP 0.0
- Water availability: Indicative cost US$50.2; Average Annual Cost (US$ m) 5.0; Annual Cost/Percent of 2018 GDP 0.4
- Food security: Indicative cost US$46.0; Average Annual Cost (US$ m) 4.6; Annual Cost/Percent of 2018 GDP 0.4
- Ecosystem resilience: Indicative cost US$26.6; Average Annual Cost (US$ m) 2.7; Annual Cost/Percent of 2018 GDP 0.2
- Coastal zone management: Indicative cost US$15.0; Average Annual Cost (US$ m) 1.5; Annual Cost/Percent of 2018 GDP 0.1
- Infrastructure and Land: Indicative cost US$112.9; Average Annual Cost (US$ m) 11.3; Annual Cost/Percent of 2018 GDP 1.0
- Disaster and disease management: Indicative cost US$0.2; Average Annual Cost (US$ m) 0.0; Annual Cost/Percent of 2018 GDP 0.0
- Climate data: Indicative cost US$7.0; Average Annual Cost (US$ m) 0.7; Annual Cost/Percent of 2018 GDP 0.1
- Public education: Indicative cost US$1.7; Average Annual Cost (US$ m) 0.2; Annual Cost/Percent of 2018 GDP 0.0
- Adaptation financing management: Indicative cost US$1.4; Average Annual Cost (US$ m) 0.1; Annual Cost/Percent of 2018 GDP 0.0
- Monitoring and evaluation: Indicative cost US$0.2; Average Annual Cost (US$ m) 0.0; Annual Cost/Percent of 2018 GDP 0.0
- Not in NAP: Indicative cost US$77.0; Average Annual Cost (US$ m) 7.7; Annual Cost/Percent of 2018 GDP 0.6
- Total: Indicative cost US$500.6; o/w Private Sector US$100.0; Average Annual Cost (US$ m) 40.1; Annual Cost/Percent of 2018 GDP 3.4

(Sources for the table: Grenada Intended Nationally Determined Contribution (2015); Grenada National Climate Change Adaptation Plan (2017); Ministry of Climate Resilience; IMF staff estimates and projections.)

### C. FRL revisions under consideration
- Revisions would provide some space for increasing climate-related investment while maintaining prudent principles.
- Proposed amendments (based on IMF technical advice) would exempt climate-related investment from the expenditure rule and strengthen the fiscal strategy process to build further fiscal buffers.

### D. Climate-change spending effects and consistency with fiscal/external sustainability
- DSGE-based simulations:
  - Achieving a public capital stock that is 80 percent resilient would imply a steady state level of potential output 3 percent higher than without the investment in resilient infrastructure, achieved through reduced net emigration and higher supply of private labor and capital.
  - Assuming 80 percent of annual public investment is continually allocated to resilient public capital, by 2050 the negative effects of climate change on most economic variables would be more than offset (output, private employment, private investment, and tax revenues higher than in 2018; net immigration instead of emigration).
  - By year 2100, modeled qualitative benefits of greater resilient investment could be reversed, with falls in steady-state output, private investment and employment, significant out-migration and drop in tax revenue relative to 2018 levels—highlighting that climate costs could overtake benefits of resilient public investment over very long horizons and the need to incentivize resilience of private capital.
- Financing implications:
  - Accommodating climate change spending without a significant step up in grant financing could be unsustainable.
  - Once public debt ratio reaches 55 percent of GDP (projected for 2020 or 2021, depending on coverage), the FRL calls for recalibrating the primary balance target to a debt-stabilizing level, creating scope to reduce the fiscal balance significantly.
  - Illustrative medium-term scenarios:
    - Baseline: modest reforms and capacity improvements; significant fiscal expansion permitted by FRL risks spending on inefficient (predominantly non-climate-related) projects with limited growth benefits; difficult to accommodate substantial climate-related spending.
    - Pro-active: aggressive capacity improvements, better quality of capital spending, moderate increases in current spending (e.g., hiring of engineers), well-targeted social protection; higher payoff in sustained growth and eventually lower debt trajectory.
    - CCPA scenario: NAP-related spending scale-up implemented on top of the pro-active scenario; if all scale-up financed by new borrowing, debt dynamics up-trend despite positive growth effects—underscores need for grant financing and private sector participation.

### E. Other macro-considerations
- Balance of Payments: shift to renewable energy and wider use of energy-efficient vehicles and products could reduce energy imports and improve the balance of payments; import bill could decrease by up to 0.8 percent of GDP by 2030 (depending on combination of mitigating policies).
- Revenue: coordinated action on carbon taxes and relevant feebates could moderately increase revenue by up to 1 percent of GDP (depending on combination of mitigating policies).

