## EXECUTIVE SUMMARY

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---

### Context and climate disaster risk
- Natural disasters and climate change are existential threats to Grenada; annual losses from these events are estimated at 1.7 percent of GDP.
- Grenada was in the top 2 percent of 182 countries in the Climate Risk Index 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.
- Annual average losses from wind-related events and floods are estimated at just under US$20 million, or 1.7 percent of GDP.
- Once every 100 years, these costs are expected to exceed US$386 million, or more than 35 percent of GDP; there is a 1 percent probability that in any year a disaster will impose losses of more than 35 percent of GDP.
- Climate projections:
  - increase in mean annual temperatures ranging from 2.4 ̊C to 3.2 ̊C by the 2080s (higher emissions scenario, RCM);
  - GCM projects rainfall ranging from -40 to +7 mm per month by 2080 (skewed toward decreases);
  - sea surface temperature increases ranging from +0.9 ̊C to +3.1 ̊C by the 2080s.
- Monthly average sea level increased at a rate of around 3.6 mm/year between 1993 and 2015.
- A 1 meter sea level rise would inundate beaches and key coastal infrastructure, affecting 73 per cent of all major tourism resorts and 40 per cent of all seaport lands.
- Tourism contributes almost a quarter of GDP and over 20 percent to overall employment.
- COVID-19 amplified challenges:
  - health impact in 2020 largely contained with 103 infections and no deaths as of late-2020;
  - border closures caused massive tourism collapse in 2020;
  - first COVID-related death recorded on January 4, 2021;
  - ICU capacity of only 2 beds noted.

### Disaster Resilience Strategy (DRS): structure and role
- DRS draws on the National Adaptation Plan, National Climate Change Policy, National Sustainable Development Plan for 2020-35, Disaster Risk Financing strategy, and the 2019 Climate Change Policy Assessment.
- DRS integrates costs and benefits of resilience plans within a consistent macroeconomic framework to identify measures, financing needs, and public debt sustainability implications.
- DRS is organized around three Pillars:
  - Pillar I: Structural resilience — “hard” investments (upgrading infrastructure, irrigation, roads, bridges, buildings, public services) and “soft” measures (early warning systems, building codes, zoning).
  - Pillar II: Financial resilience — fiscal buffers and pre-arranged financial instruments, comprehensive insurance framework for rapid access to financing.
  - Pillar III: Post-Disaster resilience — action plans, emergency protocols, community awareness, institutional arrangements for rapid mobilization and continuity of critical public services.

### DRS coverage and estimated costs
- Direct cost of rapid and critical progress in building resilience over 15 years is estimated at around US$1.3 billion, averaging on an annual basis of around 5½ percent of GDP.
- Predominant share toward structural resilience (Pillar I): estimated in the range of US$1 billion or about 4 percent of GDP on average per year.
- Additional coverage for financial resilience (Pillar II): expected to cost about ½ percent of GDP per year for the next 15 years.
- Cost of strengthening Post-Disaster or social resilience (Pillar III): estimated at around 1 percent of GDP annually.
- These costings are preliminary and would need to be completed and periodically updated.

### Financing and macro-fiscal implications
- Grenada would not be able to finance the cost of building resilience and maintain fiscal and debt sustainability without additional concessional financing from the international community.
- After domestic resource mobilization, additional external grant financing of about 2½ percent of GDP (about US$40 million) annually is key to implementing the DRS within a balanced post-COVID-19 recovery and development strategy.
- Public capital spending has averaged around 3 percent of GDP since 2016.
- Budget for infrastructure maintenance is currently only about 0.2 percent of GDP, significantly lower than estimated minimum annual requirement.
- Capital budget execution over 2016-18 averaged 50 percent; execution of the adaptation investment budget was estimated at only around 30 percent in 2018.

### Progress and gaps under Pillar I: Structural resilience
- Policy frameworks and sectoral strategies are well articulated; 2017 NCCP and NAP provide detailed costed plans.
- Sector highlights:
  - Climate Smart Agriculture (CSA) strategy adopted by Ministry of Agriculture and Land.
  - Well-costed resilience plan for three airports by Ministry of Tourism and Civil Aviation.
  - Adoption of the Antigua and Barbuda Declaration on School Safety in the Caribbean for education sector.
  - Ministry of Health and Social Security identified hospital retrofit strategy and progressing on implementation.
  - Ministry of Trade banned single-use plastic and styrofoam imports in February 2019.
  - 2015 Integrated Coastal Zone Management Policy (ICZM) and Coastal Zone Management Act provide frameworks for a blue economy.
  - Geo-thermal renewable energy project under development with technical assistance from Government of New Zealand, JICA, and CDB.
  - Pre-feasibility studies for nine Climate Resilient Cities projects with NYU Marron Institute collaboration.
- PFM upgrades:
  - Mid-2019: policy framework on sustainable public procurement introducing environmental sustainability requirements.
  - Late-2019: regulations adopted to include climate resilience criteria into PSIP project screening.
  - New budget classifier enables classification and reporting of climate resilience and disaster-related expenditures.
- Budgeted adaptation investments increased from EC$37.9 million (1.2 percent of GDP) in 2018 to EC$62.1 million (1.8 percent of GDP) in 2019.
  - Total Capital Budget (EC$ millions): Est 2018 outturn 86.4 / 2018 Budget 171.3 / Budget 2019 196.4.
  - Subtotal of Climate Resilience (EC$ millions): 11.6 / 37.9 / 62.1.
  - Percent of GDP (Climate Resilience): 0.4 / 1.2 / 1.8.
- Remaining challenges:
  - Lack of access to funding and human resources; bottlenecks in leadership, technical capacities, and ownership.
  - Low public infrastructure investment relative to needs and competing priorities.
  - High input and financial cost of projects amid debt sustainability constraints.
  - Insufficient maintenance funding and weaknesses in project planning, monitoring, and asset valuation.

---

### 16. Modernization and enforcement of infrastructure-related policies runs into capacity, planning, and staffing constraints

### Infrastructure governance, capacity, and enforcement
- Enforcement of upgraded building codes and drainage maintenance is held back by shortages in staffing.
- No overall asset management and maintenance process for infrastructure exists.
- Infrastructure project proposals are not yet comprehensively screened in practice for climate resilience.
- In September 2019, Cabinet approved 10 positions for civil engineers and quantity surveyors and 4 positions for project managers at the Ministry of Public Works to address staffing shortcomings — increasing staffing capacity to 17 professional staff. Global Aid Canada will provide financial assistance for staffing.

### Renewable energy and power sector
- Renewable energy generation in Grenada remains tiny: about 1 percent each from grid and off-grid generation.
- The 2016 Electricity Supply Act was amended in 2017, but regulations still need to be implemented to facilitate private investment in renewables.
- Planned actions:
  - Modify regulations under the Electricity Supply Act to unlock investments.
  - Implement integrated resource planning to translate NDC targets into investments.
  - Consider creating a market for private sector scaling of renewables through PPPs backed by clear regulations.

### Land use, cadaster, and disaster-risk information
- Grenada lacks a comprehensive policy framework for land use and investment planning that incorporates hazard risk and an updated, digitized, geolocated national cadaster.
- A national land use policy was submitted to Cabinet in 2018 but is not yet adopted; no urban development policy exists.
- Box 1 — Priorities for DRM Data Collection:
  - Priority data needs: large scale topographic mapping, wind, rainfall and discharge measurements, detailed vegetation classification, geotechnical soil information, and multi-hazard mapping.
  - Applications: disaster response information products, impact-based forecasting and climate data products, coastal and landslide modelling and forecasting, and spatial analysis.
  - Need for mainstreaming systems and skills and modernizing public service processes.

### DRS design and costs (15-year horizon)
- DRS aligns to a 15-year horizon consistent with the National Development Plan.
- DRS prioritization: tiers from high urgency-high return to low urgency-low return.
- Adaptation:
  - 96 percent of NAP’s total investments are in infrastructure and land, water availability, food security, ecosystem resilience, and coastal zone management.
  - An estimated additional US$377 million for investments include US$300 million for adapting St. George’s as a climate-smart city to projected sea level rise.
  - With these additions, estimated average annual cost would be around 4 percent of GDP over 15 years (around 90 percent at central government level).
- Mitigation:
  - Financing costs for government NDC commitments and private sector potential amount to about 0.3 percent of GDP annually.
  - CCPA (2019) identified a comprehensive menu of mitigation options.

### Table 2 — Infrastructure Projects for Addressing Climate Change (15-year implementation) — key numeric entries preserved
- Mitigation (NDC): 161.4 100.0 4.1 0.3
- Adaptation (NAP and latest updates): 639.1 42.6 3.6
- Institutional improvement: 0.3 0.0 0.0
- Policy development: 0.7 0.0 0.0
- Water availability: 50.2 3.3 0.3
- Food security: 463.1 0.3
- Ecosystem resilience: 26.6 1.8 0.1
- Coastal zone management: 151.0 0.1
- Infrastructure and Land: 112.9 7.5 0.6
- Disaster and disease management: 0.2 0.0 0.0
- Climate data: 7.0 0.5 0.0
- Public education: 1.7 0.1 0.0
- Adaptation financing management: 1.4 0.1 0.0
- Monitoring and evaluation: 0.2 0.0 0.0
- St. George's Climate Smart City: 300 20.0 1.7
- Not in NAP: 77.5 1.0 0.6
- Total: 800.6 100.0 46.7 3.9

### Institutional and procedural “soft” measures
- Upgrade early warning systems, risk maps, and hydrometeorological information; set up clearinghouse and data management unit with regular updates integrated into planning.
- Review, implement, monitor, and update environmental protection and sustainability legislation to improve enforcement.
- Upgrade budget policies and procedures for infrastructure:
  - Enhance Public Investment Management informed by PIMA findings.
  - Screen resilience-related PSIP project proposals with target that 60 percent of PSIP proposals be screened through the new review process by 2023.
  - Identify annual expenditures on resilience-related spending in fiscal risk statements starting from the 2021 budget.
  - Implement new public procurement procedures with at least 25 percent of government contracts on goods governed by sustainability requirements by 2020-21.
  - Establish criteria and systems for estimating maintenance and rehabilitation costs for public physical infrastructure.
- Adopt land use policy and updated geo-located national cadaster, including urban use policy.
- Adopt a nationwide vegetation management plan.

