## _cr16133

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---

### EXECUTIVE SUMMARY
- Arrangement approved on June 26, 2014; third review completed on November 25, 2015.
- Disbursements made under the arrangement: SDR 8.04 million (about US$11.5 million).
- Equivalent of SDR 2 million (about US$2.9 million) will be made available upon Executive Board completion of the fourth review.
- Debt restructuring progress:
  - Debt exchange with Grenada’s largest private creditor group implemented.
  - Agreement reached with Paris Club creditors.
  - Important progress made restructuring domestic debt.
- Program implementation:
  - Overall implementation remains satisfactory.
  - All quantitative performance criteria for the fourth review were met.
  - Most structural benchmarks for the Fourth Review were met on time or with minor delays; two unmet benchmarks are being addressed.
  - Staff proposes to refine the structural benchmark on public sector modernization to focus on public wage bill management and to rephase the benchmark to allow time for upcoming technical assistance.
- Article IV consultation medium-term priorities:
  - (i) adherence to the new fiscal framework and medium term debt anchor,
  - (ii) policies to deliver broader based growth, including through financial sector strengthening,
  - (iii) ways to lower structural unemployment.
- Date of summary: May 3, 2016.

### RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK
- Growth and activity:
  - Real GDP estimated to have expanded by 4.6 percent (market prices) in 2015.
  - Growth expected to moderate to 3 percent in 2016.
  - Construction activity projected to remain vigorous as several large tourism projects get underway.
- Labor market and inequality:
  - Unemployment has fluctuated around 30 percent since 2013.
  - Inequality is above the Caribbean average.
- Inflation:
  - Headline CPI declined by 1.3 percent (y/y) in 2015.
  - Headline CPI expected to fall by 0.9 percent in 2016.
  - Core CPI turned positive at 0.3 percent in 2015.
  - Over the medium term, CPI inflation expected to rise gradually to about 2 percent.
- External position and financing:
  - Current account deficit narrowed to 14.5 percent of GDP in 2015 from 23.3 percent in 2013.
  - Current account deficit forecast to remain around 15 percent of GDP over the medium term.
  - Foreign reserves rose to 5.7 months of imports in 2015.
  - REER appreciated by 3.6 percent since mid-2014; REER measured against tourism-markets appreciated by 5.8 percent over the same period.
  - Grenada dropped from 130th to 135th in 2016 in the World Bank Doing Business index.
- Monetary and credit:
  - Reduction in the floor on savings deposit rates from 3 to 2 percent in May 2015 reduced banks’ cost of funds; lending rates fell.
  - Bank lending contracted by 3.8 percent in 2015.
  - Loan-to-deposit ratio declined from 69 percent to 61 percent.
  - Credit unions: total loans grew by 18 percent in 2015 following 9 percent in 2014; share of total lending increased to 25 percent in 2015 (from 15 percent in 2013); NPLs remained at 5 percent of total loans at end-2015; capital reached 11.2 percent of total assets at end-2015 (regulatory requirement: 10 percent).
- Bank soundness:
  - Return on assets of 1.5 percent in 2015.
  - NPLs-to-loans ratio declined to 10 percent at end-2015.
  - Reported capital adequacy ratio declined from 13 percent in 2014 to 12.2 percent in 2015 (regulatory requirement: 8 percent).
- Debt and restructuring outcomes:
  - Agreements reached with creditors representing about 64 percent of total debt under restructuring negotiations and valued at 34 percent of GDP.
  - Most domestic debt to the National Insurance Scheme (NIS) was restructured, resulting in cash flow relief of approximately 58 percent in NPV terms.
  - Completed agreements contributed to a reduction in public debt from 107.6 percent of GDP in 2013 to 94.3 percent in 2015.
  - Assuming successful completion of the ECF program and restructuring of remaining debts:
    - Debt-to-GDP projected to fall to 79 percent of GDP by end-2017.
    - Debt-to-GDP projected to fall to below 60 percent by 2020.
- Potential growth:
  - Potential growth estimated at about 2.7 percent (slightly up from 2.5 percent).
  - Productivity growth estimated at -0.6 percent per year on average over the past decade; staff assumed zero productivity growth over the medium term.
- Outlook risks:
  - Upside: larger demand response to oil price decline; stronger tourism inflows; higher-than-expected CBI proceeds.
  - Downside: stronger impact from fiscal consolidation on growth; dispute with a major hotel property; natural disasters; possible Zika outbreak; weaker global recovery; U.S. dollar appreciation; opening of U.S.-Cuba tourism; reduction in financial services by global banks (de-risking).
- Authorities expect all debt restructuring negotiations to conclude in 2016 and are more optimistic about 2016 growth.

### PERFORMANCE UNDER THE ECF-SUPPORTED PROGRAM
- Overall assessment:
  - Program performance remains satisfactory.
  - Government met all quantitative performance criteria for the fourth review.
  - Over 80 percent of the total programmed consolidation was completed entering the final year of the program.
- 2015 fiscal outturn (selected figures, in millions of EC$ unless noted):
  - Total revenue and grants: 602.8 (Projected) / 658.2 (Actual)
  - Tax revenue: 448.1 / 511.6
  - Non-tax revenue, o.w.: 54.2 / 59.5
  - CBI-related revenue: 0.3 / 16.3
  - Grants: 100.5 / 87.2
  - Total expenditure: 717.7 / 690.6
  - Current non-interest expenditure: 403.7 / 377.1
  - Interest payments: 87.3 / 89.9
  - Capital expenditure, o.w.: 226.7 / 223.6
  - Non-grant-financed capital: 136.1 / 136.5
  - Primary balance (Act.): -27.6 / 57.5
  - Primary balance (Act., in percent of GDP): -1.1 / 2.2
  - Overall balance: -114.9 / -32.4
- Program monitoring and QPCs (end-December 2015, in millions of EC$):
  - A. Cumulative floor on central government primary balance: Program 31 / Program Adjusted 39 / Actual 58 — Met
  - B. Cumulative ceiling on central government primary spending: Program 550 / Program Adjusted 619 / Actual 601 — Met
  - C. Ceiling on stock of central government budget expenditure arrears: 0 / 0 / 0 — Met
  - D. Ceiling on accumulation of external debt arrears (continuous): 0 / 0 / 0 — Met
  - E. Ceiling on contracting of non-concessional external borrowing: 0 / 0 / 0 — Met
  - Indicative F. Cumulative ceiling on net change in central government and central government guaranteed debt: Program 66 / Program Adjusted -58 / Actual -66 — Met
  - Indicative G. Floor on social spending by central government: Program 13.4 / Actual 11.8 — Not Met
  - Monitoring H. Wage bill target: Program 220 / Actual 215 — Met
  - Monitoring I. Public employment: Program 7,484 / Actual 7,003 — Met
- SEED social program:
  - Shortfall EC$1.6 million, or 0.06 percent of GDP, for end-2015 due to delays in beneficiary information system.
  - SEED closed to new entrants until transition complete, expected in first half of 2016.
  - Government offset SEED under-spending with higher spending on other social programs.

### ARREARS CLEARANCE AND DEBT RESTRUCTURING DETAILS
- All budget expenditure arrears cleared by end-2015.
- Debt restructuring regularized about 78 percent of external debt arrears (excluding membership arrears).
- Remaining external arrears primarily to non-Paris Club bilateral creditors and 2005 holdouts.
- Previously unrecorded NIS contribution arrears of EC$14.5 million (0.6 percent of GDP) were identified and folded into restructuring, enabling government to meet the December 2015 QPC.
- Staff recommends granting a waiver for a deviation in the end-June 2015 ceiling on budget expenditure arrears (would not have been observed by EC$10.5 million (0.4 percent of 2015 GDP) absent end-2015 clearance).

### EXTERNAL BORROWING AND FINANCING (2015–2016)
- External non-concessional borrowing in 2015 restricted to bonds issued to execute restructuring with private external bond creditors.
- Remaining external borrowing primarily exceptional financing from multilateral creditors, excluded from the QPC on non-concessional external debt.
- Summary table on external borrowing program for 2016 (selected lines; New debt / Present value, US$ million):
  - Sources of debt financing: 37.0 / 24.6
  - Concessional debt, of which: 10.0 / 3.9
    - Multilateral debt: 10.0 / 3.9
    - Bilateral debt: 0.0 / 0.0
  - Non-concessional debt, of which: 27.0 / 20.7
    - Semi-concessional debt: 27.0 / 20.7
    - Commercial terms: 0.0 / 0.0
  - Use of debt financing: 37.0 / 13.3
    - Infrastructure: 17.0 / 0.0
    - Budget financing: 20.0 / 13.3
  - Memo: Indicative projections Year 2017: 33.0 / 27.7

### STRUCTURAL REFORMS PROGRESS
- Tax administration:
  - Tax Administration Act approved by Parliament in February 2016.
  - IRD restructuring complete; LMTU and Small Taxpayers Service operational by mid-January 2016.
  - Recommendation: bring Act into force expeditiously and provide IRD sufficient resources.
- Tax incentive regime:
  - Reform to be finalized in early May 2016; bringing new regime into full force is a prior action for completion of the fourth review.
- Public finance management:
  - 2016 budget prepared under new Chart of Accounts (CoA); some recurrent items still misclassified.
  - All monthly budget accounting and reporting in 2016 converted to new CoA; CARTAC to provide TA.

### PROGRAM PRIORITIES FOR 2016
- Fiscal consolidation on track but little room for maneuver in 2016.
- With VAT on banking services effective, all 2016 adjustment measures are in place.
- Nominal program target for the primary surplus, after program adjustors, is equivalent to 3.1 percent of GDP.
- Staff forecasts primary surplus to meet FRA target of 3.5 percent of GDP in 2017 but urges additional efforts in 2016.
- Main downside fiscal risk: overly-ambitious capital spending tied to scaling up of CBI program funds and increased grant inflows from NTF to finance above-program capital spending (3 percent of GDP).
- Petrocaribe-related grants projected to decline to 0.1 percent of GDP from 0.4 percent in 2014.
- Rising wage pressures: additional wage provisions in the budget equal 0.2 percent of GDP; could push wage bill slightly over ECF monitoring target but remain within QPC on primary spending and under FRA ceiling on wage expenditure (9 percent of GDP).

### AUTHORITIES’ VIEWS (selected)
- Authorities target a 2016 primary surplus of 3.5 percent (their projections) and will monitor budget outcomes closely.
- Commit to contingent fiscal measures outlined in MEFPs from 2014.
- Committed to transparent management of CBI receipts and publishing CBI statistics quarterly.

### PUBLIC SECTOR WAGE BILL — FINDINGS AND ACTIONS
- First phase controls (nominal wage controls and attrition) contained wage bill but need sustainable mechanisms.
- Authorities committed to develop a rational mechanism including:
  - pay and grading reform,
  - compensation guidelines,
  - systematic indicators for wage negotiations.
- FAD TA tentatively scheduled for May 2016.
- Approval of a “focused strategy to manage the public sector wage bill” proposed as a revised and rephased structural benchmark for end-September 2016.
- Government began consultations on public sector pension reform; TA in support took place in February 2016.