*Source: 1grdea2019002 — Grenada staff report excerpt (IMF).*

### 4. Note: For comparability, the differences between the scenarios have

### 4. Note: For comparability, the differences between the scenarios have

### Capital spending, real GDP, and public debt scenarios (summary of charts)
- Capital Spending scenarios (levels shown for 2018–2030):
  - Years indicated: 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
  - Scenario labels: Baseline; Pro-Active; Pro-Active with Climate Change Adaptation
  - Example plotted values (Capital Spending series shown in source): 2500, 2700, 2900, 3100, 3300, 3500, 3700, 3900 (years aligned 2020–2027 in chart)
- Grenada: Real GDP Levels, 2020-30 (In EC$ million, 2006 constant prices)
  - Years indicated: 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
  - Scenario labels: Baseline; Pro-Active; Pro-Active with Climate Change Adaptation
- Public Debt (chart timeframe 2018–2030)
  - Years indicated: 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
  - Scenario labels: Baseline; Pro-Active; Pro-Active with Climate Change Adaptation
- Source for charts: IMF Staff projections.

### Recommendations for Financing
- Clarify remaining financing needs, by updating the NAP.
- Prioritize the maintenance of the foreign-financing pipeline, with emphasis on ensuring maximum concessionality.
- Well use available fiscal space, guided by the FRL, to invest in infrastructure and resilience-building.
- Ensure all relevant policy and legal frameworks are in place for attracting private investment in the energy sector and other relevant sectors (e.g., sustainable tourism).

### Risk Management Strategy — overview
- Grenada has established elements of a comprehensive risk layering strategy:
  - contingency funds;
  - participation in regional parametric insurance for budget support schemes;
  - inclusion of a hurricane clause in debt restructuring agreements.
- Gaps identified:
  - indemnity and catastrophe insurance is under-used;
  - contingent lines of finance have not been established;
  - fiscal buffers fall short of prudent levels.
- Recommendation: Establish a National Disaster Risk Financing Strategy as a central element of the broader DRS to guide risk transfer and retention choices and provide a framework for seeking increased international support.

### A. Risk Assessment Procedures — findings
- Risk identification:
  - Natural disaster and climate risks are well-identified, but a comprehensive risk and contingent liability assessment is lacking.
  - No framework defining the government’s contingent liabilities in case of a disaster.
  - Government lacks ownership in the process of quantifying risks associated with climate-related hazards despite partner-supported modeling tools.
- Fiscal Risk Statement:
  - Prepared for the 2017 and 2018 budget presentation, but does not provide detailed analysis of potential implications of natural disasters and climate change nor discuss how these would be met.
  - World Bank TA provided for assessment and quantification of fiscal risks arising from contingent liabilities in the SOE sector; these will be included in subsequent Fiscal Risk Statements.
- Quantified fiscal risk estimates:
  - Annual average fiscal costs of natural disasters estimated in the range of 0.3-0.5 percent of GDP.
  - World Bank study estimate: government would need to cover approximately USD 3.5 million (EC$ 9.5 million) annually — 0.3 percent of GDP — to address contingent liabilities related to hydrometeorological events; equivalent to 1.4 percent of government’s total expenditure for 2016.
  - IMF assumptions put future fiscal cost of natural disasters at around 0.5 percent of GDP (reflecting additional risks and financing pressures).
- Economy-wide costs:
  - Average annual damage to public and private buildings: USD 10 million (EC$ 27 million) — 1.1 percent of GDP.
  - For any given year, Grenada has about a 1 percent chance of hurricane losses exceeding USD 246 million (EC$ 664 million) for the economy as a whole.

### B. Self-Insurance and Risk Retention (government buffers and contingent arrangements)
- Current practices and limitations:
  - Short-term disaster relief and some recovery expenditures are reallocated from recurrent or capital expenditures via supplementary budgets; this forces reallocation from development activities to crisis response.
  - Long-term reconstruction financed by ad hoc International assistance and loans after disasters, constraining fiscal space and increasing sovereign debt pressures.
- Existing buffers (not ring-fenced or always clearly governed):
  - Budgetary contingency:
    - Contingency provision equal to 2 percent of revenues (consistent with the PFM act); in 2018 this was EC$15 million.
    - Reserve requires a supplementary budget to use; not historically used for natural disasters and would be rapidly depleted.
  - National Transformation Fund (NTF) Contingency Fund:
    - Established by law and funded by CBI revenues; provides grant financing to the budget for capital projects.
    - FRL requires first 40 percent of CBI inflows be placed into a contingency fund while debt remains above 55 percent of GDP.
    - Resources have been saved within the NTF but not physically placed into a contingency fund; current value of the contingency fund after arrears and debt reduction operations is around EC$40 million.
    - Drafting of implementing regulations (with World Bank support) to operationalize the NTF Contingency Fund expected to be completed in mid-2019.
    - Main objective: provide financial resources to cover medium-size natural disasters where budget reserve might be insufficient and insurance relief not available.
  - Sinking fund:
    - Maintained with the ECCB, around EC$37 million.
    - Intended for debt reduction but freely available and could be drawn down after a major natural disaster.
- Use of National Insurance Scheme (NIS) after Hurricane Ivan:
  - Temporary Unemployment Program budgeted for USD 3.7 million (EC$ 10.0 million) but disbursed USD 2.7 million (EC$ 7.3 million).
  - NIS currently does not offer unemployment insurance as a result of a natural disaster, only as a result of injury.
- Contingent financing from development partners:
  - Grenada has no formal contingency financing agreements in place.
  - Possible arrangements post-disaster: IMF (through an RCF), World Bank, IADB, or private sector (potentially high cost).
  - Vehicles to allow rapid access to concessional credit include: World Bank’s CAT-DDO; IADB Development Sustainability Contingent Credit Line; World Bank Contingent Emergency Response Component (CERC).
- Private sector self-insurance facilitation:
  - Grenlec allowed to set aside pre-tax profit into a reserve to replace non-insurable infrastructure; reserve currently around EC$25 million.
  - Grenlec participates in regional arrangements between electricity companies for disaster response.