### Infrastructure investment and maintenance requirements
- General infrastructure development needs (excluding adaptation and mitigation) estimated at approximately 5 percent of GDP annually.
- Minimum annual requirement for maintenance of existing infrastructure estimated at 1.2 to 1.4 percent of GDP and to be provided for in budgets; maintenance cost estimates to be reassessed continually given adaptation investments.

---

### Pillar II: Financial Resilience — National Disaster Risk Financing Strategy (DRFS)

### DRFS features and layered instruments
- DRFS adopted in September 2019 aims to build complementarity between risk retention and risk transfer instruments within a risk layering framework.
- Layered buffers include: contingency fund (self-insurance), CCRIF parametric cover, World Bank CAT-DDO, hurricane clause for debt service, and private sector insurance mechanisms.
- As of end-2018 available buffers (per CCPA):
  - 2¼ percent of GDP of freely available cash reserves that could be used in the event of natural disasters (not exclusively dedicated).
  - Contingent coverage in the event of natural disasters of up to 3½ percent of GDP.

### Specific fiscal buffers and instruments
- Budgetary contingency: contingency provision equal to 2 percent of revenues each year (around EC$15 million); reserve requires a supplementary budget and is part of regular reserves rather than a capitalized fund.
- Sinking fund: maintained with the ECCB, amounted to around EC$37 million at end-2018; intended for debt reduction but freely available.
- NTF Contingency Fund:
  - FRL requires when debt >55 percent of GDP, 40 percent of NTF inflows be placed into a contingency fund.
  - 2019 NTF regulations amended objectives, accumulation rules, and governance.
  - Capitalization envisioned to begin in 2020Q4 with 40 percent of NTF inflows aiming to reach EC$10 million (0.3 percent of GDP) by end-2020.
  - Upgrading supported by World Bank Development Policy Credit of US$20 million approved in December 2019.
- Catastrophic Deferred Drawdown Option (CAT-DDO):
  - Approved January 2020: US$20 million (about 1.7 percent of GDP) by the World Bank.
  - Provides contingent financing on highly concessional terms.
  - During 2020 COVID-19 pandemic, government opted not to draw down the CAT-DDO given “combined shock” risks.

### Parametric insurance and sectoral coverage
- CCRIF (2019/2020 period):
  - Coverage purchased for Tropical Cyclones and Earthquakes and Excess Rainfall at cost of US$1.5 million and coverage limit of US$44.4 million (3.9 percent of GDP) in an extreme event.
  - Table 3 CCRIF entries:
    - Tropical Cyclone: Attachment Point (years) 15; Exhaustion Point (years) 150; Ceding Percentage 37%; Coverage Limit (US$) $35,754,640; Net Premium (US$) $978,500.
    - Earthquake: Attachment Point (years) 47; Exhaustion Point (years) 250; Ceding Percentage 40.2%; Coverage Limit (US$) $4,125,570; Net Premium (US$) $50,000.
    - Excess Rainfall: Attachment Point (years) 5; Exhaustion Point (years) 75; Ceding Percentage 9.9%; Coverage Limit (US$) $4,609,353; Net Premium (US$) $434,488.
- COAST:
  - Commenced July 2019; offers customized coverage with maximum payout of USD 800,000 for fisheries sector for premium US$100,000.
  - Government allocated USD 370,000 to an Emergency Relief Fund for affected farmers.
- Corporate self-insurance example: Grenlec reserve for non-insurable infrastructure around EC$25 million in 2019.
- COAST adopted in fisheries sector as pilot to rapidly transfer funds to fisheries workers affected by extreme weather.

### Debt service hurricane clause and other arrangements
- 2015 debt restructuring included hurricane clauses allowing automatic re-profiling of debt service (pause up to one year) following a hurricane or certain natural disasters.
  - Trigger tied to CCRIF payout for modelled losses exceeding US$15 million.
  - Clause could release funds of over 1 percent of GDP in major natural disaster.

### Coverage adequacy and remaining gaps
- Preliminary CCPA (2019) estimate: overall protection against natural disasters should be around 10 percent of GDP in Grenada.
- As of 2020, “dedicated” coverage against natural disasters would amount to 7¼ percent of GDP composed of:
  - 0.3 percent of GDP in amended Contingency Fund,
  - 1.7 percent of GDP CAT-DDO,
  - 3.9 percent of GDP CCRIF,
  - 1.3 percent of GDP hurricane clause.
- Caveats and gaps:
  - Parametric insurance protection may need discounting based on cost efficiency and expected payout/premium ratio.
  - CCRIF coverage has not always been sufficient, particularly for flooding damages; Grenada had not received CCRIF payouts since 2008 despite recurring moderate flooding damages.
  - Almost no insurance coverage of public assets due to lack of inventory.
  - PFM regulations do not assure quick access to various funds while retaining accountability.
  - Domestic financial system not yet much involved in climate change strategy.
- Increased investment in resilient infrastructure would over time reduce needed size of financial protection buffers.

---

### 34. The private sector remains a limited provider of insurance and is insufficiently engaged

### Insurance coverage and penetration — baseline findings
- 2015 life and non-life insurance penetration (total GWP as a percentage of GDP) was 6.1 percent; Pan-Caribbean region was 5.8 percent.
- Non-life insurance penetration was 3.8 percent.
- Insurance coverage of agriculture and fisheries remains low.
- Underinsurance is common: property insurance premiums stagnant or contracting; market small and fragmented after 2009 regional insurer collapses.
- Only 20 percent to 40 percent of homeowners are estimated to have windstorm insurance.
- Insurance often limited to mortgage holders; many insure only loan value and cancel after repayment.
- Insurance settlements sometimes insufficient due to underinsurance and post-hurricane construction price increases.
- Livelihood Protection Policy (LPP):
  - Weather index-based product for low-income individuals providing timely cash payouts for wind and excess rain damage.
  - Distributed via cooperative banks, credit unions, and farmer associations.
  - Developed under “Climate Risk Adaptation and Insurance in the Caribbean” project (Munich Climate Insurance Initiative, CCRIF SPC, MicroEnsure, Munich Re).

### DRS Pillar II — disaster risk financing priorities
- Improve availability and use of disaster loss data; inventory public assets; clarify budget processes; engage development partners to build comprehensive risk buffer.
- Increase capitalization of dedicated Contingency Fund; target EC$10 million to be achieved by end-2020 and evaluate scope for further increases.
- Optimize CCRIF insurance: purchase increased coverage for flooding; broaden indemnity and catastrophe insurance; review attachment points.
- Explore donor-supported financing options including CDB Exogenous Shock Response Policy Based Loan and IADB Development Sustainability Contingent Credit Line.
- Expand state-contingent debt instruments beyond hurricane clause.
- Amend PFM regulations to allow quick access to potentially available funds without diminishing accountability; specify circumstances for Sinking Fund use.
- Insure public assets after establishing inventory and mitigate cost-effectively by consolidating coverage.
- Enable expanded private insurance uptake: ensure insurers have strong capital buffers and liquidity; explore market expansion for housing, flood, agriculture, fisheries insurance.
- Expand COAST program in fisheries sector to register at least 200 new workers by 2023.
- Explore FAO parametric insurance for nutmeg and cocoa farmers; build technical capacity for agriculture insurance.
- Engage banks and non-banks for investment in resilience, SME inclusion, and innovative financing.

---

### Post-disaster and social resilience — Pillar III

### Institutional, procedural, and capacity status
- Oversight by NaDMAC; National Disaster Plan revised 2005; NaDMA coordinates 17 District Disaster Management Committees.
- Coordination Protocol for national/sub-national emergencies adopted with World Bank support; revisions with CDEMA support.
- Good system for collecting damage/loss information for high-intensity events.
- DRM framework progress: Hazard Mitigation Policy and Plan (2003 and 2006).
- Fiscal/social frameworks: risk analysis increasingly in budget documents; SEED program consolidated social protection; public procurement legislation improved with World Bank support.
- School safety: Antigua and Barbuda declaration adopted; Roadmap for School Safety and priorities identified.
- Capacity and information gaps:
  - NaDMA under-resourced: 6 staff and 2 interns vs. 11 full-time staff needed.
  - Gaps in reporting high-frequency, low-intensity events; example: no final national report on August 2018 floods.
  - Gaps in social and income distribution data with lags over a decade.
  - Schools lack approved comprehensive disaster management plans; slow public procurement practices may hamper post-disaster response.
- Legislative/private-sector engagement gaps:
  - No overarching DRM Act finalized; Hazard Mitigation Plan proposed Comprehensive DRM Act but not finalized.
  - Little private sector engagement to mobilize resources.
- Social protection gaps:
  - SEED program gaps across communities and vulnerable groups; rigidities in upscaling beneficiaries and benefits.
  - Pension coverage limited and tilted toward formal workers.
  - Community programs insufficient for elderly, youth, and women.
  - Gaps in training for climate-resilient techniques in agriculture and fisheries.

### DRS Pillar III priority actions and targets
- Adequately staff, resource, and operationalize NaDMA; 2021 budget to finance 11 full-time staff and NaDMA activities.
- Increase NaDMA-led emergency response coverage using coordination protocols from zero currently to 100 percent by 2023.
- Deeper integration with regional bodies (CIMH, CDEMA, SRC at UWI).
- Develop and maintain new database per DaLA methodology maintained by NaDMA to back donor financing requests.
- Finalize and implement DRM Act to institutionalize National Disaster Management Fund and make hazard risk information public.
- Upgrade public procurement to support resilience standards and emergency procurement with World Bank support.
- Roll out/expand community resilience programs: neighborhood watch, youth programs, climate smart housing policy, expanded services to elderly and persons with disabilities, gender-focused programs, training for private sector employment and climate-resilient practices.
- School safety targets: increase percentage of schools with approved comprehensive disaster management plans from zero to 70 percent by 2023; 50 percent of schools to be screened for physical hazards by 2023.
- Integrate SEED information system with geo-reference capability; update poverty assessments and location maps; integrate climate change into education and training curricula.