### EXTERNAL COMPETITIVENESS AND BALANCE OF PAYMENTS
- Competitiveness:
  - Holiday prices in Grenada are competitive within the region.
  - REER appreciated since mid-2014; Grenada’s currency estimated to be moderately overvalued (Box 3).
  - EBA-lite estimates using current BoP data indicate REER misalignment ranges from -8.0 percent to +43.2 percent depending on methodology.
- Provisional ECCB BPM6 data (covering 2014) suggest current account deficit at -7.8 percent of GDP (improvement of over 10 percent of GDP relative to earlier estimates).
  - With provisional BPM6 data, EBA assessment could indicate no misalignment or possible undervaluation.
- Reserve adequacy:
  - Imputed reserves at end-2015: US$188.5 million.
  - Coverage: 5.7 months of imports; 24 percent of broad money.
- Tourism and labor:
  - Tourism market share recovered beginning in 2014 but remains below pre-2005 levels.
  - Skills mismatch and structural rigidities impede youth employment; more than 40 percent of young Grenadians out of work.
- Energy sector:
  - Energy prices remain high compared to the region; regulatory reforms underway (PURC and Electricity Supply Act amendments).
- Financial sector:
  - Banks’ balance sheets strengthened in 2015; credit growth weak; NPLs remain elevated.
  - Policy directions: strengthen banking system, monitor correspondent banking withdrawal risks, strengthen AML/CFT and supervision.
- Natural disasters and resilience:
  - Grenada highly vulnerable; average annual damages from NDs estimated at 6.9 percent of GDP (1980–2014).
  - DSA natural disaster clause: ND clauses in debt restructuring allow delay in debt service following qualifying disaster; FRA requires 40 percent of CBI proceeds into NTF be saved for contingency financing.

### DEBT SUSTAINABILITY ANALYSIS (DSA) — KEY POINTS
- Restructuring agreements executed with creditors representing about 64 percent of total debt under negotiation valued at 34 percent of GDP.
- Public debt trajectory (selected percent of GDP):
  - 2013: 107.6
  - 2014: 101.4
  - 2015: 94.3
  - 2016: 89.2
  - 2017: 78.8
  - 2018: 73.2
  - 2019: 68.3
  - 2020: 63.6
  - 2021: 58.9
  - 2026: 53.5
  - 2036: 51.0
- DSA shock: simulated natural disaster in 2016 calibrated to 2004/2005 hurricanes:
  - Government assumed to increase expenditure by 5 percent of GDP in the two years following the hurricane (2.5 percentage points in each 2017 and 2018).
  - Growth expected to decline by 0.7 percentage points in 2016 and 1.3 percentage points in 2017.
  - Shock results in debt path about 8 percent of GDP higher than baseline by 2020.
- DSA assessments:
  - Baseline finds breaches to debt thresholds on PV of debt-to-GDP, debt service-to-revenue, and debt-to-exports ratios; breaches relatively minor and temporary.
  - External risk of debt distress rated as borderline high-moderate; absence of completion of restructuring and arrears clearance leaves external debt “in distress.”

### RISK ASSESSMENT MATRIX (selected entries)
- Structurally weak growth in key advanced economies: Relative Likelihood: High; Time Horizon: Medium Term; Expected Impact: High. Recommend: carry through programmed fiscal adjustment and structural reforms.
- Zika Virus: Relative Likelihood: High; Time Horizon: Near Term; Expected Impact: High. Recommend: raise public awareness and proactive prevention measures.
- Surge in the US dollar: Relative Likelihood: High; Time Horizon: Short Term; Expected Impact: Medium. Recommend: increase productivity and reduce labor costs.
- Reduced financial services by global/regional banks (“de-risking”): Relative Likelihood: High; Time Horizon: Short Term; Expected Impact: Medium/low. Recommend: strengthen AML/CFT and financial sector supervision.
- Natural disasters (mainly hurricanes): Relative Likelihood: Medium; Time Horizon: Medium Term; Expected Impact: High. Recommend: build fiscal buffers, increase insurance coverage, adhere to FRA, work with World Bank/donors on resilience.

### PROGRAM APPROVALS AND STAFF RECOMMENDATIONS
- Staff supports:
  - completion of the fourth review under the ECF-arrangement,
  - the waiver for nonobservance of a performance criterion,
  - the request for modification of a performance criterion,
  - the financing assurances review.
- Staff recommends the next Article IV consultation be held on the 24 month consultation cycle.

### DATA, STATISTICS, AND REPORTING (selected)
- Data adequacy:
  - Data are adequate for surveillance, but improvements needed in government finance statistics and BoP.
- Key data points and series (selected exact values from tables):
  - Real GDP growth (selected): 2013: 2.4; 2014: 5.7; 2015: 3.4; 2016 (proj): 4.6; 2017 (proj): 3.0.
  - Consumer prices, end of period: 2015: -1.2; 2016 (proj): -0.6; 2017 (proj): 0.0.
  - Central government revenue (percent of GDP): 2015: 20.9; 2016 (proj): 24.5; 2017 (proj): 23.9.
  - Public debt (percent of GDP): 2015: 107.6; 2016 (proj): 101.4; 2017 (proj): 90.2; 2018 (proj): 94.3.
  - Imputed reserves (US$ millions): 2015: 203.7; 2016: 212.6.
  - Current account (US$ millions): 2015 (Est.): -137.9; 2016 (Proj.): -120.3; 2017 (Proj.): -149.7.
  - Exports of goods and services (percent of GDP): 2015: 28.9; Tourism share 2015: 16.2.

### KEY POLICY RECOMMENDATIONS AND PRIORITIES
- Complete remaining debt restructuring with external and domestic creditors and clear arrears to all official creditors.
- Finalize and implement the medium-term debt strategy; restructure and resource the Debt Management Unit.
- Maintain fiscal consolidation and adhere to the Fiscal Responsibility Act (debt ceiling 55 percent of GDP).
- Implement FAD TA recommendations and approve a focused strategy to manage the public sector wage bill by end-September 2016.
- Bring the Tax Administration Act into force and implement tax incentive reform as prior action for the fourth review.
- Strengthen tax administration: update SIGTAS, fully use ASYCUDA World, provide IRD and Customs adequate resources.
- Complete SEED MIS rollout, implement SEED phase-out policy, and restore social spending monitoring.
- Strengthen financial sector supervision (GARFIN), address credit union oversight, and continue AML/CFT enhancements.
- Improve competitiveness: increase productivity, reduce energy costs, lower trade-related charges, keep labor costs in check, streamline property registration, simplify customs procedures, and reduce port charges.
- Build resilience to natural disasters: save CBI proceeds per FRA rules, increase natural disaster insurance coverage, and use ND clauses in restructuring instruments prudently.
- Enhance data and statistical reporting: finalize BPM6 BoP revisions, update GDDS metadata, and improve consolidated public sector reporting.

*Italic: Source: IMF staff report and supporting tables/extracts contained in the supplied document.*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Extended Credit Facility Arrangement and Disbursements
- Arrangement approved on June 26, 2014; third review completed on November 25, 2015.
- Disbursements made to Grenada so far under the arrangement: SDR 8.04 million (about US$11.5 million).
- Equivalent of SDR 2 million (about US$2.9 million) will be made available upon Executive Board completion of the fourth review.

### Debt Restructuring Progress
- Grenada’s comprehensive public debt restructuring is nearing completion.
- Debt exchange with Grenada’s largest private creditor group was implemented.
- Agreement reached with Paris Club creditors.
- Important progress made restructuring domestic debt.

### Program Implementation and Fourth Review
- Overall program implementation remains satisfactory.
- All quantitative performance criteria for the fourth review were met.
- Most structural benchmarks for the Fourth Review were met on time or with minor delays; actions are being taken to correct the two unmet benchmarks.
- Authorities advanced reforms to strengthen tax administration, improve public finance management, and overhaul the tax incentives regime.
- Staff proposes to refine the structural benchmark on public sector modernization to focus specifically on public wage bill management, and to rephase the benchmark to allow adequate time for authorities to consider recommendations from upcoming technical assistance.

### Article IV Consultation Priorities
- Medium term policy framework priorities:
  - (i) adherence to the new fiscal framework and medium term debt anchor,
  - (ii) policies to deliver broader based growth, including through financial sector strengthening,
  - (iii) ways to lower structural unemployment.

*May 3, 2016*

### Mission and Participation
- Discussions took place in St. George's during February 22-March 3, 2016.
- Staff team: Nicole Laframboise (head), Kimberly Beaton, Xin Li, Hanlei Yun (all WHD), and Jemma Lafeuillee (local IMF economist).
- A representative from the Eastern Caribbean Central Bank and the Caribbean Development Bank participated; team joined by Kevin Silston (OED).
- Approved by Robert Rennhack (WHD) and Bob Traa (SPR).

---

### RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK

### Growth and Activity
- Real GDP estimated to have expanded by 4.6 percent (market prices) in 2015.
- Growth expected to moderate to 3 percent in 2016 as agriculture output approaches capacity and tourist arrivals decelerate.
- Construction activity projected to remain vigorous as several large tourism projects get underway.
- Contribution details to 2015 and 2016 projections preserved in source charts.

### Labor Market and Inequality
- Unemployment has fluctuated around 30 percent since 2013, particularly high among youth and first-time job seekers.
- Recent growth reduced long-term unemployment but has not been particularly job-rich.
- Inequality in Grenada is above the Caribbean average.

### Inflation and Prices
- Headline CPI declined by 1.3 percent (y/y) in 2015 due to low international oil prices.
- Headline CPI expected to fall by 0.9 percent in 2016.
- Core CPI (excluding fuel and food) turned positive at 0.3 percent in 2015.
- Over the medium term, CPI inflation expected to rise gradually to about 2 percent.

### External Position and Financing
- Current account deficit narrowed to 14.5 percent of GDP in 2015 from 23.3 percent in 2013.
- Current account deficit forecast to remain around 15 percent of GDP over the medium term.
- Tourism-related FDI and other private capital inflows more than offset banking sector outflows.
- Foreign reserves rose to 5.7 months of imports in 2015.
- Real effective exchange rate (REER) appreciated by 3.6 percent since mid-2014; REER measured against tourism-markets appreciated by 5.8 percent over the same period.
- Grenada dropped from 130th to 135th in 2016 in the World Bank Doing Business index.

### Monetary and Credit Developments
- Reduction in the floor on savings deposit rates from 3 to 2 percent in May 2015 reduced banks’ cost of funds; lending rates fell.
- Bank lending contracted by 3.8 percent in 2015 due to tightened loan conditions and balance-sheet strengthening.
- Loan-to-deposit ratio declined from 69 percent to 61 percent; banks’ liquidity rose further.
- Credit unions expanded lending: total loans grew by 18 percent in 2015 following 9 percent in 2014.
  - Credit unions’ share of total lending increased to 25 percent in 2015 compared to 15 percent in 2013.
  - Credit unions’ NPLs remained at 5 percent of total loans at end-2015, of which roughly half was provisioned.
  - Credit unions’ capital reached 11.2 percent of total assets at end-2015 (regulatory requirement: 10 percent).

### Bank Soundness Indicators
- Bank profitability improved; return on assets of 1.5 percent in 2015.
- NPLs-to-loans ratio declined to 10 percent at end-2015.
- Reported capital adequacy ratio declined from 13 percent in 2014 to 12.2 percent in 2015 (regulatory requirement: 8 percent).

### Debt, Restructuring Outcomes, and Projections
- Restructuring agreements reached with creditors representing about 64 percent of total debt under restructuring negotiations and valued at 34 percent of GDP.
- Most domestic debt to the National Insurance Scheme (NIS) was restructured, resulting in cash flow relief of approximately 58 percent in NPV terms.
- Agreement finalized with the Grenada Ports Authority to restructure a privately placed T-bill with a 50 percent haircut; agreements reached with some commercial banks; some SOE debts guaranteed by the government restructured.
- Completed agreements contributed to a reduction in public debt from 107.6 percent of GDP in 2013 to 94.3 percent in 2015.
- Assuming successful completion of the ECF-supported program and restructuring of remaining debts:
  - Debt-to-GDP projected to fall to 79 percent of GDP by end-2017.
  - Debt-to-GDP projected to fall to below 60 percent by 2020.