### Risk transfer instruments and coverage
- CCRIF SPC membership and experience:
  - Grenada member since 2007 with parametric windstorm and earthquake policy; excess rainfall added in 2014.
  - Has not yet qualified for a disbursement. October 2014 rainfall event triggered a “Covered Rainfall Event” per CCRIF model but loss was below policy attachment point so no payout.
  - World Bank 3-year USD 2 million (EC$ 5 million) agreement (signed in 2013) paid almost all annual premiums to CCRIF SPC; agreement ended in 2015–2016 fiscal year.
  - Grenada seeks donor assistance to purchase CCRIF insurance at increased coverage levels.
  - CCRIF payouts go directly to the consolidated fund as budget support.
- Debt-servicing hurricane clause:
  - As part of 2015 debt restructuring, hurricane clauses agreed with creditors (private bondholders, Taiwan, Paris Club): debt service on restructured debt would be automatically re-profiled following a hurricane and in some cases other disasters.
  - Pause in debt service: up to one year depending on severity.
  - Trigger: parametric tied to independent verification by CCRIF and a payout for modelled losses exceeding US$15 million.
  - Clause could release up to EC$45 million in funds in the event of a major natural disaster (amounts smaller for smaller events depending on triggers).
- Asset insurance coverage:
  - Most public assets, including hospitals and schools, are not currently insured against natural disasters.
  - Consolidating public asset insurance into larger policies could reduce rates and be cost-effective given current soft market conditions.
- Private sector insurance penetration and market structure (2015 data):
  - Life and non-life insurance penetration (total GWP as a percentage of GDP): 6.1 percent (Grenada) versus Pan-Caribbean region 5.8 percent.
  - Non-life insurance penetration: 3.8 percent.
  - Insurer density: approximately one insurer for every 7,000 inhabitants in Grenada (better than other OECS jurisdictions at approximately one insurer per 3,700 inhabitants).
  - Market concentration: top 10 insurers wrote more than 90 percent of general insurance business in 2015.
  - Market composition: proliferation of general agency operations and a relatively small number of largely Caribbean-owned companies; limited presence of non-Caribbean insurers.
  - Regulatory/friction point: any insurer wishing to operate on more than one island must apply for a separate license.

### Box highlights (parametric insurance in fisheries — COAST)
- COAST (Caribbean Oceans and Aquaculture Sustainability Facility):
  - Intended to start in July 2019.
  - Parametric insurance product to protect food security and livelihoods and promote resilience of the fisheries sector against extreme weather.
  - Partnership among the US Department of State, the World Bank, CCRIF SPC, and the Caribbean Regional Fisheries Mechanism (CRFM).
  - Objectives: promote food security; livelihoods of fisherfolk; resilient fisheries; sustainable management of coastal infrastructure; disaster risk reduction in the Caribbean.
  - Product design features:
    - Transfer contingent liability from disasters impacting food security and livelihoods.
    - Harmonize government disaster risk management and ecosystem management plans.
    - Incentivize climate smart fisheries best practices.
    - Require minimum levels of shared governance as prerequisite for coverage.
  - Rationale: Climate change is altering fish distribution and productivity; increased variability in rainfall and storm surge risks; without adaptation, fisheries and coastal communities are increasingly vulnerable.

*Source: IMF Staff projections and analysis as presented in the content unit.*

### Box 3. Private Sector Insurance Coverage

### Box 3. Private Sector Insurance Coverage

### Private sector insurance market and trends
- In 2013, Grenada’s per capita spending on property insurance was USD 310 (EC$ 837).
- Gross written premium (GWP) increased slightly between 2012 to 2013, with a modest regression in 2014 and 2015.
- Property premiums have stagnated or contracted recently; the automobile business is also contracting due to increased competition and rate reductions.
- The 2009 collapses of the Colonial Life Insurance Company and the British American Insurance Company, while mainly affecting the life and health insurance sectors, have fueled a lack of confidence and trust in insurance companies in the region.
- Insurance premium collection issues have become a current and serious concern to insurers and will likely continue.