---

### COVID-19 implications for the DRS

### Synergies and additional considerations
- COVID-19 exposed weaknesses in ex-ante preparedness and affects DRS design across pillars:
  - Pillar 1: Need for resilient structures that permit social distancing, quarantining, and testing.
  - Pillar 2: Insurance and self-insurance buffers should be larger and more flexible; buffers dedicated to natural disasters could be made available for pandemic-type emergencies (and vice versa), subject to contingency plans.
  - Pillar 3: “Social resilience” mechanisms should be more potent, speedy, and flexible; digitalization could support social distancing responses.
- Common elements between DRS and pandemic preparedness: infrastructure investment; risk maps and early warning systems; calibrated financial insurance and self-insurance; contingency plans; channels to support affected populations.
- Additional considerations:
  - Risk of a “combined” shock: non-negligible probability for 2021 as virus expected to remain active during hurricane season of H2 2021; calls for creating additional buffers and contingency planning by mid-2021.
  - Resource prioritization requires coordination across health, engineering, meteorology, and infrastructure sectors and whole-of-society contingency plans.

---

### 49. Direct cost and macro-fiscal implications of DRS (summary)

### A. Direct cost estimates and DRS pillars
- Total direct cost estimate: US$1.3 billion over 15 years.
- Annual fiscal burden implication: reaching 5½ percent of GDP annually in 2024–35.
- Pillar 1 — Structural Resilience:
  - Preliminary total public spending needs in range of US$0.8-1 billion (Table 2).
  - Additional spending requirement about 4 percent of GDP per year on average through 2035.
- Pillar 2 — Financial Resilience:
  - Average annual fiscal cost of additional layered insurance about ½ percent of GDP per year.
  - Component costs (annual average):
    - Government saving fund for self-insurance: 0.1 percent of GDP flow cost.
    - Higher, optimized CCRIF coverage: 0.1 percent of GDP.
    - Support for other insurance programs (public assets insurance, expanded sectoral insurance): 0.3 percent of GDP.
- Pillar 3 — Post-Disaster Relief and Social Resilience:
  - Total cost estimate: around 1 percent of GDP per year on average.

### B. Macroeconomic benefits of building resilience
- Conceptual channels: resilient public infrastructure raises returns to private investment and labor supply, increases private capital accumulation and labor contribution to growth, reduces capital stock depreciation from disaster damage.
- DSGE illustration:
  - Achieving public capital stock that is 80 percent resilient implies steady state potential output 3 percent higher than without resilient investment.
- Climate change amplification in tailored DSGE (middle scenario) by 2100:
  - Real GDP to fall by about 5 percent.
  - Private investment to fall by about 5 percent.
  - Private employment to fall by 6 percent.
- Model caveats: likely understates negative effects, excludes sea level rise; resilient investment will mitigate these effects.

### C. Macro-fiscal context and FRL
- Pre-COVID-19 performance:
  - Fiscal adjustment of almost 10 percent of GDP in 2014-17.
  - Central government debt dropped from 108 percent of GDP in 2013 to below 60 percent of GDP in 2019.
  - Primary surplus in 2019 almost 7 percent of GDP.
- FRL features:
  - Mandates maintenance of significant primary surpluses until public debt reduced below 55 percent of GDP.
  - Grant-financed capital spending exempt from primary expenditure growth cap.
  - Requirement for medium-term fiscal framework and debt management strategy during budget process.
  - Fiscal Responsibility Oversight Committee monitors FRL implementation.
- Proposed revisions to create space for climate investment include:
  - Shift spending rule to pre-determined multi-year path; shift toward a primary current expenditure growth rule; exempt specific resilience-related projects from primary expenditure rule.
  - Preconditions: governance improvements, capacity to classify/report capital spending, strengthened fiscal risk analysis, clearer debt definition to include SOE debt.
  - Complementary reform: target safer long-term debt below FRL’s 55 percent of GDP.

### D. COVID-19 shock, DRS scenario 2021–35
- COVID-19 impacts:
  - Tourism accounts for over 80 percent of total exports; tourism essentially halted during border closures.
  - Fiscal deterioration: primary surplus estimated to have declined to 2 percent of GDP and public debt increased to around 70 percent of GDP at end-2020.
  - FRL escape clause invoked in April; intended continued invocation in 2021.
  - Debt reduction to 55 percent of GDP delayed to around 2026.
- DRS scenario assumptions:
  - Potential growth absent DRS ~2¾ percent; DRS adds multiplier and growth payoff from resilient infrastructure.
  - Primary surplus target of 3½ percent of GDP from 2022 until debt below 55 percent of GDP.
  - Public investment to increase by around 7-8 percent of GDP annually vs current 3-4 percent of GDP.
  - DRS climate resilience projects: 4 percent of GDP annually.
  - Resource mobilization assumes about one-half of direct DRS cost financed from additional concessional external grants (~2½ percent of GDP annually).
  - Domestic resource mobilization from fiscal reforms and expenditure rationalization.
- Macro projections and outcomes:
  - Public investment to stabilize at around 10-11 percent of GDP for most of horizon.
  - Growth to average 3¼ percent in 2025-35, some ½ percentage point above estimated potential without DRS.
  - Public debt to stabilize just below 50 percent of GDP in the long term.
- Risks and adverse scenarios:
  - Failure of domestic resource mobilization could reverse debt decline.
  - Extreme scenario: if all scale-up financed by debt, debt could exceed 100 percent of GDP by 2035.

---

### 62. Mobilizing external and domestic resources; implementation priorities

### Facilitating external grants and concessional loans
- Grenada secured US$48 million (4 percent of GDP, or 1 percent of GDP annually over 4 years) grant from GCF for sustainable water project.
- Engagement with NYU climate-smart cities program for St. George’s can catalyze more grant financing.
- Government to satisfy donors’ project documentation and transparency requirements to unlock grants.
- GoG attracted highly concessional IFI loans; CUB estimated at around 9 percent of GDP.
- Strategy: draw down cost-effective portion of CUB to execute PSIP; apply value-for-money criteria and CCORAL; optimize concessional debt via MTDS.

### Mobilizing domestic resources and contingency measures
- GoG to match external grant financing with domestic savings and adherence to FRL after escape clauses expire.
- Additional measures generating around 2½ percent of GDP over DRS horizon:
  - Rationalizing inefficient/wasteful spending: yield to reach 1 percent of GDP annually over 2025-35.
  - Improving tax administration and broadening base: yielding 1 percent of GDP over 2025-35.
  - Improving collection of tax arrears: yielding one-off cumulative revenue of 5 percent of 2020 GDP.
  - Comprehensive pension reforms including phased retirement age increase by 5 years over next 10 years; savings backloaded (exceeding ½ percent of GDP annually by end of horizon).
- Contingency options: carbon taxes, fee-bates, further expenditure rationalizations; revise tariffs and fees for public corporations; enhance transparency of CBI inflows and plan allocation of overperformance to DRS.
- Prioritization: scale down lower-priority projects if financing falls short.

### Ensuring accountability and strategic implementation
- Reporting mechanisms: Public Finance Management Act 17, 2015 requires external audit and annual report to parliament and publication.
- Fiscal Responsibility Oversight Committee scrutinizes public expenditure ex-post and publishes reports to parliament.
- GoG commitments: enhance transparency, improve monitoring of SOEs, adopt broader public debt definition including SOE debt for fiscal anchor.
- Strategic priorities and implementation:
  - DRS flexible with periodic updating of costings; NSDP 2020-35 to provide prioritization and sequencing; costings and financing identification to be part of annual budgets and 3-year MTAPs.
  - Strengthen institutional/legal framework and staffing; 3-year MTAPs to identify training/intervention sequencing for development partners.
  - Optimize financial resilience: implement DRFS (Sept 2019); prioritize CCRIF optimization, broaden indemnity/catastrophe coverage, inventory and valuation of public assets.
  - Streamline donor grant qualification, application, and disbursement to reduce burden on small state; integrated DRS with transparent monitoring to facilitate donor mobilization.

### Strategic Actions (summary)
- Strengthening Structural Resilience: review/update NDC; update/enforce environmental legislation; strengthen institutional framework for adaptation/mitigation; set up clearinghouse and data management unit; integrate climate criteria in PSIP screening.
- Strengthening Financial Resilience: identify insurance products/costs for public assets; incentivize private insurance uptake; implement national disaster risk financing strategy; amend FRL; establish PPP regulations and clarify access to contingency funds.
- Strengthening Post-Disaster Resilience: strengthen regulatory/operations framework for DRM; implement school safety measures; amend public procurement law for disasters; integrate climate change into curricula; resource NaDMA adequately; improve contingency planning and disaster-related social protection targeting.

### Annex I — Effects of Hurricane Ivan (2004) — key statistics
- Hurricane Ivan damage estimated at total 147.7 percent of GDP; direct 131.5 percent of GDP; indirect 16.2 percent of GDP.
- Sector damage (percent of GDP): Housing direct 84.8, indirect 0.6, total 85.4; Tourism direct 18.9, indirect 6.3, total 25.1; Education total 12.1; Telecommunications total 9.4; Agriculture total 6.2; Electricity total 5.6; Manufacturing total 1.4; Transport total 0.7; Wholesale & Retail 0.7; Health 0.7; Water and Sewage total 0.5.
- About 89 percent of damage was direct loss of infrastructure and physical capital (131.5 percent of GDP); 30 percent of housing stock required complete replacement.
- Tourism and telecommunications severely hit: about 55 percent of hotel room capacity impaired; 60 percent of overhead distribution lines for telecommunications lost.
- Electricity distribution system: 80 percent damaged, leaving three quarters of residents without power.
- Pre-Ivan projection: economy to grow 4.7 percent in 2004 but instead declined by 0.6 percent in 2004.
- Fiscal impacts: 2004 overall deficit of 1 percent of GDP as capital spending declined about 50 percent from 2003 while revenue fell 8.4 percent.
- Longer-term: reconstruction widened fiscal deficit and increased public debt; poverty headcount rose from 32.1 percent in 1999 to 37.7 percent in 2008.