### Outlook and Potential Growth
- Baseline: growth converging at potential; potential growth estimated at about 2.7 percent (slightly up from 2.5 percent).
  - Potential growth estimate based on a Cobb-Douglas production function; productivity growth estimated at -0.6 percent per year on average over the past decade; staff assumed zero productivity growth over the medium term.
- Output gap has been largely closed by robust growth over 2013-15.

### Risks to the Outlook
- Upside risks:
  - Larger demand response to oil price decline,
  - Stronger-than-anticipated tourism inflows,
  - Higher-than-expected proceeds from the CBI program.
- Downside risks:
  - Stronger impact from fiscal consolidation on growth,
  - Reputational and fiscal risks from a dispute between the government and a major hotel property,
  - Natural disasters,
  - Possible Zika virus outbreak,
  - Externally: weaker global recovery, appreciation of the U.S. dollar, opening of U.S.-Cuba tourism, reduction in financial services by global banks (de-risking).

### Authorities’ Views
- Authorities share staff’s views on outlook and risks but are more optimistic about 2016 growth based on potential impact of tourism-related construction projects.
- Authorities indicated all debt restructuring negotiations are expected to conclude in 2016.

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### PERFORMANCE UNDER THE ECF-SUPPORTED PROGRAM

### Overall Assessment
- Program performance remains satisfactory.
- Government met all quantitative performance criteria for the fourth review.
- Progress made on the structural reform agenda.

### Fiscal Performance and Quantitative Criteria
- Grenada achieved a primary surplus in 2015 of 2.2 percent of GDP (first time in a decade), reversing a primary deficit of 3.9 percent of GDP in 2013.
- Primary balance exceeded the adjusted Quantitative Performance Criterion (QPC) by 0.7 percent of GDP due to continued expenditure restraint and higher-than-projected revenues.
- Stronger growth and higher yield from tax measures helped boost revenues.
- All end-2015 and continuous QPCs were met.
- Authorities used some fiscal space provided by strong revenue growth to raise capital spending (allowed under the program) to support growth.
- Over 80 percent of the total programmed consolidation was completed entering the final year of the program.

---

*IMF staff report: EXECUTIVE SUMMARY (May 3, 2016).*

### 14.      All budget expenditure arrears were

### _cr16133 - 14.      All budget expenditure arrears were

### Arrears clearance and debt restructuring
- All budget expenditure arrears were cleared by end-2015.
- Debt restructuring agreements have regularized about 78 percent of external debt arrears (excluding membership arrears).
- Remaining external arrears are primarily to non-Paris Club bilateral creditors and holdouts from the 2005 debt restructuring.
- The new instrument issued for the restructured U.S. dollar 2025 bonds included an allowance for participation by these 2005 holdouts; the restructuring for these creditors will be finalized in the first half of 2016.
- During restructuring negotiations with the NIS in late 2015, previously unrecorded contribution arrears amounting to EC$14.5 million (0.6 percent of GDP) were identified and folded into the restructuring, enabling the government to meet the December 2015 QPC.
- Because of these additional NIS arrears, the program ceiling on budget expenditure arrears for end-June 2015 would not have been observed by EC$10.5 million (0.4 percent of 2015 GDP) absent the end-2015 clearance. Staff recommends granting a waiver for this deviation.

### 2015 Fiscal outturn (selected figures, in millions of EC$ unless noted)
- Total revenue and grants: 602.8 (Projected) / 658.2 (Actual)
- Tax revenue: 448.1 / 511.6
- Non-tax revenue, o.w.: 54.2 / 59.5
- CBI-related revenue: 0.3 / 16.3
- Grants: 100.5 / 87.2
- Total expenditure: 717.7 / 690.6
- Current non-interest expenditure: 403.7 / 377.1
- Interest payments: 87.3 / 89.9
- Capital expenditure, o.w.: 226.7 / 223.6
- Non-grant-financed capital: 136.1 / 136.5
- Primary balance (Act.): -27.6 / 57.5
- Primary balance (Act., in percent of GDP): -1.1 / 2.2
- PC: Primary balance ... 31.0
- Adjustor: Shortfall in SEED spending... 1.6
- Adjustor: CBI related revenue... 19.4
- Adjustor: Debt Advisor Fees... -12.6
- PC: Primary balance (adjusted)... 39.4
- PC: Primary balance (adjusted, in percent of GDP)... 1.5
- Overall balance: -114.9 / -32.4

Memorandum items:
- Primary spending: 630.4 / 600.7
- Primary spending (in percent of GDP): 25.6 / 23.3
- PC: Primary spending ... 550.5
- Adjustor: Shortfall in SEED spending... -1.6
- Adjustor: Revenue overperformance... 47.3
- Adjustor: Additional capital grants... 10.1
- Adjustor: Debt Advisor Fees... 12.6
- PC: Primary spending (adjusted)... 618.9
- PC: Primary spending (adjusted, in percent of GDP)... 24.0
- IT: Social spending (on SEED): 13.0 / 11.8
- Monitoring: Wage bill 1/: 223.3 / 215.3
  - 1/ Excludes retroactive payments in 2014.

### Program monitoring and quantitative performance criteria (end-December 2015, in millions of EC$)
- A. Cumulative floor on central government primary balance (EC$ mln) 2/: Program 31 / Program Adjusted 39 / Actual 58 / Difference 19 — Met
- B. Cumulative ceiling on central government primary spending (EC$ mln) 2/: Program 550 / Program Adjusted 619 / Actual 601 / Difference -18 — Met
- C. Ceiling on stock of central government budget expenditure arrears (EC$ mln): 0 / 0 / 0 / 0 — Met
- D. Ceiling on accumulation of external debt arrears (continuous): 0 / 0 / 0 / 0 — Met
- E. Ceiling on contracting of non-concessional external borrowing by the central government (continuous): 0 / 0 / 0 / 0 — Met
- Indicative target F. Cumulative ceiling on net change in central government and central government guaranteed debt (EC$ mln) 2/: Program 66 / Program Adjusted -58 / Actual -66 / Difference -8 — Met
- Indicative target G. Floor on social spending by central government (EC$ mln): Program 13.4 / Program Adjusted n.a. / Actual 11.8 / Difference -1.6 — Not Met
- Monitoring H. Wage bill target (excluding retroactive payments) 3/: Program 220 / Program Adjusted n.a. / Actual 215 / Difference -5 — Met
- Monitoring I. Public employment (excluding workers under the IMANI program): Program 7,484 / Program Adjusted n.a. / Actual 7,003 / Difference -481 — Met
  - 2/ From end-December 2014.
  - 3/ Wages, salaries, and personnel allowances.

### External borrowing and financing in 2015–2016
- External non-concessional borrowing in 2015 was restricted to bonds issued to execute the restructuring agreement with private external bond creditors.
- Remaining external borrowing consists primarily of exceptional financing from multilateral creditors, excluded from the QPC on non-concessional external debt (TMU¶10).
- Continuous QPC on non-concessional external borrowing was met.
- External borrowing going forward expected to remain limited to program and project based lending from the World Bank and Caribbean Development Bank, consistent with authorities’ development strategy.

Summary Table on External Borrowing Program for 2016 (selected lines):
- New debt (US million) / Present value (US million)
  - Sources of debt financing: 37.0 / 24.6
  - Concessional debt, of which: 10.0 / 3.9
    - Multilateral debt: 10.0 / 3.9
    - Bilateral debt: 0.0 / 0.0
  - Non-concessional debt (NCD), of which: 27.0 / 20.7
    - Semi-concessional debt 4/: 27.0 / 20.7
    - Commercial terms 5/: 0.0 / 0.0
  - Use of debt financing: 37.0 / 13.3
    - Infrastructure: 17.0 / 0.0
    - Budget financing: 20.0 / 13.3
    - Debt restructuring: 0.0 / 0.0
- Memo: Indicative projections Year 2017: 33.0 / 27.7
  - 1/ Contracting and guaranteeing of new debt. The present value of debt is calculated using the terms of individual loans and applying the 5 percent program discount rate.
  - 2/ Debt with a grant element that exceeds a minimum threshold of 35 percent.
  - 3/ NCDs from the IBRD and the CDB and NCD issued for the purposes of debt restructuring are excluded from the continuous quantitative performance criterion on zero ceiling of NCD specified in the TMU (TMU¶10).
  - 4/ Debt with a positive grant element which does not meet the minimum grant element. These include financings from IBRD and CDB.
  - 5/ Debt without a positive grant element.

### SEED social program performance
- Spending under the ‘Support for Education, Employment and Development’ (SEED) program was below the indicative target (floor) for end-2015.
- Shortfall: EC$1.6 million, or 0.06 percent of GDP, due to delays in operationalizing the new beneficiary information system (World Bank-supported), caused by technical and administrative capacity constraints.
- SEED closed to new entrants until transition is complete, expected in the first half of 2016.
- Government offset SEED under-spending with higher spending on other social programs (youth apprenticeship, needy assistance, emergency recovery programs).

### Structural reforms (progress and actions)
- Tax administration:
  - Tax Administration Act approved by Parliament in February 2016 (November 2015 structural benchmark).
  - Restructuring of the Inland Revenue Department (IRD) complete; Large and Medium (LMTU) and Small Taxpayers Service Units operational by mid-January 2016 (end-2015 structural benchmark).
  - Recommendation: Act should be brought into force expeditiously and IRD provided sufficient resources.
- Tax incentive regime:
  - Reform to make regime rule-based, predictable and transparent to be finalized in early May 2016.
  - Additional amendments codify incentives for qualifying investments in priority sectors; CARICOM-partner-approved amendments to conditional duty exemptions finalized.
  - Regulations under the Investment Act of 2014 completed.
  - Bringing new regime into full force is a prior action for completion of the fourth review.
  - Authorities committed to immediate action should there be revenue losses.
- Public finance management (PFM):
  - Authorities undertook to prepare the 2016 budget under the new Chart of Accounts (CoA) classification (end-2015 structural benchmark).
  - Several recurrent spending items and some wage spending related to capital projects were still recorded incorrectly under the capital budget; thus the end-2015 structural benchmark was not met.
  - All monthly budget accounting and reporting in 2016 has been converted to the new CoA; staff does not propose to rephase the structural benchmark.
  - CARTAC agreed to provide focused TA to correctly record recurrent components of capital projects under the new CoA.

Selected enacted reforms and status (as listed):
- Fiscal Responsibility Act 2015: Approved by Parliament — Entered into Force — Regulations n/a
- Public Debt Management Act 2015: Approved by Parliament — Entered into Force
- Public Finance Management Act 2015: Approved by Parliament — Entered into Force — Regulations Entered into Force
- Public Procurement and Disposal of Property Act 2014: Approved by Parliament — Entered into Force — Regulations Entered into Force
- Tax Administration Act 2016: Approved by Parliament — Entered into Force n/a
- Investment Act 2014 and related amendments and regulations: various approvals and force-entry statuses noted; all tax incentive reform legislation will be entered into force as a prior action for completion of the fourth review.