### Drivers of low coverage and underinsurance
- Mortgage termination: market observers report that when mortgages in Grenada end and banks no longer require insurance on mortgaged properties, many insureds lapse policies. In recessionary times these lapses are not replaced by new mortgages, shrinking the market.
- Commercial sector: closures of businesses and fewer construction projects reduce demand for commercial insurance.
- Underinsurance is common, even after Hurricane Ivan; insureds often underinsure for cost reasons despite understanding the average clause.
- Average clauses: United Kingdom-style average clauses apply to property policies on either an 85 percent basis (usually for homeowners) or a 100 percent basis and may only be deleted under exceptional circumstances.
- Coverage estimates: market sources indicate that only 20 percent to 40 percent of homeowners are estimated to have windstorm insurance, often conditioned on borrowing money. Insurance is generally limited to mortgage holders, a minority in Grenada.
- Many individuals insure only the value of their loan and cancel coverage when the loan has been repaid.
- Insurance settlements may be insufficient due to underinsurance and the rise in construction prices following hurricanes.

### Livelihood Protection Policy (LPP)
- Low-income individuals in Grenada are eligible for insurance from wind and excess rain through the Livelihood Protection Policy (LPP).
- LPP characteristics:
  - Weather index-based insurance policy.
  - Designed by Trans-Nemwil Insurance Ltd., together with Grenada Co-Operative Bank Ltd. and Grenville Co-Operative Credit Union.
  - Helps low-income individuals recover from damage caused by strong winds and/or heavy rainfall during hurricanes and tropical storms.
  - Targets all low-income individuals irrespective of occupation.
  - Provides timely cash payouts soon after a weather event.
  - Available across the island through local distribution channels, including cooperative banks, credit unions, and farmer associations.
- LPP development partners: developed through the “Climate Risk Adaptation and Insurance in the Caribbean” project implemented by the Munich Climate Insurance Initiative in partnership with CCRIF SPC, MicroEnsure, and Munich Re.

### Insurance rates and market pricing
- Regional market indication: average commercial insurance rate for the overall market is 0.54 percent of the total sums insured, or USD 5.40 per USD 1,000 (EC$ 14.58 per EC$ 2,700) of insurance coverage.
- Homeowners’ rates (including contents) tend to be 0.25 percent to 1.00 percent higher than commercial rates.
- Historical and recent rate bands:
  - Historically: USD 7.50–USD 8.50 per USD 1,000 (EC$ 20.25–EC$ 22.95 per EC$ 2,700) of coverage several years ago.
  - Over the last couple of years: USD 6.00–USD 6.50 per USD 1,000 (EC$ 16.20–EC$ 17.55 per EC$ 2,700) of coverage.
- Domestic market anomaly: in Grenada’s domestic market, commercial rates between USD 6.00 and USD 7.00 per 1,000 (EC$ 16.20 and EC$ 18.90 per EC$ 2,700) of insurance coverage are higher than homeowner rates.

### Improving risk layering and disaster risk financing
- Progress: Good progress has been made in implementing a natural disaster risk financing management strategy in Grenada although some gaps remain.
- IMF estimate for optimal protection: IMF estimates suggest that the overall amount of protection offered by the various layered financing instruments should be around 10 percent of GDP in Grenada.
- Current buffers: currently available buffers amount to around 5 percent of GDP, short of the 10 percent of GDP target.
- Elements of the layered buffer should include:
  - Risk retention mechanisms, in particular a natural disaster contingency fund.
  - Risk transfer mechanisms such as CCRIF cover, the hurricane clause, and private sector insurance mechanisms.
  - Contingent financing mechanisms such as a World Bank CAT DDO.
- Building resilient infrastructure and creating space below Grenada’s debt ceiling of 55 percent of GDP would over time reduce the needed size of this buffer.
- Short-term priorities to build buffers toward the optimal level:
  - Further optimize insurance coverage, in particular through optimizing CCRIF coverage and broadening the use of indemnity and catastrophe insurance.
  - Further build and strengthen the contingency fund by establishing regulations for its use, including clear circumstances for use (linked to escape clauses in the FRL) and ringfencing an amount for natural disasters.
  - Modernize PFM regulations to ensure the fund can be accessed quickly without diminishing accountability.
  - Enhance access to rapid and cheap contingent financing that can be triggered in the event of a natural disaster.

### Recommendations for risk management (numbered)
1. Formalize a national disaster risk financing strategy, including improving availability of data on losses from disaster, inventorying public assets, clarifying budget processes and engaging with development partners on financing modalities and focusing on building a comprehensive risk buffer.
2. Clarify regulations for accessing the National Transformations Fund’s Contingency Fund in the event of a natural disaster.
3. Optimize Caribbean Catastrophe Risk Insurance Facility (CCRIF) coverage by and broadening the use of property indemnity insurance.
4. Enhance insurance coverage for public assets and incentivize private uptake. Explore with private insurers the options for expanding the traditional market, both for housing and socially-desirable services such as flood and agriculture insurance, which may require public sector involvement.
5. Adopt parametric insurance policy to help protect the financial assets of coastal fishing communities.