---

### Annex II. Covid-19 Impact and Implications for Grenada

### Health impact and timeline
- Initial containment effective; inbound travel restrictions and lockdown measures in March flattened the curve; no deaths initially.
- Re-opening in fall 2020 led infections to rise in late-2020.
- Incidence remains below regional and global averages.
- Key dates:
  - Mid-September: CARICOM agreed to a regional “travel bubble.”
  - Late October: Grenada initially participated but opted out due to virus recurrence in partners.
  - Mid-December: Spike related to Sandals resort caused partial re-imposition of restrictions.

### Economic impact: tourism, trade, and revenues
- Travel restrictions caused near-shutdown of tourism; air and cruise tourism halted in mid-March.
- Tourism recovery lagged regional peers.
- Offshore university shifted to online classes, exacerbating visitor contraction.
- Imports and tax revenues experienced deep, double-digit percentage plunges in Q2 and Q3.
- Remittance inflows recovered strongly since May.
- CBI inflows broadly unchanged in H1.

### Fiscal and policy response
- Announced discretionary fiscal measures a little over 2 percent of GDP, including:
  - increased health care spending;
  - support to agriculture and fishery sectors;
  - income support for displaced workers;
  - infrastructure projects for local employment;
  - tax and import duty deferrals.
- IFI support, including an IMF RCF disbursed in spring 2020, helped finance measures.

### Health system and social resilience implications
- Pandemic revealed additional public health infrastructure needs:
  - retrofitting for social distancing;
  - upscaling quarantine and testing capacities;
  - pulmonary diagnostics, oxygen, ventilators;
  - low ICU capacity highlighted.
- Social resilience impacts:
  - Unemployment: pre-crisis 15 percent; 2020Q2 28½ percent.
  - Tourism-related jobs and lower-income groups disproportionately affected.
  - Inequality in social protection: unemployment benefits available only to NIS contributors, excluding many bottom-workers.

*Prepared jointly by the Ministry of Finance and Ministry of Climate Resilience of Grenada, with support from the International Monetary Fund and by drawing on the 2019 Climate Change Policy Assessment that was prepared jointly by the staffs of the IMF and the World Bank.*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context and climate disaster risk
- Natural disasters and climate change are existential threats to Grenada; annual losses from these events are estimated at 1.7 percent of GDP.
- Grenada was in the top 2 percent of 182 countries in the Climate Risk Index 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.
- Annual average losses from wind-related events and floods are estimated at just under US$20 million, or 1.7 percent of GDP.
- Once every 100 years, these costs are expected to exceed US$386 million, or more than 35 percent of GDP; there is a 1 percent probability that in any year a disaster will impose losses of more than 35 percent of GDP.
- Climate projections: increase in mean annual temperatures ranging from 2.4 ̊C to 3.2 ̊C by the 2080s (higher emissions scenario, RCM); GCM projects rainfall ranging from -40 to +7 mm per month by 2080 (skewed toward decreases); sea surface temperature increases ranging from +0.9 ̊C to +3.1 ̊C by the 2080s.
- Monthly average sea level increased at a rate of around 3.6 mm/year between 1993 and 2015.
- A 1 meter sea level rise would inundate beaches and key coastal infrastructure, affecting 73 per cent of all major tourism resorts and 40 per cent of all seaport lands.
- Tourism contributes almost a quarter of GDP and over 20 percent to overall employment.
- COVID-19 amplified challenges: health impact in 2020 largely contained with 103 infections and no deaths as of late-2020; border closures caused massive tourism collapse in 2020; first COVID-related death recorded on January 4, 2021; ICU capacity of only 2 beds noted.

### Disaster Resilience Strategy (DRS): structure and role
- The DRS draws on the National Adaptation Plan, National Climate Change Policy, National Sustainable Development Plan for 2020-35, Disaster Risk Financing strategy, and the 2019 Climate Change Policy Assessment.
- The DRS integrates costs and benefits of resilience plans within a consistent macroeconomic framework to identify measures, financing needs, and public debt sustainability implications.
- DRS is organized around three Pillars:
  - Pillar I: Structural resilience — “hard” investments (upgrading infrastructure, irrigation, roads, bridges, buildings, public services) and “soft” measures (early warning systems, building codes, zoning).
  - Pillar II: Financial resilience — fiscal buffers and pre-arranged financial instruments, comprehensive insurance framework for rapid access to financing.
  - Pillar III: Post-Disaster resilience — action plans, emergency protocols, community awareness, institutional arrangements for rapid mobilization and continuity of critical public services.

### DRS coverage and estimated costs
- Direct cost of rapid and critical progress in building resilience over 15 years is estimated at around US$1.3 billion, averaging on an annual basis of around 5½ percent of GDP.
- Predominant share toward structural resilience (Pillar I): estimated in the range of US$1 billion or about 4 percent of GDP on average per year.
- Additional coverage for financial resilience (Pillar II): expected to cost about ½ percent of GDP per year for the next 15 years.
- Cost of strengthening Post-Disaster or social resilience (Pillar III): estimated at around 1 percent of GDP annually.
- These costings are preliminary and would need to be completed and periodically updated.

### Financing and macro-fiscal implications
- Grenada would not be able to finance the cost of building resilience and maintain fiscal and debt sustainability without additional concessional financing from the international community.
- After domestic resource mobilization, additional external grant financing of about 2½ percent of GDP (about US$40 million) annually is key to implementing the DRS within a balanced post-COVID-19 recovery and development strategy.
- Public capital spending has averaged around 3 percent of GDP since 2016.
- Budget for infrastructure maintenance is currently only about 0.2 percent of GDP, significantly lower than estimated minimum annual requirement.
- Capital budget execution over 2016-18 averaged 50 percent; execution of the adaptation investment budget was estimated at only around 30 percent in 2018.

### Progress under Pillar I: Structural resilience — recent developments and gaps
- Policy frameworks and sectoral strategies are well articulated; 2017 National Climate Change Policy (NCCP) and National Adaptation Plan (NAP) provide detailed costed plans.
- Sector-specific progress highlights:
  - Ministry of Agriculture and Land adopted a strategy for Climate Smart Agriculture (CSA).
  - Ministry of Tourism and Civil Aviation has a well-costed plan for increasing resilience of the three airports.
  - Education: adoption of the Antigua and Barbuda Declaration on School Safety in the Caribbean.
  - Ministry of Health and Social Security identified a strategy to retrofit hospitals and is progressing on implementation.
  - Ministry of Trade banned single-use plastic and styrofoam imports in February 2019.
  - 2015 Integrated Coastal Zone Management Policy (ICZM) and Coastal Zone Management Act provide frameworks for a blue economy.
  - Geo-thermal renewable energy project under development with technical assistance from the Government of New Zealand, JICA, and CDB.
  - Ministry for Climate Resilience collaborated with NYU Marron Institute on pre-feasibility studies for nine Climate Resilient Cities projects.
- Public financial management (PFM) upgrades:
  - Mid-2019: policy framework on sustainable public procurement introducing environmental sustainability requirements.
  - Late-2019: regulations adopted to include climate resilience criteria into PSIP project screening.
  - New budget classifier enables classification and reporting of climate resilience and disaster-related expenditures.
- Budgeted adaptation investments increased from EC$37.9 million (1.2 percent of GDP) in 2018 to EC$62.1 million (1.8 percent of GDP) in 2019.
  - Table 1 highlights (Est 2018 outturn / 2018 Budget / Budget 2019):
    - Total Capital Budget: 86.4 / 171.3 / 196.4 (in EC$ millions)
    - Subtotal of Climate Resilience: 11.6 / 37.9 / 62.1 (in EC$ millions)
    - Percent of GDP (Climate Resilience): 0.4 / 1.2 / 1.8
- Remaining challenges and gaps:
  - Lack of access to funding and human resources; bottlenecks in leadership, technical capacities, and ownership.
  - Low public infrastructure investment relative to needs, competing priorities for growth-enabling projects (ICT, tourism, transport).
  - High input and financial cost of projects amid debt sustainability constraints.
  - Insufficient maintenance funding; risk that neglected infrastructure will become costlier to repair.
  - Shortcomings in planning sustainable investment levels, allocating to right projects, protecting and maintaining assets, and implementing projects on time with adequate monitoring and asset valuation.

*Prepared jointly by the Ministry of Finance and Ministry of Climate Resilience of Grenada, with support from the International Monetary Fund and by drawing on the 2019 Climate Change Policy Assessment that was prepared jointly by the staffs of the IMF and the World Bank.*

### 16.      Modernization and enforcement of infrastructure-related policies runs into

### 16.      Modernization and enforcement of infrastructure-related policies runs into capacity, planning, and staffing constraints

### Infrastructure governance, capacity, and enforcement
- Enforcement of the recently upgraded building codes and other infrastructure activities (e.g., drainage maintenance) is held back by shortages in staffing.
- There is yet no overall asset management and maintenance process for infrastructure.
- Infrastructure project proposals are not yet comprehensively screened in practice for climate resilience, although steps are being made despite initial steps to enable such screening.
- In September 2019, Cabinet approved 10 positions for civil engineers and quantity surveyors and 4 positions for project managers at the Ministry of Public Works to address shortcomings in staffing. This will increase staffing capacity to 17 professional staff. Global Aid Canada will provide financial assistance for staffing.