### Program priorities for 2016 — Completing the fiscal consolidation
- The programmed fiscal consolidation is on track, but little room for maneuver in 2016.
- With the VAT on banking services effective (MEFP¶4), all 2016 adjustment measures are in place.
- Primary spending and primary balance for 2016 are projected in line with nominal program targets under conservative forecast assumptions, but require close monitoring.
- Successful implementation of final year of the programmed consolidation would place Grenada in the top quartile (93rd percentile) of fiscal consolidation efforts recorded globally over the past two decades for countries with debt ratios higher than 60 percent of GDP.
- The nominal program target for the primary surplus, after program adjustors, is equivalent to 3.1 percent of GDP.
- Risk: While projected to meet the nominal QPC, the primary surplus could fall below the 3.5 percent of GDP target under Grenada’s FRA (required until public debt is reduced to 55 percent of GDP). Expenditures related to restructuring of two SOEs are accommodated under the program by an adjustor on the floor of the primary surplus (TMU¶5).
- Staff forecasts the primary surplus to meet the FRA target of 3.5 percent of GDP in 2017 but urged additional efforts in 2016 to deliver a surplus that complies with the FRA target.
- Main downside fiscal risk for 2016: overly-ambitious capital spending tied to scaling up of CBI program funds and increased grant inflows from the National Transformation Fund (NTF) to finance above-program capital spending (3 percent of GDP). Some planned capital spending is on recurrent projects and not easily scaled back.
- Staff concluded the December structural benchmark for “approval of a budget consistent with program commitments” was not met; authorities have put in corrective measures, including revising capital budget allocations (TMU¶20), and are closely monitoring execution.
- Petrocaribe-related grants projected to decline to 0.1 percent of GDP from 0.4 percent in 2014.
- Rising wage pressures present a downside risk:
  - Additional wage provisions in the budget equal 0.2 percent of GDP; could push the wage bill slightly over the ECF monitoring target but remain within QPC on primary spending and under FRA ceiling on wage expenditure (9 percent of GDP).
  - Public wage negotiations ongoing; unions demand automatic grade increments for 2014-16 period.
  - Authorities committed (structural benchmark) to implement measures to strengthen management of the public sector wage bill.

### Authorities’ views
- Authorities reaffirm commitment to contingent fiscal measures outlined in MEFPs from 2014 (MEFP¶8).
- They target a 2016 primary surplus of 3.5 percent (their projections) and will monitor budget outcomes closely.
- Government committed to executing capital budget in line with program commitments.
- On wages, government noted prior commitment in 2014 not to pay wage increases or increments during the program, but discovered contractual obligations to pay increments to some public sector employees; agreed with staff on need to overhaul civil service compensation practices to address rigidities and deficiencies.

*Source: IMF staff report (End-December 2015, fourth review) contained in the provided document.*

### 24.      The top priority in 2016 is to strengthen management of the public sector wage

### The top priority in 2016 is to strengthen management of the public sector wage bill

### Public sector wage bill: findings and planned actions
- During the first phase of the program, direct controls on nominal wages and attrition contained the wage bill, but these measures must be replaced with more sustainable mechanisms.
- Public sector wages have an important impact on private sector wages in small states.
- Authorities committed to develop a rational mechanism to manage the wage bill, including:
  - pay and grading reform,
  - compensation guidelines, and
  - systematic indicators to inform regular wage negotiations (MEFP¶7, 11).
- IMF Fiscal Affairs Department (FAD) TA is tentatively scheduled for May 2016 to review existing policies.
- Approval of a “focused strategy to manage the public sector wage bill”, informed by the TA recommendations, is proposed as a revised and rephased structural benchmark for end-September 2016.
- The government has begun consultations on public sector pension reform to address the overall cost of the civil service and ensure sustainability of the NIS. TA in support of pension reform took place in February 2016.

### Labor law and investment reforms (pro-growth measures)
- Drafts completed:
  - new Act for the Grenada Investment Development Corporation (GIDC),
  - revised Labor Code.
- Parliamentary approval is on track to meet structural benchmarks:
  - GIDC Act: end-June 2016 (MEFP¶15),
  - revised Labor Code: end-August 2016 (MEFP¶17).
- Expected benefits: strengthen investment processes and prospects, improve labor relations, motivate job search, raise potential growth and lower unemployment.

### Program design and financing: conditionality and QPCs
- No changes proposed to the QPCs (MEFP Table 1).
- Authorities agreed to lower the monitoring target ceiling on public employment for both end-June and end-December 2016 to maintain employment at or below the end-2015 level.
- Staff proposes to revise the structural benchmark on public sector modernization to focus specifically on management of the public sector wage bill and to rephase it to allow time for FAD TA recommendations (MEFP Table 2).
- Consultations with TA experts will inform the government’s position in ongoing negotiations with unions in 2016.

### Public debt borrowing and QPC definition changes
- Modifications proposed to the continuous QPC ceiling on contracting of non-concessional external debt by central government to comply with the Fund’s new policy on Public Debt Limits.
- Previously excluded lenders (CDB and WB) are to be included in the QPC definition with associated adjustors for set amounts and purposes.
- The ceiling and adjustors specify the nature and cap of development loans expected.
- Projected borrowing from CDB and WB: US$30 million for the CDB and WB, respectively, expected primarily under Development Policy Loans (DPL), regional partnership strategies, and project loans.
- Debt instruments issued as part of the restructuring remain excluded from the QPC ceiling.

### Financing assurances and arrears
- Completion of several debt restructuring agreements and an improved macroeconomic outlook have narrowed financing needs.
- Remaining financing gaps expected to close over the program period with exceptional financing from International Financial Institutions (Tables 3 and 6).
- Authorities remain in arrears to three official bilateral creditors: Algeria, Libya, and Trinidad and Tobago, pending agreement on debt restructuring.
- Staff view: the agreement reached with Grenada’s Paris Club creditors in November 2015 is not adequately representative under the Fund’s policy on non-toleration of arrears to official bilateral creditors.
- Authorities continue to engage these creditors in good faith; creditors have indicated consent to completion of the review.

### Fiscal sustainability and fiscal policy framework
- Progress:
  - Fiscal adjustment and debt restructuring have reduced public debt since 2013, but debt remains elevated and above the regional average.
  - Tax policy changes increased revenues by over 3 percent of GDP since 2013.
- New fiscal policy framework highlights:
  - Grenada implemented fiscal rules; debt ceiling set at 55 percent of GDP (more ambitious than ECCU target of 60 percent by 2030).
  - Framework covers general government and aims to reduce fiscal risks from state enterprises.
- Challenges:
  - Revenues as a share of output remain lower than in peer countries.
  - Need to follow through with full implementation of the fiscal policy framework as the anchor for policymaking.

### Tax policy, administration, and revenue measures
- Tax policy changes implemented:
  - lower income threshold for the personal income tax (PIT),
  - reduced exemptions under the VAT and customs duties.
- Further options noted:
  - lower the PIT income threshold (currently described as relatively high),
  - broaden the PIT base to include investment income,
  - complete and bring into force the tax incentive reform (prior action) to ensure tax base integrity,
  - broaden the corporate income tax base by restricting deductions and taxing foreign-source interest, rents, royalties, and fees,
  - when fiscal space allows, consider lowering the corporate income tax rate,
  - streamline the list of priority sectors under the tax incentive regime to focus on key growth sectors.
- Tax administration reforms underway:
  - strengthened legislative framework for tax administration and restructuring of the Inland Revenue Department (IRD) complete,
  - developing a Compliance Strategy and strengthening compliance risk management within IRD and Customs (in line with Fund TA advice),
  - IRD needs to urgently update its SIGTAS technology system,
  - Customs and IRD need to make full use of ASYCUDA World,
  - both agencies require adequate resources and leadership.

### Public financial management and SOE oversight
- PFM improvements:
  - 2016 Budget preparation vastly improved due to the 2015 PFM Act,
  - Budget accompanied by a medium-term fiscal framework, an assessment of prior year performance, summary financial condition of each SOE, and consistency with the FRA,
  - assessments of fiscal and debt sustainability impacts are now prepared for policy proposals,
  - 2015 PEFA assessment noted PFM contributions to improved fiscal outcomes.
- SOE management and accountability:
  - Grenada’s SOE oversight framework and strategy assessed as the strongest in the region by CARTAC experts,
  - reporting has improved: the 2016 Budget included financial indicators for each SOE/SB; as of March 2016, more than half of SOEs/SBs met new reporting requirements,
  - fewer SOEs/SBs submitted strategic business plans needed for capital expenditure advice and dividend policy,
  - the Policy Unit (oversight responsibility) has only one staff assigned and needs more resources,
  - recommendations: allocate resources to the SOE monitoring unit, boost outreach to improve compliance on reporting, dividend policy, and salary guidance,
  - consider tariff increases and broader private sector participation in service delivery where appropriate.

### Debt management: weaknesses and recommendations
- Debt management weaknesses:
  - challenges in accurate reporting of central government budget expenditure arrears are symptomatic of broader debt management issues,
  - Debt Management Unit (DMU) focused on back office functions (debt recording, reporting, payments) rather than analytical, strategic, and resourcing responsibilities mandated by the 2015 PDM Act.
- Recommended actions:
  - comprehensively restructure the DMU along front, middle and back office functions in line with TA advice and international best practice,
  - refocus DMU operations on implementing the government’s medium-term debt strategy to achieve debt management objectives in support of fiscal sustainability,
  - allocate additional resources to the DMU,
  - finalize the draft medium-term debt strategy as an urgent priority as the debt restructuring nears completion.

### Authorities’ views
- Authorities reiterated confidence in and commitment to the FRA framework.
- Given significant tax policy changes over the past two years, authorities saw limited scope for further policy changes at the time and emphasized strengthening tax administration to raise yields.
- Authorities agreed with staff’s priority areas for reform and committed to improving SOE compliance and oversight despite staffing constraints.

*IMF Country Report content (section as provided).*

### 38.      While external imbalances have narrowed, broader competitiveness signs are mixed

### 38.      While external imbalances have narrowed, broader competitiveness signs are mixed

### External competitiveness: findings and policy measures
- Holiday prices in Grenada are competitive within the region (chart).
- The real exchange rate has appreciated since mid 2014 along with the stronger U.S. dollar, presenting a challenge for tourism and for agricultural and manufacturing exports.
- Grenada’s currency is estimated to be moderately overvalued (Box 3) based on existing data.
- In the absence of active exchange rate policy tools, recommended measures to strengthen competitiveness:
  - improving productivity;
  - reducing energy costs;
  - lowering trade-related charges;
  - keeping labor costs in check.

### Box 3 — Grenada: EBA Assessment and BoP Data Revision (summary)
- Based on existing balance of payments (BoP) data, the real equilibrium exchange rate (RER) is assessed to be near balance or overvalued by up to 43 percent, depending on the methodology (Annex II).
- The ECCB in January 2016 released provisional revised BoP and IIP statistics for ECCU members based on improved and updated methodologies.
- The new provisional data (covering 2014 only, prepared using BPM6) show a large improvement in the current account balance in most ECCU countries and by over 10 percent of GDP in Grenada, arising from:
  - higher travel services;
  - matched by lower FDI inflows, portfolio outflows, and errors & omissions.
- A rough estimation under the EBA approach with these new data produces external sector assessments that are significantly different:
  - existing-data RER estimates range from -2.7 (undervalued) to 43 percent (overvalued);
  - preliminary estimates with new data suggest no misalignment or possibly undervaluation.
- Staff view:
  - the new BoP statistics would better reflect underlying BoP flows and provide a more accurate picture of Grenada’s external position;
  - staff will continue working with CARTAC and the ECCB and will reassess Grenada’s external position when the new data are finalized.

### Growth-enhancing policies: overall direction
- Measures should focus on improving productivity and building resilience.
- Caution against overheating from a possible sudden surge of investment flows related to the CBI program or mega tourism projects which could cause “Dutch disease” and harm competitiveness.
- Staff analysis: economic growth since the 2000s has been mostly attributed to factor accumulation, while productivity growth has been absent.
- Recommended supply-side policies:
  - increase competition and efficiency in product markets;
  - improve labor market flexibility.