### National processes: integration of climate change and public investment management
- Integration into planning:
  - Grenada has integrated climate resilience into national planning, developed a NAP and several sectoral plans, and is developing National Sustainable Development Plan 2035 (NSDP) with climate resilience as one pillar.
  - Ministry of Climate Resilience (MoCR) established in 2017 by combining functions of climate resilience, environment, forestry, fisheries, disaster management and information.
  - Twenty-five climate change focal points across ministries, statutory bodies and utilities support coordination and project preparation.
  - Climate relevance is required in PSIP project proposals; ministries use CCORAL for assessment; assessments reviewed by the National Climate Change Committee (NCCC) before PPCC screening.
  - Practical weight given to climate resilience is unclear; in the 2019 budget domestically financed capital budget has only 2.5 percent allocated to climate related projects.
- Public investment management (PIM) performance:
  - Project execution rates between 2016 and 2018 averaged less than 50 percent annually:
    - 2018: 50.0
    - 2017: 52.2
    - 2016: 40.8
  - Grenada’s PIM assessment using PIMA:
    - Grenada scores 4.6 compared to low income developing country average 4.3 and a top score of 10, indicating a considerable gap in public investment management.
  - Strengths and gaps:
    - FRL provides fiscal framework but capital spending is constrained when consolidation is necessary to meet the real primary expenditure rule.
    - GPRS 2014/18 identifies investment priorities but information on measurable targets and costings is limited.
    - Standard methodology and central support for project appraisal exist; cost-benefit analysis and risk assessments are mainly applied for major donor-financed projects.
    - Public Utilities Regulatory Commission (PURC) is not operational; Electricity Supply Act (2016) regulations are incomplete.
    - PPP framework exists but requirements are limited; SOE financial performance is monitored though not published as a consolidated report.
    - From June 2019 the Government will share individual SOE scorecards and make aggregate SOE financial information publicly available under the new World Bank DPF.
- Allocation and implementation issues:
  - Three-year budgeting exists but does not adequately show full annualized costs for long-life projects.
  - Capital and recurrent budgets are presented but some maintenance expenditure is incorrectly classified as capital.
  - Significant capital spending by extra-budgetary entities is reviewed but not disclosed in budget documentation.
  - Open competitive bidding is the default procurement method; procurement information publication has improved with a procurement website launched in May 2018.
  - Cash flow forecasts are updated monthly; donor funds are reasonably well-protected though some are outside the Single Treasury Account (TSA).
  - Project monitoring exists but inadequate implementation plans and staffing have caused delays and missed donor conditions; ex-post reviews and audits are rare.
  - No comprehensive registration or valuation of public physical assets exists (except some equipment), and depreciation of fixed assets is not recorded in operating statements.

*Source: Box 3. Private Sector Insurance Coverage, 1grdea2019002*

### 74.      Grenada has made substantial progress in improving its PFM systems in recent years. A

### 1grdea2019002 - 74.      Grenada has made substantial progress in improving its PFM systems in recent years. A

### Public Financial Management (PFM): progress and features
- A 2015 PEFA assessment found some important improvements since the 2010 PEFA and some deterioration.
- Since 2014 a robust suite of PFM legislation and regulations has been established and is operational, including:
  - Public Financial Management Act and Regulations
  - Public Procurement and Disposal of Public Property Act and Regulations
  - Fiscal Responsibility Act
  - Public Debt Management Act and Regulations
  - National Transformation Regulations
- Key operational improvements:
  - A medium term fiscal framework (MTFF) where rolling forward estimates are conducted and fiscal risks are summarized.
  - Orderliness in the budget calendar and Cabinet involvement in setting commitment ceilings.
  - Strengthened financial oversight of SOEs with Ministry of Finance (MOF) closer monitoring of their financial performance.
  - The 2016 chart of accounts (COA) is largely compliant with GFSM 2014 enabling more comprehensive and coherent fiscal analysis.

### Gaps for climate-resilience integration in PFM
- Budget classification and chart of accounts need to be updated to easily track climate resilience expenditures.
- Macroeconomic analysis of climate change has not yet been effectively included in the MTFF and fiscal risk statement.
- Guidelines for the use of the NTF Contingency Fund under development should be finalized to ensure transparent and smooth application after natural disasters.
- Establishing a NTF board following NTF regulation requirements would strengthen capital budgeting and present the fiscal situation more comprehensively.
- A physical asset registry initiative should be implemented as soon as possible to facilitate management of public wealth and assessment of losses following natural disasters.