### Renewable energy and power sector
- Renewable energy generation in Grenada remains tiny: about 1 percent each from grid and off-grid (e.g., rooftop solar) generation.
- The 2016 Electricity Supply Act was amended in 2017, but regulations still need to be implemented to facilitate private investment in renewables.
- Actions to boost renewable energy generation will be implemented:
  - Regulations under the Electricity Supply Act will be modified to unlock investments in renewable energy.
  - Implementation of integrated resource planning will help translate NDC targets into tangible investments.
  - The government will consider creating a market for the private sector to scale renewable energy penetration through well-structured public private partnerships (PPPs) backed by clear regulations.

### Land use, cadaster, and disaster-risk information
- Grenada does not yet have a comprehensive policy framework, particularly for land use and investment planning, that incorporates hazard risk, nor an updated, digitized, and geolocated national cadaster.
- A national land use policy was submitted to Cabinet in 2018 but is not yet adopted. There is no urban development policy and hazard-related information and mapping is often not utilized in economic decisions.
- Box 1 — Priorities for DRM Data Collection:
  - Priority data needs include large scale topographic mapping, wind, rainfall and discharge measurements, detailed vegetation classification, geotechnical information on soils, and multi-hazard mapping.
  - Applications: information products for disaster response, impact-based forecasting and climate data products, coastal and landslide modelling and forecasting, and spatial analysis.
  - Mainstreaming of these systems and skills and modernization of public service processes is needed.

### Disaster Resilience Strategy (DRS) design and costs (15-year horizon)
- DRS aligns to a 15-year horizon consistent with the National Development Plan.
- DRS prioritization: tiers from high urgency-high return to low urgency-low return.
- Adaptation:
  - The core of the DRS’ structural pillar will be aimed at executing the NAP’s projects. 96 percent of NAP’s total investments are in the areas of infrastructure and land, water availability, food security, ecosystem resilience, and coastal zone management.
  - An estimated additional US$377 million for investments include US$300 million for adapting Grenada’s capital, St. George’s, as a climate-smart city to the projected sea level rise.
  - With these additions, the estimated average annual cost would be around 4 percent of GDP over 15 years (of which around 90 percent would take place at the central government level).
- Mitigation:
  - Financing costs for the government as identified in the NDC and taking account of the private sector’s potential contribution would amount to about 0.3 percent of GDP annually over the same horizon.
  - The CCPA (2019) has identified a comprehensive menu of options for Grenada to pursue mitigation strategies.

### Table 2 — Infrastructure Projects for Addressing Climate Change (assumes implementation in 15 years)
- Column headings implied: Needs / Indicative cost (US$ m) / o/w Private Sector / Average Annual Cost (US$ m) / Annual Cost/Percent of 2018 GDP
- Key rows (preserving numeric entries exactly as in source):
  - Mitigation (NDC): 161.4 100.0 4.1 0.3
  - Adaptation (NAP and latest updates): 639.1 42.6 3.6
  - Institutional improvement: 0.3 0.0 0.0
  - Policy development: 0.7 0.0 0.0
  - Water availability: 50.2 3.3 0.3
  - Food security: 463.1 0.3
  - Ecosystem resilience: 26.6 1.8 0.1
  - Coastal zone management: 151.0 0.1
  - Infrastructure and Land: 112.9 7.5 0.6
  - Disaster and disease management: 0.2 0.0 0.0
  - Climate data: 7.0 0.5 0.0
  - Public education: 1.7 0.1 0.0
  - Adaptation financing management: 1.4 0.1 0.0
  - Monitoring and evaluation: 0.2 0.0 0.0
  - St. George's Climate Smart City: 300 20.0 1.7
  - Not in NAP: 77.5 1.0 0.6
  - Total: 800.6 100.0 46.7 3.9
- Sources: Grenada Intended Nationally Determined Contribution (2015); Grenada National Climate Change Adaptation Plan (2017); Ministry of Climate Resilience; IMF staff estimates and projections.

### Institutional and procedural “soft” measures to strengthen resilient infrastructure
- Upgrade early warning systems and risk maps and improve hydrometeorological information:
  - Set up clearinghouse and data management unit, regular data updates, and mainstream them into infrastructure planning and maintenance decisions.
- Systematically review, implement, monitor, and update existing legislation on environmental protection and sustainability policies and plans to improve enforcement.
- Upgrade budget policies and procedures for infrastructure:
  - Public Investment Management will be enhanced, informed by the PIMA findings, to speed up project implementation.
  - Identification and screening of resilience-related projects and spending through the budget codes will be implemented, with a target of 60 percent of PSIP project proposals screened through the new review process by 2023 and annual expenditures on resilience-related spending identified in the fiscal risk statements starting from the 2021 budget.
  - New public procurement procedures adopted in 2019 will be implemented, with at least 25 percent of government contracts on the purchase of goods governed by sustainability requirements by 2020-21.
  - Criteria and systems for estimating maintenance and rehabilitation costs for public physical infrastructure will be established.
- Adopt land use policy and updated geo-located national cadaster, including urban use policy.
- Adopt a nationwide vegetation management plan to support balanced economic development and sectoral plans.

### Infrastructure investment and maintenance requirements
- General infrastructure development needs (excluding adaptation and mitigation) are approximately estimated to require investments of 5 percent of GDP annually.
- Minimum annual requirement for maintenance of existing infrastructure is estimated at 1.2 to 1.4 percent of GDP and will be provided for in the budgets. Given the scale of investments anticipated for climate change adaptation, estimated maintenance costs would need to be re-assessed continually.

### Pillar II: Financial Resilience — National Disaster Risk Financing Strategy (DRFS)
- A National Disaster Risk Financing Strategy (DRFS) was adopted in September 2019. The strategy aims to build complementarity between risk retention and risk transfer instruments within a risk layering framework.
- Layered buffers include: contingency fund (self-insurance), CCRIF parametric cover, World Bank CAT-DDO, hurricane clause for debt service, and private sector insurance mechanisms.
- As of end-2018 available buffers (per CCPA):
  - 2¼ percent of GDP of freely available cash reserves that could be used in the event of natural disasters (not exclusively dedicated to natural disaster events).
  - Contingent coverage in the event of natural disasters of up to 3½ percent of GDP.

### Specific fiscal buffers and instruments
- Budgetary contingency:
  - The budget includes a contingency provision equal to 2 percent of revenues each year (around EC$15 million). This reserve requires a supplementary budget and is part of the government’s regular reserves rather than a capitalized fund.
- Sinking fund:
  - Maintained with the ECCB, which amounted to around EC$37 million at end-2018. Intended for debt reduction but freely available to the government.
- National Transformation Fund (NTF) Contingency Fund:
  - FRL requires when debt remains above 55 percent of GDP, 40 percent of NTF inflows be placed into a contingency fund for arrears repayment, debt reduction, and contingency financing for disaster relief.
  - In 2019, NTF regulations were amended to define objectives, accumulation rules, and governance for the Contingency Fund.
  - Capitalization of the Contingency Fund is envisioned to begin in 2020Q4 with 40 percent of NTF annual inflows with the aim of reaching EC$10 million (0.3 percent of GDP) by end-2020.
  - Upgrading supported by the World Bank Development Policy Credit of US$20 million approved in December 2019.
- Catastrophic Deferred Drawdown Option (CAT-DDO):
  - Approved in January 2020: US$20 million (about 1.7 percent of GDP) by the World Bank.
  - Provides contingent financing in case of natural disasters or other emergencies on highly concessional terms.
  - During the 2020 COVID-19 pandemic, the government opted not to draw down the CAT-DDO given risks of a “combined shock” scenario.

### Parametric insurance and sectoral coverage
- CCRIF (2019/2020 period):
  - Coverage purchased for Tropical Cyclones and Earthquakes and Excess Rainfall at a cost of US$1.5 million and coverage limit of US$44.4 million (3.9 percent of GDP) in an extreme event if the parametric options are triggered.
  - Table 3 coverage under CCRIF Insurance (preserving table entries exactly):
    - Tropical Cyclone: Attachment Point (years) 15; Exhaustion Point (years) 150; Ceding Percentage 37%; Coverage Limit (US$) $35,754,640; Net Premium (US$) $978,500.
    - Earthquake: Attachment Point (years) 47; Exhaustion Point (years) 250; Ceding Percentage 40.2%; Coverage Limit (US$) $4,125,570; Net Premium (US$) $50,000.
    - Excess Rainfall: Attachment Point (years) 5; Exhaustion Point (years) 75; Ceding Percentage 9.9%; Coverage Limit (US$) $4,609,353; Net Premium (US$) $434,488.
- COAST (Caribbean Oceans and Aquaculture Sustainability Facility):
  - Commenced in July 2019; offers customized coverage with a maximum payout of USD 800,000 for the fisheries sector for a premium (US$100,000).
  - Government allocated USD 370,000 to an Emergency Relief Fund to help affected farmers in the event of losses.
- Corporate self-insurance example:
  - Grenlec reserve for non-insurable infrastructure: around EC$25 million in 2019.
- Climate risk insurance mechanism (COAST) adopted in the fisheries sector as a pilot to rapidly transfer funds to fisheries workers affected by extreme weather.

### Debt service hurricane clause and other arrangements
- As part of the 2015 debt restructuring, Grenada agreed hurricane clauses with creditors allowing automatic re-profiling of debt service (pause up to one year) following a hurricane or certain natural disasters.
  - Trigger tied to CCRIF payout for modelled losses exceeding US$15 million.
  - This clause could release funds of over 1 percent of GDP in the event of a major natural disaster (amounts smaller for smaller events).