### Box 4 — Natural disasters, macro performance, and policy framework (summary)
- Grenada is highly vulnerable to natural disasters (NDs).
- During 1980-2014, average annual damages from NDs are estimated at 6.9 percent of GDP.
- Two major hurricanes in 2004 and 2005 (Ivan and Emily) had damages estimated at 148 and 31 percent of GDP, respectively, and account for the majority of average annual storm damages in 1980-2014.
- Staff’s baseline projection includes the detrimental impact of NDs on potential growth.
- A regional study (Acevedo 2014) finds growth declines in the year the ND occurs, with a persistent negative effect the year after.
- A simulated ND shock in the DSA calibrated to the regional study and historical ND public finance impacts results in a debt path about 8 percent of GDP higher than in the baseline by 2020.
- Grenada’s resilience measures and contingency instruments:
  - ND clauses in recent debt restructuring agreements allow delay in debt service following a qualifying natural disaster—a global precedent;
  - new instrument under the debt restructuring with external commercial creditors includes a clause triggered by a qualifying ND (covered by Grenada’s CCRIF Policy) if the calculated loss is greater than US$15 million; upon such event Grenada may elect to defer debt service payments (either one or two payments depending on severity), with deferred amounts remaining repayable and accruing interest;
  - agreement with Paris Club creditors includes a clause allowing creditors to consider further relief in the event of a ND (terms not specified);
  - the FRA of 2015 requires that 40 percent of proceeds from the CBI program into the NTF are saved to make contingency financing available in the event of a ND;
  - Grenada is the first Caribbean country with a CBI program to mandate such a requirement.

### Business climate: constraints and reforms
- Areas where Grenada lags based on the World Bank’s Doing Business Index:
  - resolving insolvency;
  - property registration;
  - trading across borders;
  - protecting minority investors;
  - dealing with construction permits.
- Underlying problems include:
  - high port charges;
  - inefficiencies in the judicial system;
  - absence of legal liability and insurance regimes to cover structural building flaws.
- Targeted reforms recommended:
  - streamline property registration;
  - reinforce corporate governance;
  - simplify customs procedures and reduce port charges;
  - strengthen building quality control and supervision;
  - collaborate regionally on joint solutions (e.g., a regional credit registry).

### Box 5 — Implementation of the GPRS and PSIP/PIMS (summary)
- Implementation of the GPRS is progressing.
- A new public investment management system (PIMS) is being developed to improve PSIP efficiency and to achieve GPRS objectives; expected rollout by the 2017 budget.
- PIMS components and expected benefits:
  - secure, interactive, web-based PSIP database (project bank) for preparation, monitoring and evaluation;
  - stronger monitoring and evaluation of projects through IT platforms;
  - clarification of roles and responsibilities and improved institutional arrangements;
  - new reporting requirements;
  - proposed project cycle manual, PIMS training for local planning officers, and training in project development and management.
- Governance and institutional recommendations:
  - institutional framework for coordination, monitoring and evaluation of the GPRS with clear reporting lines and guidelines;
  - annual reports to measure progress and support policy adjustments;
  - publish annual reports with specific, relevant, and time-bound deliverables;
  - add staff in the ETCU with technical skills/experience and provide training for line ministries.
- A review of GPRS implementation will be conducted during the fifth review of the ECF-supported program.

### Labor market: diagnostics and policy needs
- Annual labor force surveys started in 2013 provide better labor market data.
- Staff research indicates skills mismatch, particularly at higher skill levels, due to sectoral shifts toward service-oriented sectors demanding higher skills.
- Skills mismatch and structural rigidities have impeded youth employment growth.
- With more than 40 percent of young Grenadians out of work:
  - review and align the education curriculum with labor market needs;
  - provide additional training opportunities in collaboration with the private sector to improve career readiness;
  - existing initiatives include sector-specific training programs via the National Training Agency and private partners, and an internet platform for job center and vacancy posting.

### Energy sector reforms
- Energy prices remain high in Grenada compared to the region, even abstracting from recent petrol tax increases.
- Regulatory reforms underway:
  - amendments to the Public Utilities Regulatory Commission Act and the new Electricity Supply Act drafted (with World Bank assistance) to establish an independent regulatory authority.
- Expected outcomes and cautions:
  - an independent regulator could encourage competition and guide the transition to renewable energy;
  - care needed to minimize fiscal risks related to the transition from the status quo and to assess economies of scale risks and returns.

### Agriculture and climate resilience
- Efforts to expand agricultural output and strengthen climate resilience should improve growth prospects (MEFP ¶19).
- Planned and draft initiatives:
  - infrastructure (road access) investments and commercialization of government farms to create jobs, improve efficiencies, and promote private investment;
  - a draft National Agriculture Strategy outlines environmentally sustainable development, identifies strategic crops for export markets, and focuses on integrating agriculture into the tourism supply chain.

### Financial sector: stability, reforms, and risks
- Financial stability is slowly improving:
  - banks’ balance sheets strengthened in 2015 with lower leverage, improved asset quality, healthy deposit growth, and a turnaround in profitability;
  - these improvements reduced the financial sector’s exposure to credit and liquidity risks.
- Remaining concerns:
  - loan delinquency ratio remains high and significant credit risks persist;
  - profitability is still weak;
  - financial cycles have larger amplitude and duration than business cycles in Grenada, implying sluggish credit growth is expected to persist and remain an impediment to growth in the near term.
- Policy directions and actions:
  - with new regional legislative framework for bank regulation, supervision and resolution in place, focus will shift to addressing regional bank diagnostics once available (MEFP¶21);
  - staff and authorities agree private sector solutions should be considered first-best to safeguard fiscal sustainability;
  - continue efforts to strengthen the banking system to support private sector investment and growth;
  - monitor and address potential effects of correspondent banking relationship withdrawals; continue strengthening AML/CFT framework and financial sector supervision.
- Non-bank financial sector:
  - authorities increasing staff at GARFIN to strengthen oversight (MEFP ¶23-25);
  - credit union sector: rapid increase in lending calls for strengthened legislative and oversight framework, credit quality review and stress testing;
  - insurance sector: implement single regulatory framework while continuing off-site supervision by GARFIN;
  - pension funds: off-site supervision continued, interim reporting expected shortly, on-site supervision planned next year;
  - authorities are working with CARTAC to develop a national crisis management plan.
- Safeguards:
  - 2016 safeguards assessment update found ECCB maintains a governance framework providing independent oversight and transparency in financial reporting with a sound external audit mechanism;
  - internal audit function only partially conforms to international standards and steps are underway to address this weakness.

### Authorities’ views
- Authorities agreed that improving productivity and strengthening resilience to natural disasters are critical to boosting growth and sustainability.
- They concurred with staff diagnostics on key impediments (inefficiency in property registration and high port charges).
- Authorities are working with regional partners on a strategic plan to prioritize reforms and those suitable for regional collaboration.
- They noted energy sector reform is near completion and expect it to promote competition and renewable alternatives.
- They agreed on the need to review the education curriculum and expand training to improve skill matching.
- They committed to proactively address banking sector issues and to strengthen supervision of the non-bank financial sector.

### Staff appraisal (key points)
- Since the last Article IV consultation in 2014, Grenada has made further progress toward restoring fiscal and external sustainability.
- The government had achieved 80 percent of the planned fiscal consolidation under the ECF-supported program before the last year of the program.
- Debt has been reduced, and the balance of payments position has strengthened.
- Authorities have enacted important legislative reforms to build a fiscal framework intended to lock in fiscal discipline over the long term.

*Source: IMF staff report excerpt (sections 38–50) on Grenada.*

### 51.      Performance under the program has been satisfactory. All quantitative performance

### Performance under the program has been satisfactory. All quantitative performance

### Program performance and fiscal outcomes
- All quantitative performance criteria and most of the structural benchmarks for the Fourth Review were met.
- Corrective actions have been taken to address the two unmet benchmarks.
- The government exceeded the fiscal targets in 2015 and cleared all budget arrears while still finding space to raise capital spending in support of growth.
- Successful restructuring of domestic and external debt has led to a reduction in public debt from a peak of 107 percent of GDP in 2013 to 94 percent at end-2015.

### Economic outlook and growth drivers
- The recovery is continuing, but all of the economy’s pistons are not yet firing.
- Agriculture, tourism and construction are expected to continue fueling growth in 2016, projected at 3 percent in 2016.
- The external position has strengthened despite some real exchange rate appreciation.
- The health of the financial system is gradually improving, but credit growth is weak and not yet supportive of growth.
- Unemployment remains high and some targeted attention will be needed to address underlying problems in the labor market.

### Program risks and near-term priorities
- The program is at an important juncture and continued policy resolve will be essential to secure lasting success.
- After an intensive reform sprint, the authorities will need to guard against fatigue and be wary of risks posed by the external environment.
- Near term fiscal priorities should be guided by program goals under the medium term debt anchor.
- The government must focus on execution of the budget in line with program commitments and staff urges the government to ensure that budget outcomes are in line with FRA targets to safeguard the credibility of the new rules-based policy framework.
- The authorities’ strong record of budget discipline will need to continue in the face of mounting wage and spending pressures.

### Implementation gaps and capacity constraints
- Problems related to some indicative and monitoring targets reflect capacity limitations that should receive focused attention.
- Failure to fully launch the SEED targeting program reflects technical capacity constraints.
- The discovery of older NIS contribution arrears reflects shortcomings in debt management.
- Staff urges the government to:
  - redouble efforts to launch the SEED beneficiary system to strengthen the effectiveness of social spending;
  - move decisively to implement the regulations for the debt management act;
  - finalize the medium-term debt strategy; and
  - restructure the debt management unit.

### Legislative achievements and remaining priorities
- Over the past two years the authorities have pushed through an exhaustive legislative agenda to overhaul the fiscal policy framework, improve tax policies and strengthen public finance management.
- These reforms comprised no less than 21 new laws, not including new laws on the investment code, insolvency and banking (24 total).
- Implementing the remaining elements of the new fiscal policy framework―the tax incentive regime, the tax administration act, and the regulations for the public debt management act―remains a priority for 2016.

### Public sector wage bill and public sector reform
- Staff place high priority in 2016 on reforms to strengthen management of the public sector wage bill.
- Staff urges the authorities to draw on TA from the Fiscal Affairs Department to inform their discussions with labor in 2016 and to formulate a strategy as soon as possible to put in place a rational mechanism to manage the wage bill.
- The system should include pay and grading reform, compensation guidelines, and systematic indicators to inform regular wage negotiations.
- More broadly, public sector reform has failed to materialize as committed under the program and remains critical to reducing inefficiencies and right-sizing the public sector.
- Failure to address these issues risks undermining the hard work so far at fiscal adjustment and structural reform.

### Structural reforms to boost growth and employment
- Renewed energy is needed to push through priority structural reforms.
- Key pro-growth reforms for 2016 comprise a revised Labor Code, new GIDC Act, and steps to remove impediments to private sector activity.
- Staff’s findings on impediments to doing business point to the need to:
  - streamline property registration;
  - simplify customs procedures and reduce port charges;
  - strengthen building quality control; and
  - other measures to remove impediments to private sector activity.
- To lower unemployment, research on labor market developments suggests greater focus on:
  - modernizing education systems to align skills with the needs of the labor market; and
  - training opportunities in collaboration with the private sector to improve skills and job readiness.