### Recommendations for National Process (enumerated)
- 1. Enhance technical capacity and coordination mechanisms within the Ministry of Climate Resilience (MoCR), to mobilize climate finance and enhance its project implementation capacity.
- 2. Enhance the medium-term fiscal framework (MTFF) and fiscal risk analysis by including macroeconomic analysis of natural disasters and climate change.
- 3. Develop more rigorous project prioritization criteria to better align public investment with policy priorities. Establish National Transformation Fund (NTF) board to strengthen project screening.
- 4. Improve COA and budget classification to identify and track mitigation and adaptation spending. Ensure they clearly differentiate capital and current budget and continue cleaning up the current expenditures existing in capital budget.
- 5. Strengthen staff capacity in public investment management and improve capital project preparation with a focus on large projects to ensure timely delivery of capital projects.

### Priority needs to implement climate strategy; overall resource estimate
- Grenada has advanced climate planning since its 2013 Nationally Determined Contribution, including establishing the Ministry of Climate Resilience and developing a detailed and costed National Adaptation Plan.
- Resource needs: An indicative tally points to resource needs of at least US$500 over the next 10 years. These needs were developed in the context of the Paris Agreement NDC and in the National Adaptation Plan.
- The Ministry of Climate Resilience has revised priorities into six key areas ("the big 6") for engagement with climate finance providers.

### Key priority areas and illustrative measures (summarized)
- General preparedness (see Chapter III):
  - Development of a Disaster Resilience Strategy (DRS) (capacity building).
  - Development of a damage and loss data collection system systematized across all ministries (capacity-building).
  - Finalization and enactment of national overarching DRM legislation (capacity-building).
  - Formalization of a national disaster risk financing strategy (capacity-building).

- Mitigation (see Chapter IV):
  - Private investment target of US$100 million within 10 years, mainly in:
    - Renewable energy generation, including solar, geothermal and wind.
    - Energy-efficient buildings and hotels.
    - Fuel efficiency for vehicles.
    - Waste collection, reduction, sorting and recycling.
  - Possible government financial involvement (seed financing or guarantees).
  - Development of a feebate scheme within the excise tax framework, adequate to achieve planned reductions in energy consumption while calibrated to delivering required revenue (capacity-building) and a similar scheme for forestry.

- Adaptation (see Chapter V):
  - A public investment envelope of US$340 million, within 10 years (requiring concessional foreign financial support), mainly in:
    - Resilient infrastructure
    - Climate smart agriculture, including vegetation management
    - Disaster risk management, include communications systems
    - Sustainable energy
    - Sustainable natural resources
  - Development and enforcement of an enabling legal framework such as land use policy, building codes, and draining maintenance (capacity-building).

- Risk management (see Chapter VI):
  - Development of a national risk financing strategy (capacity building).
  - Building of fiscal buffers, including a budget contingency fund (capacity building).
  - Contingency financing arrangements (contingent financial support) and expansion of insurance to cover (financial support, either contingent or to underwrite premia costs).

- National processes (see Chapter VII and Annex III):
  - Institutional strengthening of the Ministry of Climate Resilience (capacity building).
  - Development of more rigorous project prioritization criteria, enhancement of staff capacity in managing public investment, and improvement of capital project preparation (capacity building).
  - Updates of budget classification and chart of accounts to identify and track mitigation and adaptation spending (capacity building).

### Annex I: Spreadsheet model to assess mitigation impacts — key model features and assumptions
- Model scope:
  - Demand functions specified for: electricity consumption by household, industrial, and commercial sectors; gasoline; road diesel; marine diesel; and diesel used in power generation.
- Baseline dynamics:
  - GDP expands by 39 percent between 2018 and 2030 based on IMF forecasts and extrapolation.
  - Income elasticities for electricity and fuels are set to 0.6.
  - Electricity and fuel use are assumed to decline autonomously by 1 percent a year due to gradual retirement of older, less efficient capital.
- Prices and supply:
  - Electricity prices are constant in real terms over time in the BAU, as are retail fuel prices (international oil prices are assumed fixed).
  - In the BAU scenario, the share of renewable generation in electricity supply rises from 0.02 in 2018 to 0.06 in 2030.
- Price-responsiveness:
  - Each 1 percent increase in electricity or fuel prices is assumed to reduce electricity/fuel demand by 0.5 percent, with 60 percent of the response from efficiency improvements and 40 percent from reduced product use.
- Emissions and revenues:
  - CO2 emission rates: 0.0104 (metric) tons per imperial gallon for gasoline; 0.0121 ton per gallon for diesel fuels.
  - Total emissions in a year = fuel use times the emission rate aggregated over fuels.
  - Revenues = fuel use times the relevant fuel excise tax aggregated over fuels.
- Base-year fuel and electricity data:
  - Total electricity consumption in 2018 is about 200 gigawatt-hours.
  - 2018 fuel use: 11 million imperial gallons for diesel used in power generation, 9 million for gasoline, 2 million for land-based diesel, and 1 million for other sources (not subject to excise).
  - 2018 prices: ECD 14.3 per gallon for gasoline, ECD 13.1 for road diesel, and ECD 8.0 for diesel exempt from excise.
  - Excises in ECD per gallon (fixed to 2030 in BAU): 5.5 for gasoline and diesel with exemptions/rebates for diesel used in power generation and fishing boats.