### Coverage adequacy and remaining gaps
- Preliminary CCPA (2019) estimate: overall protection against natural disasters should be around 10 percent of GDP in Grenada, which is above current levels safeguarded.
- As of 2020, “dedicated” coverage against natural disasters would amount to 7¼ percent of GDP composed of:
  - 0.3 percent of GDP in the amended Contingency Fund,
  - 1.7 percent of GDP CAT-DDO,
  - 3.9 percent of GDP CCRIF,
  - 1.3 percent of GDP hurricane clause.
- Caveats and gaps:
  - Effective parametric insurance protection may need to be discounted based on cost efficiency and expected payout/premium ratio.
  - CCRIF coverage has not always been sufficient, particularly for flooding-related damages; Grenada had not received CCRIF payouts since becoming a member in 2008 despite recurring moderate flooding damages.
  - There is almost no insurance coverage of public assets, as valuation is hampered by the lack of their inventory.
  - PFM regulations do not provide assurances that various funds can be accessed quickly while retaining accountability mechanisms.
  - The domestic financial system has not yet been much involved with the climate change strategy.
- Increased investment in resilient infrastructure would over time reduce the needed size of financial protection buffers.

*Source: IMF and Authorities estimates as presented in the original content.*

### 34.      The private sector remains a limited provider of insurance and is insufficiently

### 1grdea2022001 - 34.      The private sector remains a limited provider of insurance and is insufficiently

### Insurance coverage and penetration — baseline findings
- In 2015, life and non-life insurance penetration (comprising total GWP as a percentage of GDP) was 6.1 percent, slightly above that of the Pan-Caribbean region (5.8 percent).
- The non-life insurance penetration was 3.8 percent.
- Insurance coverage of the key traditional sectors of agriculture and fisheries remains low.
- Underinsurance is common: property insurance premiums have generally been stagnant or contracting, held back by Grenada’s small and fragmented insurance sector and limited trust and confidence following the 2009 collapse of two large regional insurers.
- Only 20 percent to 40 percent of homeowners are estimated to have windstorm insurance.
- 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 is repaid.
- Insurance settlements are not always enough because properties were under insured and/or construction prices increased following hurricanes.
- Low-income individuals are eligible for the Livelihood Protection Policy (LPP), a weather index-based insurance product providing timely cash payouts for wind and excess rain damage; the LPP is available across the island through cooperative banks, credit unions, and farmer associations.
- The LPP was 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.

### DRS Plan — disaster risk financing (Pillar II) — objectives and instruments
- The DRS will focus on closing remaining gaps in financial protection by identifying and strengthening financial protection mechanisms to operationalize disaster responses while limiting impacts on public and private sectors.
- National disaster risk financing strategy implementation priorities:
  - Improve availability and use of data on losses from disasters; comply with plans on inventorying public assets; clarify budget processes; engage with development partners on financing modalities and building a comprehensive risk buffer.
  - Increase capitalization of the new dedicated Contingency fund for natural disasters; the envisaged target of EC$10 million was planned to be achieved by end-2020 and scope for further increases will be evaluated.
  - Optimize CCRIF insurance: purchase increased coverage for flooding; broaden the use of indemnity and catastrophe insurance; review attachment points for various types of coverage for optimality in line with enhanced protection from the CAT-DDO and the Contingency fund.
  - Explore donor-supported financing options including CDB Exogenous Shock Response Policy Based Loan. Private sector component (CERC) and IADB Development Sustainability Contingent Credit Line.
  - Seek to expand use of state-contingent debt instruments beyond the hurricane clause, including negotiating similar terms for new debt.
  - Amend PFM regulations to ensure all potentially available funds (including from “non-dedicated” sources) can be accessed quickly without diminishing accountability; specify circumstances under which existing fiscal buffers such as the Sinking Fund can be used for natural disasters (including if appropriate by linking them to the escape clauses in the FRL).
  - Insure public assets, including critical assets such as hospitals and schools; first establish an inventory of physical assets then mitigate risk cost-effectively by insuring public assets and consolidating coverage into larger policies that reduce rates.
  - Enable expanded private insurance uptake: government and regulator to ensure insurance companies have strong capital buffers and sufficient liquidity; explore options with private insurers to expand market for housing and socially desirable services such as flood, agriculture, and fisheries insurance.
  - Expand pilot COAST program in the fisheries sector with a target that at least 200 new workers would be registered under the program by 2023.
  - Explore with the FAO a parametric insurance facility for the agricultural sector covering nutmeg and cocoa farmers; technical capacity building in agriculture insurance is required for contract design, monitoring, and access to reinsurance markets.
  - Engage banks and non-banks for investment in resilience, inclusion of small and medium enterprises, mobilization of innovative financing, and participation in disaster preparedness.

### Post-disaster and social resilience — recent developments and remaining gaps (Pillar III)
- Institutional improvements:
  - Oversight by the National Disaster Management Council (NaDMAC); National Disaster Plan revised in 2005; National Disaster Management Agency (NaDMA) coordinates 17 District Disaster Management Committees.
  - Adoption of a Coordination Protocol for declaration of national and sub-national emergencies with World Bank support; revisions with CDEMA support.
  - Good system for collecting information on damages and losses for high-intensity events.
- DRM policy framework progress: Hazard Mitigation Policy and Hazard Mitigation Plan (2003 and 2006) aimed to mainstream DRM into national development planning.
- Fiscal and social frameworks: budget documents increasingly include risk analysis; social protection consolidated around Support for Education, Employment and Development (SEED) program with improved targeting; public procurement legislation improved with World Bank support.
- School safety: government adopted Antigua and Barbuda declaration on school safety; Roadmap for School Safety and priorities to enhance physical, environmental, and social protection.
- Capacity and information gaps:
  - NaDMA is under-resourced: currently has 6 staff and 2 interns, relative to 11 full-time staff needed; Grenada’s capacity to respond to a major disaster is limited.
  - Significant gaps in reporting of high-frequency, low-intensity events across ministries (example: no final national report on August 2018 floods).
  - Gaps in social and income distribution data, typically updated with long lags (of over a decade).
  - Schools do not have approved comprehensive disaster management plans or screening for physical hazards.
  - Slow public procurement practices are a potential handicap for post-disaster situations.
- Legislative and private-sector engagement gaps:
  - No overarching legislation on DRF or DRM; Hazard Mitigation Plan proposed a Comprehensive DRM Act to institutionalize a National Disaster Management Fund and other measures, but the Act has not yet been finalized.
  - Little engagement with private sector to mobilize financial and technical resources for prevention and mitigation.
- Social protection coverage gaps:
  - SEED program gaps across communities and vulnerable groups; rigidities in quickly upscaling beneficiaries and benefits.
  - Pension benefits coverage limited and tilted toward formal workers.
  - Community programs do not fully address needs of elderly, youth, and women.
  - Gaps in training (including climate-resilient techniques) hinder productive employment in agriculture and fisheries, where technological upgrading is needed.

### DRS Plan — Post Disaster Response (Pillar III) — priority actions and targets
- Institutional, legal, and financial strengthening actions:
  - NaDMA to be adequately staffed, resourced, and operationalized; 2021 budget will contain an allocation adequate to finance 11 full-time staff and necessary NaDMA activities in risk reduction and response.
  - Increase NaDMA-led emergency response (including simulation/drills) coverage using the public coordination protocols from zero percent currently to 100 percent by 2023.
  - Deeper integration with regional bodies (CIMH, CDEMA, SRC at UWI) to increase technical and operational capacity of NaDMA.
  - Develop and maintain a new database in line with the standard damage and loss assessment (DaLA) methodology with guidelines on data entry, maintained by NaDMA to back financing requests to donors.
  - Finalize and implement the DRM Act to institutionalize a National Disaster Management Fund, make natural hazard risk information public, and enable integrated disaster management.
  - Upgrade public procurement to support resilience standards and emergency procurement with World Bank support; adopt resilience/sustainability policy and public e-procurement early during DRS implementation.
  - Roll out or expand community resilience programs including: neighborhood watch and youth programs; climate smart housing policy and strategy; expanded services to the elderly and persons with disabilities; gender-focused programs; training to facilitate private sector employment uptake and climate-resilient practices in agriculture and fisheries.
  - Implement school safety commitments: increase percentage of schools with approved comprehensive disaster management plans from zero currently to 70 percent by 2023; 50 percent of schools to be screened for physical hazards by the same date.
  - Tailor key social and education programs for effective post-disaster response: integrate SEED information management system with geo-reference capability of beneficiaries; update country poverty assessments and location maps; integrate climate change into education and training curriculums.

### Implications of COVID-19 for the DRS — synergies and additional considerations
- COVID-19 exposed weaknesses in ex-ante preparedness and affects DRS design across pillars:
  - Pillar 1: Increased need for resilient public and private structures and integrated information/risk monitoring; public infrastructure should be resilient and sufficiently spacious for social distancing, quarantining, and testing.
  - Pillar 2: Insurance and self-insurance buffers should be larger and more flexible; buffers dedicated to natural disasters could be made available for pandemic-type emergencies (and vice versa), subject to contingency plans.
  - Pillar 3: Mechanisms for insuring “social resilience” should be more potent, speedy, and flexible; design of social programs must prioritize nimbleness; new technologies and digitalization could support social distancing and reduced mobility responses.
- Common elements between DRS and pandemic preparedness: investment in infrastructure; risk maps and early warning systems; calibrated financial insurance and self-insurance; contingency plans; channels to support affected populations; peer support mechanisms.
- Additional DRS considerations prompted by the pandemic:
  - Risk of a “combined” shock: a non-negligible probability for 2021 as the virus is expected to remain active during the hurricane season of H2 2021; calls for intensifying efforts to create additional buffers and capacities by mid-2021 and develop contingency planning.
  - Resource prioritization between DRS and pandemic preparedness: coordination needed between healthcare professionals for pandemics and engineers/meteorologists and infrastructure professionals for natural disasters; requires whole-of-society contingency plans to connect the relevant experts.

*Source: 1grdea2022001 - 34.      The private sector remains a limited provider of insurance and is insufficiently*

### 49.      The direct cost of making critical progress in upgrading Grenada’s natural disaster

### 49.      The direct cost of making critical progress in upgrading Grenada’s natural disaster resilience is estimated in the range of US$1.3 billion over 15 years, reaching 5½ percent of GDP annually in 2024–35

### A. Direct cost estimates and DRS pillars
- Total direct cost estimate: US$1.3 billion over 15 years (range given in source).
- Annual fiscal burden implication: reaching 5½ percent of GDP annually in 2024–35.
- Note: total cost estimates represent only “direct” costs; there are also indirect costs related to implementation of fiscal and structural reforms, capacity upgrades, and infrastructure maintenance needed to support the DRS.