### Financial sector and banking system
- Continued efforts to strengthen the banking system are needed to enable it to contribute more effectively to private sector investment and growth.
- Steps to address potential weaknesses in the banking sector will need to safeguard fiscal sustainability.
- Staff welcome the measures taken so far and plans to continue strengthening regulation and supervision of the non-bank financial sector.

### Data, statistics, and reporting
- Data is adequate for surveillance (see Informational Annex).
- The authorities are encouraged to build on the progress achieved under the ECF-supported program on government finance statistics, including in the implementation of the new Chart of Accounts, to improve reporting on capital expenditure and on the broader public sector, and to consider providing the Fund with fiscal data for the GFSM.
- Staff urges the government to take advantage of the data provision under the program to work toward updating the metadata under the GDDS, which has not been updated since 2001.

*IMF staff report excerpt.*

### 61.      Staff supports the completion of the fourth review under the ECF-arrangement, the

### _cr16133 - 61.      Staff supports the completion of the fourth review under the ECF-arrangement, the

### Program approvals and IMF recommendations
- Staff supports:
  - completion of the fourth review under the ECF-arrangement,
  - the waiver for the nonobservance of a performance criterion,
  - the request for modification of a performance criterion,
  - the financing assurances review.
- Staff recommends that the next Article IV consultation be held on the 24 month consultation cycle in accordance with the provisions of Decision No. 14747, as amended.

### Social development indicators
- Social spending on health and education expanded over the past decade but remains low.
- Life expectancy: "slightly below the regional average."
- Educational attainment: high relative to regional comparators, with universal secondary school enrollment.
- Unemployment: remains high despite a skilled labor force, suggesting a potential mismatch of skills.
- Per capita income: below the regional average; inequality in Grenada is above the regional average.
- Source data referenced: World Bank, World Development Indicators; United Nations, International Human Development Indicators, ECCB, country authorities and IMF staff calculations.
- Notes from figure footnotes:
  - "1/ ATG refers to Antigua and Barbuda, AIA refers to Anguilla, BRB refers to Barbados, BHS refers to Bahamas, BLZ refers to Belize, DMA refers to Dominica, GRD refers to Grenada, GUY refers to Guyana, JAM refers to Jamaica, KNA refers to St. Kitts and Nevis, LCA refers to St. Lucia, VCT refers to St. Vincent and the Grenadines, SUR refers to Suriname, TTO refers to Trinidad and Tobago"
  - "2/ Enrollment can exceed 100% if include over-aged and under-aged students because of early or late school entrance and grade repetition."
  - "3/ The data of GINI coefficient is from Caribbean Development Bank Annual Economic Report, data are based on survey in different countries from 1996 to 2006"

### Recent economic developments and projections
- Output and growth:
  - "The economic recovery has continued, with the output gap estimated to have closed in 2015."
  - Real GDP growth contributions: tourism and agriculture are important drivers; tourism arrivals continue to display strong momentum.
- Inflation and energy:
  - Headline inflation driven by the decline in global energy prices.
  - Despite recent petrol tax increases, retail petroleum product prices are forecast to remain below their 2013-14 levels in the near term.
  - Figure note: "1/ From WEO, simple average of Brent, WTI and Dubai Fateh spot prices."
- Key projection signals (from figures and text):
  - Real and potential GDP series are shown with projection through 2021.
  - Charts emphasize stronger external demand (tourism) and continued recovery in agricultural output.

### External sector and reserves
- Real effective exchange rate: "continues its gradual depreciation."
- Current account:
  - "The external current account improved, though the level is still relatively high compared to other Caribbean countries."
  - Tourism service exports increased and imports fell in line with weak domestic demand and low oil price.
  - "In 2015, the current account deficit is estimated to have been financed by FDI, capital transfers, and some debt, including exceptional financing from IFIs."
- Reserves and external position:
  - "Due to the improvement in the current account, imputed reserves reached 5 months of prospective imports."
  - Net foreign liabilities position: "continued to improve in 2015."
- Chart-based indicators:
  - Trade and current account deficits and projected import coverage are shown across 2000–2017.
  - Current account financing composition includes FDI, external debt flow, and others.

### Monetary and banking sector developments
- Monetary aggregates and credit:
  - "Banks’ net domestic assets have continued to decline... driven by a contraction in credit to the private sector."
  - Contraction in credit occurred despite a moderate expansion in broad money, as banks expanded net foreign assets.
- Liquidity and interest rates:
  - "Banks’ excess reserves at the central bank continued to build... while lending rates declined due to the ECCB decision to lower the savings deposits rate floor in April 2015."
- Indicators highlighted:
  - Components of broad money (M2) growth and private sector credit growth are presented over time.
  - Commercial banks’ net foreign assets and excess reserves series are shown.

### Fiscal policy, consolidation and public debt dynamics
- Fiscal consolidation:
  - "Fiscal consolidation outperformed the budget... with both revenue and expenditure contributing to the adjustment."
  - Public employment and personnel expenditure have been lowered with the wage freeze and attrition policy.
- Debt restructuring:
  - "Completion of the debt restructuring with external commercial creditors has helped improve debt dynamics."
  - Debt restructuring combined with consolidation have put public debt on a downward path toward the FRA target.
- Debt structure (at 2015Q4):
  - External official debt concentration: Multilateral 32%; Official Bilateral 11%; Commercial 22%; Domestic 4%; Treasury Bills 6%; Bonds 13%; Commercial bank loans 1%; External 3% (chart labels).
- Fiscal execution and levels (selected exact values from operations tables):
  - Total revenue and grants (2015 act.): 474.7 (EC$ million).
  - Revenue (2015 act.): 443.4 (EC$ million).
  - Tax revenue (2015 act.): 376.8 (EC$ million).
  - Grants (2015 act.): 31.3 (EC$ million).
  - Total expenditure and net lending (2015 act.): 639.6 (EC$ million).
  - Current expenditure (2015 act.): 479.2 (EC$ million).
  - Capital expenditure and net lending (2015 act.): 160.5 (EC$ million).
  - Interest payments (2015 act.): 75.3 (EC$ million).
  - Primary balance (2015 act.): -89.6 (EC$ million).
  - Overall balance (2015 act.): -164.9 (EC$ million).
- Fiscal ratios (selected exact values, percent of GDP):
  - Total revenue and grants (2015 act.): 20.9 percent of GDP.
  - Revenue (2015 act.): 19.5 percent of GDP.
  - Total expenditure and net lending (2015 act.): 28.1 percent of GDP.
  - Primary balance (2015 act.): -3.9 percent of GDP.
  - Overall balance (2015 act.): -7.3 percent of GDP.
  - Public Debt (2015 act., percent of GDP): 107.6 percent of GDP.
- Medium-term projections and financing:
  - Table 3 summary (selected exact flows):
    - Stock of deposits at beginning of 2015: 94.0 (EC$ million).
    - Inflows 2016: 1,501.5 (EC$ million) and 2017: 642.6 (EC$ million).
    - Primary surplus projections: 2016: 57.5; 2017: 83.6; 2018: 98.2; 2019: 103.7; 2020: 109.1; 2021: 115.6 (all EC$ million).
    - Debt stock reduction from restructuring noted: 153.6 (EC$ million) in 2016, and additional entries in later years.
    - Net cash flow projections (stock change): 2015: 41.2; 2016: 56.7; 2017: 7.0; 2018: 7.7; 2019: 4.8; 2020: 5.3; 2021: -0.8 (EC$ million).
    - Public Debt (levels from table): 2015: 2,447.6; 2016: 2,495.4; 2017: 2,330.8; 2018: 2,429.0; 2019: 2,329.1; 2020: 2,402.3; 2021: 2,231.3 (EC$ million).
    - Public Debt (percent of GDP from memorandum): 2015: 107.6; 2016: 101.4; 2017: 90.2; 2018: 94.3; 2019: 85.8; 2020: 89.2; 2021: 78.8 (percent of GDP).
  - Note on financing gap: "To be closed through IMF and other IFIs financing and debt restructuring."

### Financial sector health and risks
- Nonperforming loans (NPLs):
  - "Though heading lower, nonperforming loans remain elevated across the banking system."
  - Provisions for NPLs are "relatively low, particularly for indigenous banks."
- Profitability and margins:
  - Interest margins relative to gross income have declined; bank profitability remains weak, although it is improving.
- Capital and liquidity:
  - "Banks’ reported capital adequacy is above the regulatory minimum... and their liquidity continues to increase."
  - Example: Total capital/Risk-weighted assets series and liquidity ratios presented in figures.

### Key macro indicators (selected time series and projections)
- From Table 1 (selected exact entries):
  - Real GDP growth: 2013: 2.4; 2014: 5.7; 2015: 3.4; 2016 (proj): 4.6; 2017 (proj): 3.0; 2018 (proj): 2.7; 2019 (proj): 2.7 (annual percent change).
  - Nominal GDP (percent change): 2013: 5.3; 2014: 8.2; 2015: 5.0; 2016 (proj): 4.6; 2017 (proj): 4.6; 2018 (proj): 5.1; 2019 (proj): 4.5.
  - Consumer prices, end of period: 2015: -1.2; 2016 (proj): -0.6; 2017 (proj): 0.0; 2018 (proj): -1.2; 2019 (proj): -0.2.
  - Output gap (percent of potential GDP): 2015: -5.4; 2016 (proj): -2.0; 2017 (proj): 0.1; 2018 (proj): 0.2; 2019 (proj): 0.5.
  - Central government revenue (percent of GDP): 2015: 20.9; 2016 (proj): 24.5; 2017 (proj): 23.9; 2018 (proj): 25.6; 2019 (proj): 28.7.
  - Public debt (incl. guaranteed) (percent of GDP): 2015: 107.6; 2016 (proj): 101.4; 2017 (proj): 90.2; 2018 (proj): 94.3; 2019 (proj): 85.8.

_Italic: Source: IMF staff summary and figures as provided in the content unit._

### 1.  Multilateral223.124.626.5247.126.727.1280.031.129.4

### 1.  Multilateral223.124.626.5247.126.727.1280.031.129.4

### Arrears (Table 5: Grenada: Arrears, 2013-15)
- Total arrears:
  - 2013: US$106.4; % of GDP 25.3
  - 2014: US$131.7; % of GDP 15.6
  - 2015: US$81.7; % of GDP 33.1
- External arrears:
  - 2013: US$65.5; % of GDP 19.3
  - 2014: US$84.8; % of GDP 10.1
  - 2015: US$42.9; % of GDP 21.8
- Multilateral external arrears (by row in source):
  - 2013: US$0.8; % of GDP 0.5
  - 2014: US$1.3; % of GDP 0.1
  - 2015: US$0.0; % of GDP 0.0
- Bilateral external arrears:
  - 2013: US$37.8; % of GDP 10.1
  - 2014: US$47.9; % of GDP 5.7
  - 2015: US$13.3; % of GDP 1.5
- Paris Club (subset of bilateral):
  - 2013: US$2.6; % of GDP 0.4
  - 2014: US$2.9; % of GDP 0.3
  - 2015: US$3.8; % of GDP 0.4
- Non-Paris Club bilateral (selected creditors highlighted):
  - Libya (listed): constant US$5.0 across years (see table)
  - Trinidad: 2013 US$1.8; % of GDP 0.7; 2014 US$2.5; % of GDP 0.3; 2015 US$2.7; % of GDP 1.0
- Commercial external arrears:
  - 2013: US$5.6; % of GDP 8.7
  - 2014: US$14.3; % of GDP 1.7
  - 2015: US$5.6; % of GDP 20.3
- Unpaid contributions to organizations:
  - 2013: US$21.3; % of GDP 0.0
  - 2014: US$21.3; % of GDP 2.5
  - 2015: US$23.9; % of GDP 0.0
- Budget expenditure arrears and domestic debt:
  - Total budget expenditure arrears 2013 US$41.0; % of GDP 6.0; 2014 US$47.0; % of GDP 5.6; 2015 US$38.9; % of GDP 11.3
  - Domestic debt 2013 US$6.4; % of GDP 6.0; 2014 US$12.4; % of GDP 1.5; 2015 US$9.7; % of GDP 11.3
- Supplier arrears:
  - 2013 US$34.6; % of GDP 0.0; 2014 US$34.6; % of GDP 4.1; 2015 US$29.2; % of GDP 0.0