### Annex II: Applying feebates — principles and examples
- Feebate design advantages:
  - Potentially effective at reducing energy use if comprehensively applied, continuously scaled, and appropriately set.
  - Cost-effective if a uniform reward for saving energy is applied across products.
  - Can limit administrative burdens by incorporation into existing excise collection procedures.
  - Consistent with fiscal objectives because an ad valorem excise component can be retained for revenue needs.
  - Limits first-order pass-through to higher fuel/electricity/product prices, helping vulnerable households/firms.
- Transportation sector:
  - Current vehicle excise system: imported cars categorized with excise rates of 5, 7.5 or 10 percent for new cars depending on engine size; 50 percent for cars 1–4 years old; 40 percent for cars 5 years and older. Bus and truck rates vary between 7.5 and 45 percent depending on age and engine size.
  - Recommendation: shift to a vehicle excise tax with an ad valorem component (to meet a revenue target) and a feebate component (taxes on fuel-inefficient vehicles; subsidies to efficient vehicles) using a pivot point and a charge per gallon per mile.
  - Example: a feebate with pivot point of 250 grams of CO2 per mile and a price of USD100 or ECD270 per gram of CO2 would provide a subsidy of ECD $13,500 to a vehicle with fuel economy of 45 miles per (US) gallon and impose a tax of ECD $27,000 on a vehicle with fuel economy of 25 miles per (US) gallon.
  - International precedents: Denmark, France, Germany, Mauritius, the Netherlands, Norway, Sweden, and the United Kingdom; pivot points typically about 200 to 250 grams CO2 per mile; feebate prices vary widely (e.g., about USD10 per gram in France up to USD155 in Norway).
- Electricity-using appliances:
  - Feebate analogous to vehicles could apply to imported appliances and other electricity-using capital with an ad valorem component retained for revenue.
  - Feebate formula applies to consumption metrics (e.g., kWh/(cubic foot cooled) for refrigerators) with a pivot point and a charge per unit consumption.
  - Example: pivot point 5 kWh/month and feebate price ECD 80 per kWh/month yields a tax of ECD240 on an 8 kWh/month refrigerator and a subsidy of ECD240 on a 2 kWh/month refrigerator.
  - Feebate component can be made approximately revenue-neutral by setting the pivot point equal to the average consumption rate of models sold in the previous year and updating over time.
  - To minimize cost of reductions across product classes, the incremental reward per kWh (tax rate t) should be uniform across products.

*Source: 1grdea2019002 - 74.      Grenada has made substantial progress in improving its PFM systems in recent years. A*

### Annex III. PIMA Institutional Questionnaire—Interview Responses

### Annex III. PIMA Institutional Questionnaire—Interview Responses

### Fiscal Principles or Rules
- The Fiscal Responsibility Law (FRL) has explicit targets for public debt, with a debt brake mechanism and well-defined escape clause.
- The FRL includes primary balance, wage bill and real primary expenditure rules aimed at reducing debt and encouraging fiscal sustainability.
- The medium-term fiscal framework (MTFF) forecasts the budget year and 2 outer years; the outer years are indicative and not expenditure commitments, though consistent with the FRL.

### National and Sectoral Planning
- Growth and Poverty Reduction Strategy (GPRS), several sectoral strategies, and climate change adaptation-related plans identify national priorities; only some specify projects for budget inclusion.
- There is adherence to the requirement that all projects be consistent with priorities identified in the GPRS.
- Some plans/strategies identify costings for projects, but the lack of a national plan integrating costs prevents prioritization and rational allocation of projects.
- Measurable targets for outputs are provided in some strategies and budget documents, but significant scope for improvement exists.

### Coordination between Entities
- Questions regarding subnational governments (SNGs) are not applicable: "N.A. There are no autonomies entities."
- The FRL stipulates reporting of contingent liabilities. Government guaranteed debt for borrowing by PCs is reported and reflected as public debt.
- Financial statements of PCs are generally presented to central government albeit with delays.
- There is "some ambivalence about the existence of PPP’s."

### Project Appraisal
- Rigorous technical, economic, and financial analysis are not systematically applied to major capital projects; appraisal may reflect donor processes.
- A Project Cycle Manual (December 2015) and the Public Financial Management Regulations (January 2016) provide the methodology for project appraisals.
- Central support is provided by the Project Coordination Unit and other agencies and project committees.
- Risk consideration in appraisals is "Not generally" applied; limited to donor-financed projects.

### Alternative Infrastructure Financing
- Telecommunications is regulated by ECTEL and the local NTRC, both financially supported by government.
- The PURC, legislated to regulate other utilities, is in the process of being established (January 2019).
- Legal infrastructure is strong, but effectiveness is weak; regulators generally lack price-setting autonomy and full organizational, financial and managerial autonomy.
- A PPP policy has been published; FRL provides the legal/regulatory framework but requirements for PPPs are limited. A PPP Unit has not been established.
- The government reviews investment plans of public corporations (PCs) but does not systematically publish consolidated reports on their financial performance.