- Pillar 1. Structural Resilience
  - Preliminary total public spending needs: in the range of US$0.8-1 billion (as per Table 2).
  - Additional spending requirement: about 4 percent of GDP per year on average through 2035.
  - Early years: investment spending would be lower to allow capacity build-up and internalize modest implementation during 2021–22 from existing project pipelines.
  - Donor capacity support: useful to support efficient scale up.

- Pillar 2. Financial Resilience
  - Average annual fiscal cost of additional layered insurance: about ½ percent of GDP per year.
  - Component costs (annual average):
    - Government saving fund for self-insurance: 0.1 percent of GDP flow cost (complemented with access to World Bank CAT-DDO, negligible cost).
    - Higher, optimized CCRIF coverage for certain medium and large disasters: 0.1 percent of GDP (cost estimate approximate; requires recalibration of CCRIF’s attachment point).
    - Support for other insurance programs planned under DRS (public assets insurance, expanded sectoral insurance): 0.3 percent of GDP.
  - Exclusions: cost of potential further layering with market instruments such as CAT bonds is not included due to high cost.
  - Rationale: relatively low fiscal costs reflect substantial accumulated protection available at low or negligible cost (World Bank’s CAT-DDO, hurricane clause, IFI-subsidized premiums, existing deposit buffers).
  - Dynamics: as resilient capital is built (Pillar 1), financial resilience requirements expected to gradually decrease, allowing reduced reliance on subsidized elements over time.

- Pillar 3. Post-Disaster Relief and Social Resilience
  - Total cost estimate: around 1 percent of GDP per year on average.
  - Coverage: development of post-disaster contingency plans, sustainable ecosystems, protection of social resilience, financing “soft” measures (NaDMA resources, information enhancements).
  - Status: many measures are being identified and costed in the draft 3-year action plan underlying the 2020–35 NSDP but remain to be fully elaborated.

### B. Macroeconomic benefits of building resilience
- Conceptual channels: resilient public infrastructure raises returns to private investment and labor supply, increases private capital accumulation and labor contribution to growth, and reduces capital stock depreciation from disaster damage.
- DSGE-based illustration:
  - Achieving a public capital stock that is 80 percent resilient would imply a steady state level of potential output that is 3 percent higher than without the investment in resilient infrastructure.
  - Additional long-term benefits: lower reconstruction costs and reduced output losses from hurricanes.
- Climate change amplification:
  - In a DSGE tailored to Grenada, the estimated change in temperatures (middle scenario) would cause by 2100:
    - Real GDP to fall by about 5 percent.
    - Private investment to fall by about 5 percent.
    - Private employment to fall by 6 percent.
  - Other effects: out-migration and interest rates would increase perceptibly.
  - Caveats: model likely understates negative effects because it focuses on intensification of wind-related disasters and excludes other relevant channels such as sea level rise.
  - Resilient investment will mitigate these effects.

### C. Macro-fiscal context for the DRS — fiscal track record and framework
- Pre-COVID-19 performance
  - Fiscal adjustment of almost 10 percent of GDP in 2014-17.
  - Central government debt: dropped from 108 percent of GDP in 2013 to below 60 percent of GDP in 2019.
  - Primary surplus in 2019: almost 7 percent of GDP.
  - Fiscal Responsibility Law (FRL): anchored rule-based expenditure restraint and guided fiscal space for non-grant-financed investment.
- FRL features and role
  - Mandates maintenance of significant primary surpluses until public debt reduced below 55 percent of GDP.
  - Exemptions: grant-financed capital spending is exempt from the primary expenditure growth cap.
  - Requirements: presentation of medium-term fiscal framework and debt management strategy during budget process.
  - Oversight: independent Fiscal Responsibility Oversight Committee monitors FRL implementation.
- Next phase and proposed revisions
  - Once public debt ratio reaches 55 percent of GDP, FRL allows recalibrating primary balance target to stabilize debt at that level.
  - Revisions under consideration to create space for climate-related investment include:
    - Allow spending rule to follow pre-determined multi-year path instead of annual ceiling based on prior-year spending.
    - Shift toward a primary current expenditure growth rule.
    - Exempt specific resilience-related projects from the primary expenditure rule.
  - Preconditions: significant improvements in governance, accountability, capacity to classify/implement/report capital spending, strengthened fiscal risk analysis (public enterprises, PPPs, contingent liabilities).
  - Complementary reform: target a safer long-term debt level below the FRL’s 55 percent of GDP and fix ambiguities in debt definition to include all SOE debt.

### D. COVID-19 shock, initial macro context, and DRS scenario for 2021–35
- COVID-19 impacts
  - Tourism accounts for over 80 percent of total exports; tourism essentially halted during border closures.
  - Fiscal deterioration: primary surplus estimated to have declined to 2 percent of GDP and public debt increased to around 70 percent of GDP at end-2020.
  - FRL escape clause invoked in April; government intended to continue invoking the escape clause in 2021.
  - Debt reduction to 55 percent of GDP delayed to around 2026 (about 5 years later than earlier envisaged), limiting medium-term fiscal space.
- DRS scenario assumptions (post-COVID-19)
  - Growth: projections internalize COVID-19 shock; potential growth in absence of DRS estimated at around 2¾ percent. DRS adds multiplier effects from spending scale-up and growth payoff from more resilient infrastructure.
  - Fiscal responsibility: government targets gradual increases in capital spending; primary surplus of 3½ percent of GDP remains the key operational rule from 2022 until debt below 55 percent of GDP.
  - Fiscal reforms: continued reforms to enhance public sector efficiency and transparency (Public Sector Modernization Strategy, strengthen public investment management and tax administration, improve targeting of social protection, upgrade PFM and debt management).
  - Structure of public spending:
    - Total public investment to increase by around 7-8 percent of GDP annually compared to current level of 3-4 percent of GDP.
    - DRS climate resilience projects: 4 percent of GDP annually.
    - Other increases: normalization of general infrastructure spending and higher resilience standards.
    - Increases in current spending distributed between additional infrastructure maintenance, pension spending, and public wages needed for skills upgrading.
  - Resource mobilization:
    - Assumed that about one-half of the direct DRS cost would be financed from additional concessional external grant support (external non-CBI grants), by about 2½ percent of GDP annually.
    - Domestic resource mobilization would incorporate yield from fiscal reforms, including expenditure rationalization and improved tax collection.
    - Additional financing could be provided through concessional external debt with significant grant element, including IFI new loans and a portion of committed-but-undisbursed debt.
  - External position: upscaling public investment initially increases imports and widens current account; current account expected to narrow later as net exports improve with a more sustainable economy.

- Macro projections and outcomes
  - Public investment: would rise gradually and stabilize at around 10-11 percent of GDP for most of the horizon.
  - Growth: economic growth would average 3¼ percent in 2025-35, some ½ percentage point above estimated potential without the DRS.
  - Public debt: would stabilize just below 50 percent of GDP in the long term.

- Risks and adverse scenarios
  - Two principal risk scenarios:
    - Failure of domestic resource mobilization: part of the public investment upscaling financed by debt, reversing the decline in public debt and causing it to rise over time.
    - Extreme scenario: if all scale-up of climate-related capital expenditure is financed by debt instead of grants/domestic measures, debt dynamics would become explosive, with debt levels exceeding 100 percent of GDP by 2035—well above FRL and ECCU regional debt targets.

*Source: IMF staff estimates and analysis as presented in the source chapter.*

### 62.      Mobilizing sufficient external and domestic resources is    therefore crucial to

### 1grdea2022001 - 62.      Mobilizing sufficient external and domestic resources is    therefore crucial to 

### Facilitating external grants
- Grenada secured a US$48 million (4 percent of GDP, or 1 percent of GDP annually over 4 years) grant from the Green Climate Fund (GCF) for a sustainable water project.
- Engagement with New York University’s program of climate-smart cities for St. George’s can catalyze more grant financing.
- Government commitment: satisfy donors’ project documentation and transparency requirements to unlock additional grants.

### Using concessional external loans
- GoG has attracted loans from IFIs on highly concessional terms, including several World Bank loans supporting policy and investment operations.
- Committed undisbursed balances (CUB) are estimated at around 9 percent of GDP.
- Strategy: draw down the most cost-effective portion of CUB to execute the PSIP over the medium term.
- Revised projects subject to value-for-money criteria and operational guidelines for climate resilience, including the Climate Change Online Risk Adaptation Tool (CCORAL).
- Optimization of concessional external debt financing to be implemented through the government’s annual Medium Term Debt Strategies (MTDS).

### Mobilizing domestic resources
- GoG will match increased external grant financing with domestic savings and adherence to the FRL, including return to core parameters after the 2020-21 escape clauses expire.
- Additional measures with combined effect of around 2½ percent of GDP over the DRS horizon:
  - Rationalizing inefficient/wasteful spending: yield expected to gradually increase and reach 1 percent of GDP annually over 2025-35.
  - Improving tax administration and broadening the tax base: yielding 1 percent of GDP over 2025-35.
  - Improving collection of tax arrears: yielding one-off cumulative revenue of 5 percent of 2020 GDP.
  - Comprehensive pension reforms, including phased increases in retirement age by 5 years over the next 10 years; savings expected to be backloaded (exceeding ½ percent of GDP annually by the end of the DRS horizon).

### Preparing contingency measures
- Options to back-stop shortfalls and timing delays: carbon taxes, fee-bates, further expenditure rationalizations.
- Examine and revise tariffs and fees for public corporations to finance maintenance and investments and facilitate reliable, cost-efficient services.
- Enhance transparency of recording of CBI inflows and plan procedures for greater allocation of CBI revenues (in event of overperformance) to the DRS pillars.
- Prioritization: scale down lower-priority projects if financing falls short.