### Balance of Payments Summary (Table 6: Grenada: Balance of Payments Summary, 2012-21)
- Current account (US$ millions):
  - 2012: -168.5
  - 2013: -195.5
  - 2014: -141.8
  - 2015 (Est.): -137.9
  - 2016 (Proj.): -120.3
  - 2017 (Proj.): -149.7
  - 2018 (Proj.): -159.7
  - 2019 (Proj.): -175.8
  - 2020 (Proj.): -188.3
  - 2021 (Proj.): -199.5
- Trade balance for goods and services (US$ millions):
  - 2012: -164.4
  - 2013: -184.2
  - 2014: -133.1
  - 2015: -120.6
  - 2016: -104.9
  - 2017: -134.2
  - 2018: -148.3
  - 2019: -166.4
  - 2020: -180.8
  - 2021: -193.4
- Net income (US$ millions):
  - 2012: -34.3
  - 2013: -29.6
  - 2014: -34.7
  - 2015: -39.7
  - 2016: -38.3
  - 2017: -39.0
  - 2018: -35.6
  - 2019: -35.5
  - 2020: -35.6
  - 2021: -36.1
- Current transfers (US$ millions):
  - 2012: 30.3
  - 2013: 18.3
  - 2014: 26.1
  - 2015: 22.5
  - 2016: 22.9
  - 2017: 23.5
  - 2018: 24.2
  - 2019: 26.1
  - 2020: 28.1
  - 2021: 30.0
- Capital and financial account (US$ millions):
  - 2012: 139.1
  - 2013: 203.3
  - 2014: 125.2
  - 2015: 167.9
  - 2016: 112.3
  - 2017: 154.5
  - 2018: 173.1
  - 2019: 187.2
  - 2020: 198.7
  - 2021: 207.7
- Capital transfers (US$ millions):
  - 2012: 58.6
  - 2013: 43.9
  - 2014: 82.5
  - 2015: 104.8
  - 2016: 55.4
  - 2017: 127.8
  - 2018: 83.6
  - 2019: 89.6
  - 2020: 93.9
  - 2021: 98.4
  - o.w. debt forgiveness (2014 entry): 17.2; (2015 entry): 48.4 (see table)
- Foreign direct investment (US$ millions):
  - 2012: 31.5
  - 2013: 113.1
  - 2014: 39.9
  - 2015: 65.6
  - 2016: 64.2
  - 2017: 84.8
  - 2018: 89.8
  - 2019: 100.9
  - 2020: 106.0
  - 2021: 111.4
- Public sector borrowing (net) (US$ millions):
  - 2012: 3.6
  - 2013: 51.8
  - 2014: 40.1
  - 2015: -38.3
  - 2016: -11.2
  - 2017: -56.9
  - 2018: -13.4
  - 2019: -14.6
  - 2020: -18.8
  - 2021: -23.1
- Net change in ECCB NFA (US$ millions):
  - 2012: 18.5
  - 2013: -57.0
  - 2014: -62.2
  - 2015: -69.9
  - 2016: -31.7
  - 2017: -15.6
  - 2018: -9.4
  - 2019: -9.6
  - 2020: -9.8
  - 2021: -10.3
- Overall balance (US$ millions):
  - 2012: -7.7
  - 2013: 9.4
  - 2014: 39.5
  - 2015: 30.0
  - 2016: -8.0
  - 2017: 4.8
  - 2018: 13.3
  - 2019: 11.4
  - 2020: 10.4
  - 2021: 8.2
- Current account (percent of GDP):
  - 2012: -21.1
  - 2013: -23.2
  - 2014: -15.5
  - 2015: -14.5
  - 2016: -12.1
  - 2017: -14.3
  - 2018: -14.5
  - 2019: -15.1
  - 2020: -15.4
  - 2021: -15.5
- Exports of goods and services (percent of GDP) and components:
  - Exports: 2012: 28.9; 2013: 28.5; 2014: 28.9; 2015: 28.9; 2016: 28.8; 2017: 29.7; 2018: 29.8; 2019: 30.0; 2020: 30.1; 2021: 30.2
  - Tourism: 2012: 15.2; 2013: 14.4; 2014: 15.7; 2015: 16.2; 2016: 16.3; 2017: 16.5; 2018: 16.5; 2019: 16.6; 2020: 16.7; 2021: 17.2
  - Student receipts 3/: 2012: 3.1; 2013: 3.1; 2014: 2.9; 2015: 2.8; 2016: 2.7; 2017: 2.6; 2018: 2.6; 2019: 2.5; 2020: 2.5; 2021: 2.5

### Banking System Summary (Table 7: Grenada: Summary Accounts of the Banking System, 2009-17)
- Net foreign assets (EC$ millions; end of period):
  - 2009: 283.7
  - 2010: 242.3
  - 2011: 165.8
  - 2012: 113.8
  - 2013: 352.4
  - 2014: 582.2
  - 2015: 772.9 (3rd review); 852.5 (2015)
  - 2016 (proj): 971.9
  - 2017 (proj): 1,021.3
- ECCB net foreign assets:
  - 2009: 303.4
  - 2010: 277.5
  - 2011: 282.9
  - 2012: 280.8
  - 2013: 365.6
  - 2014: 427.3
  - 2015: 480.3 (3rd review); 509.0 (2015)
  - 2016 (proj): 542.7
  - 2017 (proj): 550.1
- Commercial banks (net) foreign assets:
  - 2009: -19.8
  - 2010: -35.2
  - 2011: -117.0
  - 2012: -167.0
  - 2013: -13.2
  - 2014: 154.8
  - 2015: 292.6 (3rd review); 343.5 (2015)
  - 2016 (proj): 429.2
  - 2017 (proj): 471.3
- Broad money (EC$ millions):
  - 2009: 1,820.0
  - 2010: 1,837.4
  - 2011: 1,849.7
  - 2012: 1,862.2
  - 2013: 1,938.7
  - 2014: 2,018.0
  - 2015: 2,162.1 (3rd review); 2,122.4 (2015)
  - 2016 (proj): 2,220.9
  - 2017 (proj): 2,335.0
- Money and Quasi-money components (EC$ millions, selected years):
  - Money 2015 (3rd review): 579.6; 2015: 543.0; 2016: 608.0; 2017: 639.3
  - Quasi-money 2015 (3rd review): 1,582.5; 2015: 1,579.4; 2016: 1,612.8; 2017: 1,695.7
- Annual percentage change contributions to broad money:
  - Net foreign assets contribution 2012: 13.6; 2013: 11.6; 2014: 7.9; 2015: 5.3; 2016: 15.5; 2017: 23.6; 2018: 29.9; 2019: 33.1; 2020: 36.1; 2021: 36.1
  - Net domestic assets contribution 2012: 73.8; 2013: 76.6; 2014: 80.1; 2015: 81.0; 2016: 69.7; 2017: 58.3; 2018: 53.8; 2019: 49.3; 2020: 46.4; 2021: 46.4
- Interest rates (percent per year, selected):
  - ECCB policy rate: 6.5 (2009–2014 and indicated as 6.5 in projections)
  - US policy rate: 0.1 (2009–2014); 0.1 in 2015 (Feb-16)
  - Time deposit rate (Feb-16): 6.5 (U.S. T-bill rate 0.2 in 2009; data provided)
  - Weighted average lending rate (selected years): 2009: 10.7; 2010: 9.5; 2011: 10.3; 2012: 9.2; 2013: 9.1; 2014: 9.0

### Indicators of Capacity to Repay the Fund (Table 8: Grenada: Indicators of Capacity to Repay the Fund, 2014-22)
- Existing Fund credit (stock):
  - In percent of quota: 2014: 174.3; 2015: 180.8; 2016: 106.9; 2017: 85.7; 2018: 64.6; 2019: 52.4; 2020: 44.1; 2021: 34.3; 2022: 24.5
  - In millions of SDRs: 2014: 20.4; 2015: 21.2; 2016: 17.5; 2017: 14.1; 2018: 10.6; 2019: 8.6; 2020: 7.2; 2021: 5.6; 2022: 4.0
  - In millions of US$: 2014: 29.7; 2015: 29.9; 2016: 24.9; 2017: 19.9; 2018: 15.0; 2019: 12.2; 2020: 10.3; 2021: 8.0; 2022: 5.7
  - In percent of GDP: 2014: 3.3; 2015: 3.1; 2016: 2.5; 2017: 1.9; 2018: 1.4; 2019: 1.0; 2020: 0.8; 2021: 0.6; 2022: 0.4
- Proposed Extended Credit Facility (stock) projections:
  - In percent of quota 2016: 24.5; 2017: 36.7; 2018: 36.7; 2019: 36.7; 2020: 36.8; 2021: 35.5; 2022: 29.4
  - In millions of SDRs 2016: 4.0; 2017: 6.0; 2018: 6.0; 2019: 6.0; 2020: 6.0; 2021: 5.8; 2022: 4.8
  - In millions of US$ 2016: 5.7; 2017: 8.5; 2018: 8.5; 2019: 8.5; 2020: 8.6; 2021: 8.3; 2022: 6.8
  - In percent of GDP 2016: 0.6; 2017: 0.8; 2018: 0.8; 2019: 0.7; 2020: 0.7; 2021: 0.6; 2022: 0.5
- Outstanding Fund credit (end of period):
  - In percent of quota: 2014: 174.3; 2015: 180.7; 2016: 131.4; 2017: 122.4; 2018: 101.3; 2019: 89.1; 2020: 80.8; 2021: 69.8; 2022: 53.9
  - In millions of SDRs: 2014: 20.4; 2015: 21.1; 2016: 21.5; 2017: 20.1; 2018: 16.6; 2019: 14.6; 2020: 13.3; 2021: 11.4; 2022: 8.8
  - In millions of US$: 2014: 29.7; 2015: 29.9; 2016: 30.6; 2017: 28.5; 2018: 23.6; 2019: 20.7; 2020: 18.8; 2021: 16.2; 2022: 12.5
  - In percent of exports of goods and services: 2014: 11.2; 2015: 10.8; 2016: 10.7; 2017: 9.2; 2018: 7.2; 2019: 5.9; 2020: 5.1; 2021: 4.2; 2022: 3.1
  - In percent of debt service: 2014: 24.5; 2015: 27.7; 2016: 56.0; 2017: 50.6; 2018: 39.8; 2019: 35.5; 2020: 34.3; 2021: 29.1; 2022: 21.2
- Fund obligations based on existing and prospective credit (US$ millions and percent metrics):
  - In millions of US$: 2014: 2.7; 2015: 4.6; 2016: 4.7; 2017: 4.9; 2018: 5.0; 2019: 2.9; 2020: 2.0; 2021: 2.6; 2022: 3.8
  - In percent of exports of goods and services: 2014: 1.0; 2015: 1.7; 2016: 1.6; 2017: 1.6; 2018: 1.5; 2019: 0.8; 2020: 0.5; 2021: 0.7; 2022: 0.9
  - Net use of Fund credit (annual): 2014: 2.3; 2015: 0.8; 2016: 0.4; 2017: -1.5; 2018: -3.5; 2019: -2.0; 2020: -1.4; 2021: -1.8; 2022: -2.6
- Memorandum items:
  - Exports of goods and services (US$ millions): 2014: 286.9; 2015: 311.3; 2016: 329.1; 2017: 348.4; 2018: 367.6; 2019: 387.6; 2020: 409.4
  - Debt service (US$ millions): 2014: 54.6; 2015: 56.3; 2016: 59.2; 2017: 58.5; 2018: 54.8; 2019: 55.8; 2020: 59.1
  - GDP (US$ millions): 2014: 997.2; 2015: 1,048.4; 2016: 1,104.8; 2017: 1,162.4; 2018: 1,221.5; 2019: 1,283.6; 2020: 1,348.9
  - Imputed Net International Reserves (US$ millions): 2014: 201.0; 2015: 203.7; 2016: 212.6; 2017: 222.4; 2018: 233.1; 2019: 241.3; 2020: 249.8
  - Quota (millions of SDR): 2014: 11.7; 2015: 11.7; 2016–2022: 16.4 (effective March 23, 2016)