### Multiyear Budgeting
- Capital spending is forecasted over a three-year horizon.
- There are indicative multiyear ceilings on capital expenditure by ministry in budget documents.
- Budget documents often contain total costs of major projects commencing in the budget year with indicative annual aggregated costs over a three-year period.

### Budget Comprehensiveness and Unity
- Extra-budgetary spending of PCs is not shown in the budget documentation.
- All capital projects, regardless of financing source, are included in the budget documentation.
- Capital and recurrent budgets are prepared by a single ministry and presented together in the budget documents, using a program or functional classification; this does not fully conform to international standards (e.g., maintenance is included in the capital budget); the CoA is being revised.

### Budgeting for Investment
- Project outlays are appropriated on an annual basis; information on total project costs is included in the budget documentation.
- Virement from capital to current spending requires approval of the legislature.
- There is a mechanism to protect funding for ongoing projects in the annual budget and over the medium term.

### Maintenance Funding
- No standard methodology for estimating routine maintenance needs and budget funding.
- No standard methodology for determining major improvements; not included systematically in national and sectoral investment plans.
- Maintenance services are listed by Ministry and program as recurrent expenditure, but some maintenance expenditure is also reflected as capital expenditure.

### Project Selection
- Major projects are reviewed by the Ministry of Finance prior to inclusion in the budget.
- The Project Cycle Manual (December 2015) and Appendix D of the PFM Regulations list criteria for selection and prioritization of PSIP projects, but projects can be selected without going through the process.
- The government maintains a pipeline of appraised investment projects, but other projects may be selected for financing through the annual budget.

### Procurement
- The Public Procurement and Disposal of Public Property Act provides a legal basis for an open and competitive process; this is a requirement for most donor-financed projects but may not apply generally to locally financed projects.
- There is a procurement database with reasonably complete information, but no standard analytical reports are produced from the database.
- Commissioners have been appointed to the independent complaints committee, but no complaints have been reviewed.

### Availability of Funding
- Cash-flow forecasts are prepared or updated monthly, and ministries/agencies are provided with commitment ceilings for the full fiscal year.
- Cash for project outlays is sometimes released with delays.
- External financing is largely held in bank accounts outside the main government bank account.

### Portfolio Management and Oversight
- For all major projects, total project costs and physical progress are centrally monitored during implementation.
- Funds can be re-allocated between projects during implementation, using systematic monitoring and transparent procedures.
- Ex-post reviews of major projects are neither systematically required, nor frequently conducted.

### Management of Project Implementation
- Ministries/agencies systematically identify senior responsible officers for major investment projects, but implementation plans are not prepared prior to budget approval.
- There are no standardized rules and procedures for project adjustments.
- Except for some donor-financed projects, major capital projects are usually not subject to ex-post external audits.

### Monitoring of Public Assets
- Asset registers are neither comprehensive nor updated regularly.
- Recording of nonfinancial asset values in government financial accounts is limited to some capital equipment; plans are underway to do this.
- Depreciation of fixed assets is not captured in the government’s operating statements.

### Cross-cutting Institutional Notes
- IT support: No comprehensive computerized information system for public investment projects. "Smart-Stream is mainly used for financial accounting and reporting. Public investment projects are managed with excel."
- Legal framework: Part XIII of the Regulations for the PFM Act No. 17/2015 is the legal framework supporting PIM institutional arrangements, mandates, coverage, procedures, standards and accountability.
- Staff capacity: There is inadequate capacity and skills (architects, civil engineers, quantity surveyors, project managers, lawyers) to undertake the range of projects identified in the budget. "World Bank-sponsored projects are better equipped."

### Appendix I. CCPA Template (selected checklist items)
- Assess climate change risks and expected impacts on macro-framework/long-term outlook; compile "Table of recent and expected climatic developments."
- Evaluate general preparedness: whether NDC and resilience-building strategies are comprehensive and costed; disaster planning adequacy.
- Contribution to mitigation: statement of NDC pledge; clean energy plans; carbon taxation and fuel subsidy policies; other carbon-pricing strategies.
- Adaptation plans: existence of adequate adaptation strategy; inclusion of public investment plans and "Table of Costed Climate Change Projects (if costing has been done)" with columns US$, %GDP, Total, Mitigation, Adaptation.
- Financing strategy: assess current financing state; consistency with fiscal and external debt sustainability; macro spillovers.
- Risk management strategy: quality of risk assessment procedures; government self-insurance; risk reduction and transfer mechanisms.
- National processes: integration of climate change into national planning; adequacy of public investment management and PFM systems to manage climate-related financing and outlays.
- Taking stock: identify resources needed to mobilize to achieve climate-change strategy.

*Annex III. PIMA Institutional Questionnaire—Interview Responses (Grenada).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2019/1grdea2019002.pdf_