### Ensuring accountability
- Existing reporting mechanisms: Public Finance Management Act 17, 2015 requires external audit by the Director of Audit and presentation of an annual report to parliament and publication.
- Fiscal Responsibility Oversight Committee (created 2017) scrutinizes public expenditure ex-post in context of compliance with the rule-based fiscal framework; presents and publishes reports to parliament.
- GoG commitments: further enhance transparency requirements, improve monitoring of SOEs, and shift to a broader definition of public debt (including SOE debt) as the basis of its fiscal anchor.

### Macroeconomic scenarios and key fiscal figures (as presented)
- Figure 9 scenarios note: baseline assumes 2021-22 DRS and baseline identical based on existing pipeline, then diverge as baseline financing dries up; assumed 2021-22 path highly uncertain because of COVID-19.
- CUB (Committed Undisbursed Balances): around 9 percent of GDP.
- DRS-related capital spending and macro trajectories illustrated (figures provided in source).

### Way forward: strategic priorities and implementation
- DRS must be flexible and periodically update costings of DRS pillars to reflect economic developments and resilience cost revisions (paragraphs 64–65).
- National Sustainable Development Plan (NSDP) 2020-35 to provide strategic prioritization, sequencing, and integration into budgets; NSDP translated into 8 national outcomes including:
  - modern climate and disaster resilient infrastructure, and
  - climate resilience and hazard risk reduction (referencing NCCP and NAP).
- Costing of strategic actions and identification of financing sources to be part of annual budgets and forthcoming 3-year Medium-term Action Plans (MTAPs).
- Institutional and legal framework and staffing capacities need strengthening; 3-year MTAPs should identify needs and sequencing of training/interventions for discussion with development partners (paragraph 66).
- Optimize financial resilience: implement DRFS approved September 2019; focus on optimizing CCRIF coverage and broadening indemnity/catastrophe insurance for public/private assets; inventory and valuation of public assets to quantify contingent liabilities and refine insurance coverage (paragraph 67).
- DRS three-pillar approach: balance post-disaster response and ex-ante interventions; post-disaster pillar ensures sustainability of other two pillars (paragraph 68).
- Consolidate nature, amounts, and terms of financial/resource assistance committed under DRS; align with MTAP and NSDP for regular updates and performance evaluation (paragraph 69).
- Streamline donor grant qualification, application, and disbursement requirements to reduce disproportionate burden on small state with limited capacity; integrated DRS with transparent monitoring and evaluation would facilitate donor funding mobilization (paragraph 70).

### Strategic Actions (summary of Table 8)
- Strengthening Structural Resilience:
  - Review and update the NDC (revise targets, identify projects/technologies, implementation plans, cost estimates, prioritization): Responsible: MOCR and MOA, in partnership with all ministries and private sector.
  - Update/create/enforce legislation for environmental protection and sustainability: Responsible: MOCR, MOF in partnership with all ministries.
  - Strengthen institutional framework for adaptation/mitigation, improve PIM and public procurement; establish criteria/systems for estimating maintenance and rehabilitation costs: Responsible: Ministry of Public Works, MOF.
  - Set up clearinghouse and data management unit: Responsible: MOCR, Ministry of ICT, and CSO.
  - Integrate climate change criteria in screening of PSIP projects: Responsible: MOF, MOCR, Ministries/Agencies.

- Strengthening Financial Resilience:
  - Identify insurance products and costs for public assets based on inventory: Responsible: MOF and Insurance Association of Grenada.
  - Incentivize private insurance uptake and explore market expansion (housing, flood, agriculture, fisheries insurance): Responsible: NEWLO, St. George’s University, financial institutions.
  - Implement national disaster risk financing strategy: improve data on disaster losses, inventory public assets, clarify budget processes, engage development partners, build comprehensive risk buffer: Responsible: MOF and MOCR.
  - Complete amendments to the FRL (expenditure rule and debt coverage): Responsible: MOF.
  - Establish clear PPP regulations and clarify regulations for accessing NTF Contingency Fund and Natural Disaster Contingency Fund after disasters.

- Strengthening Post-Disaster Resilience:
  - Strengthen regulatory and operations framework for disaster risk management: Responsible: NaDMA and MOCR.
  - Implement measures to improve school safety from natural disasters: Responsible: MOE.
  - Amend public procurement law for procurement following natural disasters: Responsible: MOF, Ministry of Legal Affairs.
  - Integrate climate change into education and training curricula and public education: Responsible: MOCR, MOE, Media, civil society and NSAs.
  - Adequately resource NaDMA (financial and staffing) for preparedness, response, recovery: Responsible: MOCR, MOF, private sector.
  - Improve post-disaster contingency planning, pooling of resources, costings, and disaster-related social protection targeting and spending.

### Annex I — Effects of Hurricane Ivan (2004): key statistics and impacts
- Hurricane Ivan (2004) damage estimated at almost 150 percent of GDP (total 147.7 percent of GDP; direct 131.5 percent of GDP; indirect 16.2 percent of GDP).
- Sector damage (percent of GDP): Housing direct 84.8, indirect 0.6, total 85.4; Tourism direct 18.9, indirect 6.3, total 25.1; Education total 12.1; Telecommunications total 9.4; Agriculture total 6.2; Electricity total 5.6; Manufacturing total 1.4; Transport total 0.7; Wholesale & Retail 0.7; Health 0.7; Water and Sewage total 0.5.
- About 89 percent of the damage was direct loss of infrastructure and physical capital (131.5 percent of GDP); 30 percent of housing stock required complete replacement.
- Tourism and telecommunications severely hit: about 55 percent of hotel room capacity impaired; 60 percent of overhead distribution lines for telecommunications lost.
- Agricultural damage equivalent to its contribution to GDP; electricity distribution system: 80 percent damaged, leaving three quarters of residents without power.
- Losses in education and skills training sector about 12 percent of GDP.
- Pre-Ivan projection: economy to grow 4.7 percent in 2004 but instead declined by 0.6 percent in 2004.
- Fiscal impacts: 2004 overall deficit of 1 percent of GDP as capital spending declined about 50 percent from 2003 while revenue fell 8.4 percent.
- Longer-term: reconstruction widened overall fiscal deficit and increased public debt; poverty headcount rose from 32.1 percent in 1999 to 37.7 percent in 2008.

*Source: Government of Grenada (GoG) and IMF staff estimates and projections as presented in the provided chapter.*

### Annex II. Covid-19 Impact and Implications for Grenada

### Annex II. Covid-19 Impact and Implications for Grenada

### Health impact and epidemiological timeline
- The COVID-19 health impact in Grenada was initially well-contained; the GoG moved quickly to restrict inbound travel and impose lockdown measures at the epidemic’s onset in March.
- These steps helped to successfully “flatten the curve” of COVID-19 cases; there have been no deaths.
- As Grenada re-opened to visitors in the fall of 2020, infections rose in late-2020.
- For now, the incidence of COVID-19 in Grenada remains below regional and global averages.
- Key dates and regional coordination:
  - Mid-September: CARICOM countries agreed to strengthen the regional approach by instituting a regional “travel bubble.”
  - Late October: Grenada initially participated in the bubble but was forced to opt out given recurrence of the virus in some partners.
  - Mid-December: A spike in cases related to the Sandals resort caused a partial re-imposition of domestic and travel restrictions.

### Economic impact: tourism, trade, and revenues
- Travel restrictions caused a near-shutdown of the country’s tourism lifeline; air and cruise tourism came to a halt in mid-March.
- Grenada’s tourism recovery lagged that of other countries in the region.
- The main offshore university (a medical school with mostly US students) shifted to online classes, exacerbating the contraction in visitor arrivals.
- Imports and tax revenues suffered a deep, double-digit percentage plunge in Q2 and Q3, reflecting the broader economic contraction.
- Remittance inflows started recovering strongly since May.
- CBI inflows were a relative point of strength, having been broadly unchanged in H1.
- Caribbean context: total tourist arrivals and import values showed sharp year-on-year declines through mid-2020.

### Fiscal and policy response
- Announced discretionary fiscal measures were a little over 2 percent of GDP.
- Measures included:
  - increased health care spending;
  - support to agriculture and fishery sectors;
  - income support for displaced workers in tourism and other sectors;
  - infrastructure projects to support local employment;
  - tax and import duty deferrals.
- IFI support, including an IMF RCF disbursed in the spring of 2020, helped finance these measures.

### Health system and infrastructure implications
- The pandemic revealed substantial additional investment needs in Grenada’s infrastructure from a public health perspective.
- Existing hospital retrofitting plans for natural disaster risks had not been adjusted for pandemic-specific needs, including:
  - facilities to improve social distancing;
  - upscaling of health care services for quarantine and testing capacities;
  - specific COVID-19-related services (e.g., pulmonary diagnostics, supply of oxygen, ventilators);
  - Grenada’s low intensive care unit (ICU) capacity.

### Social resilience and distributional effects (DRS pillar 3)
- The COVID-19 shock sharpened existing social resilience challenges and worsened social problems and inequalities along several dimensions:
  - Unemployment:
    - Pre-crisis unemployment: 15 percent.
    - 2020Q2 unemployment: 28½ percent.
    - The surge in joblessness particularly affected the elderly and lower-income groups; unemployment among women remained higher than among men.
  - Inequality in job opportunities:
    - Tourism-related jobs, which tend to employ lower income earners, suffered disproportionately.
    - Workers in poor households are less likely to hold occupations that can be done from home and have less access to necessary technologies.
  - Inequality in social protection:
    - Increased government support was largely provided through an unemployment benefits program for individuals laid off as a result of the crisis.
    - The program is available only to those who were active contributors to the National Insurance Scheme (NIS), likely excluding a significant portion of workers at the bottom of the income distribution.

*Source: IMF staff and country authorities (Annex II. Covid-19 Impact and Implications for Grenada).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1grdea2022001.pdf_