### Financial Sector Indicators (Table 9: Grenada: Financial Sector Indicators, 2009-2015)
- Regulatory capital to risk-weighted assets:
  - 2015 (Dec-15): 12.2
  - Earlier years: 2009: 15.9; 2010: 16.5; 2011: 15.1; 2012: 13.9; 2013: 13.6; 2014: 13.0
- Regulatory Tier 1 capital to risk-weighted assets:
  - Sep-15/Dec-15: 10.2 (Dec-15)
  - Earlier years: 2010: 15.0; 2011: 13.6; 2012: 13.2; 2013: 12.2; 2014: 11.7
- Nonperforming loans to total gross loans:
  - Dec-15: 10.0
  - Series: 2009: 5.9; 2010: 7.6; 2011: 9.4; 2012: 11.8; 2013: 13.8; 2014: 14.6
- Nonperforming loans net of provisions to capital (Dec-15): 41.0 (series shows high volatility)
- Sectoral distribution of loans to total loans (Dec-15):
  - Residents: 95.9
  - General government: 3.9
  - Nonfinancial corporations: 27.3
  - Nonresidents: 4.1
- Profitability and efficiency (Dec-15):
  - Return on assets: 1.5 (Dec-15)
  - Return on equity: 15.4 (Dec-15)
  - Net interest income to total income: 56.0 (Dec-15)
  - Noninterest expenses to gross income: 73.8 (Dec-15)
- Liquidity and foreign currency exposure (Dec-15):
  - Liquid assets to total assets: 37.5 (Dec-15)
  - Liquid assets to short-term liabilities: 40.0 (Dec-15)
  - Net foreign currency exposure to total capital: 124.1 (Dec-15)
- External sector and reserve indicators:
  - Exchange rate (per US$, end of period): 2.7 (series 2009–2015)
  - Gross international reserves of the ECCB (US$ millions): 898.4 (2009); 991.8 (2010); 1,069.2 (2011); 1,181.1 (2012); 1,222.4 (2013); 1,457.1 (2014); 1,661.4 (Jan-16)
  - Gross international reserves to broad money in ECCU countries (percent): 17.4 (2009); 18.8 (2010); 19.7 (2011); 20.5 (2012); 20.4 (2013); 23.0 (2014); 25.0 (Jan-16)
- Public sector indicators (Dec-15):
  - Central government overall balance (after grants): -1.3 (Dec-15)
  - Public and publicly-guaranteed gross external debt: 94.3 (Dec-15)
- U.S. treasury bill rate (percent per annum) Feb-16: 0.3
- Treasury bill rate (365-day, Feb-16): 6.0

### Schedule of Disbursement under the Extended Credit Facility (Table 10)
- Amount of Disbursement and conditions (SDR million and percent of quota):
  - June 26, 2014: 2.040 SDR million; 12.439 percent of quota; condition: Executive Board approval of the arrangement
  - September 30, 2014: 2.000 SDR million; 12.195 percent of quota; condition: Observance of continuous and end-June 2014 performance criteria and completion of the first review
  - March 31, 2015: 2.000 SDR million; 12.195 percent of quota; condition: Observance of continuous and end-December 2014 performance criteria and completion of the second review
  - September 30, 2015: 2.000 SDR million; 12.195 percent of quota; condition: Observance of continuous and end-June 2015 performance criteria and completion of the third review
  - March 31, 2016: 2.000 SDR million; 12.195 percent of quota; condition: Observance of continuous and end-December 2015 performance criteria and completion of the fourth review
  - September 30, 2016: 2.000 SDR million; 12.195 percent of quota; condition: Observance of continuous and end-June 2016 performance criteria and completion of the fifth review
  - March 31, 2017: 2.000 SDR million; 12.195 percent of quota; condition: Observance of continuous and end-December 2016 performance criteria and completion of the sixth review
  - Total: 19.68 SDR million; 120 percent of quota
- Note: Quota increased from SDR 11.7 million to SDR 16.4 million, effective March 23, 2016.

### Recent and Ongoing Legislative Reform (Table 11)
- Financial Legislation (selected entries):
  - Banking Act 2015: Approved by Parliament: ; Entered into Force: 
  - Eastern Caribbean Asset Management Corporation Act 2016: Approved by Parliament: ; Entered into Force: 
  - Bankruptcy and Insolvency Act 2016: Approved by Parliament: 
- Fiscal Policy Framework Reform:
  - Fiscal Responsibility Act 2015: Approved by Parliament: ; Entered into Force: 
- Public Finance Management Reform (selected):
  - National Transformation Fund Regulations 2015: Approved by Parliament: ; Entered into Force: ; Regulations entered into force: 
  - Public Finance Management Act 2015: Approved by Parliament: ; Entered into Force: ; Regulations entered into force: 
  - Public Procurement and Disposal of Property Act 2014: Approved by Parliament: ; Entered into Force: ; Regulations entered into force: 
- Tax Administration and Incentive Reform (selected):
  - Customs Act 2015: Approved by Parliament: ; Entered into Force: 
  - Tax Administration Act 2016: Approved by Parliament: 
  - Income Tax (Amendment) Act 2015: Approved by Parliament: ; Entered into Force: 
  - Value-Added Tax (Amendment) Act 2015: Approved by Parliament: ; Entered into Force: 
- Notes from table:
  - n/a = not applicable.
  - * = Signed by the Minister responsible for Finance.
  - ** = Approved by Cabinet.
  - 1/ All tax incentive reform legislation will be entered into force as a prior action for completion of the fourth ECF Review.

*Sources: Grenadian authorities and Fund staff estimates.*

### Annex I. Grenada: Risk Assessment Matrix

### Annex I. Grenada: Risk Assessment Matrix

### Key Risks, Likelihoods, Time Horizons, Impacts, and Policy Responses
- Structurally weak growth in key advanced economies
  - Relative Likelihood: High
  - Time Horizon: Medium Term
  - Expected Impact: High. Slower growth in advanced economies could directly dampen Grenada’s growth through lower tourism arrivals, remittances, and FDI. The fiscal position could also worsen with weaker revenues.
  - Recommend Policy Response: Carry through with the programmed fiscal adjustment and structural reforms.

- Slowdown in commodity exporters (Canada and Trinidad and Tobago); lower oil prices with spillovers to financial sectors
  - Relative Likelihood: High
  - Time Horizon: Near Term
  - Expected Impact: High. Direct effects via lower tourism arrivals, remittances and FDI; potential cutback in lending from Canadian and Trinidadian banks; tightened liquidity in regional financial markets, increasing rollover risks for sovereign debt.
  - Recommend Policy Response: See (1). Strengthen creditworthiness and build fiscal and financing buffers by implementing home grown program, saving receipts from the CBI program, adhering to fiscal rules in the FRA and focusing public investment to raise productivity and competitiveness.

- Zika Virus (mosquito-transmitted; suspected association with microcephaly)
  - Relative Likelihood: High
  - Time Horizon: Near Term
  - Expected Impact: High. If spread to Grenada, could significantly discourage tourist arrivals, widen current account deficit and dampen growth.
  - Recommend Policy Response: Raise public awareness and urge proactive prevention measures by tourism facilities (e.g., regular mosquito fogging).

- Surge in the US dollar (EC dollar pegged to USD)
  - Relative Likelihood: High
  - Time Horizon: Short Term
  - Expected Impact: Medium. A surge in the U.S. dollar could lead to further appreciation of Grenada’s real exchange rate, making Grenada a more expensive destination for tourists from Europe and Canada.
  - Recommend Policy Response: Increase productivity and reduce labor costs to improve competitiveness and promote tourism through better targeted marketing strategies.

- Reduced financial services by global/regional banks (“de-risking”)
  - Relative Likelihood: High
  - Time Horizon: Short Term
  - Expected Impact: Medium/low. Shock to remittance flows could impact BOP net inflows and consumption; disrupted banking services could hinder tourism-related transactions.
  - Recommend Policy Response: Continue efforts to strengthen AML/CFT and financial sector supervision. Implement regional strategy to strengthen bank balance sheets.

- Persistently lower energy prices (supply-driven)
  - Relative Likelihood: High
  - Time Horizon: Medium Term
  - Expected Impact: Low. Could tighten liquidity in regional financial markets and increase rollover risks for sovereign T-bills; potential upside from lower domestic energy costs and price competitiveness.
  - Recommend Policy Response: Strengthen creditworthiness and build fiscal and financing buffers by carrying through with home grown program, saving receipts from the CBI program.

- Opening of U.S.-Cuba tourism
  - Relative Likelihood: High
  - Time Horizon: Short Term
  - Expected Impact: Low. Unclear effect on ECCU; research suggests ECCU niche could be preserved and downside risks manageable.
  - Recommend Policy Response: Comprehensive approach to raise competitiveness; build regional synergy against potential negative shocks.

- Natural disasters (mainly hurricanes)
  - Relative Likelihood: Medium
  - Time Horizon: Medium Term
  - Expected Impact: High. Severe damage to infrastructure, disruption to tourism, pressure on fiscal position.
  - Recommend Policy Response: Build fiscal buffers by saving receipts from the CBI program, increase coverage of natural disaster insurance with donor assistance, adhere to fiscal rules in the 2015 Fiscal Responsibility Act (FRA). In long-term, work with World Bank/donors to build resilience to climate change.

- Stronger-than-expected adverse impact from fiscal consolidation on growth
  - Relative Likelihood: Medium
  - Time Horizon: Short Term
  - Expected Impact: Low. A larger than expected negative fiscal impulse could slow domestic demand recovery; cyclical impact should run its course by 2017.
  - Recommend Policy Response: Follow through with program to raise confidence; prioritize growth-enhancing and job creating public investment.

- Higher-than-expected proceeds from the citizenship-by-investment (CBI) program
  - Relative Likelihood: Low
  - Time Horizon: Short/Medium Term
  - Expected Impact: Medium. CBI-related investment could accelerate growth and employment but a surge could pose overheating or Dutch Disease pressures.
  - Recommend Policy Response: Manage the program transparently and prudently; save a portion of potential windfalls for contingencies while maximizing impact on potential growth.

*The Risk Assessment Matrix shows events that could materially alter the baseline path. Relative likelihood categories: “low” <10 percent, “medium” 10–30 percent, “high” 30–50 percent. “Short term” indicates within 1 year, “medium term” within 3 years.*

---

### Annex II. Grenada — External Sector and Competitiveness Assessment

### Summary findings
- Despite signs of improvement, Grenada’s external competitiveness needs close monitoring.
- Under the authorities’ home grown program, fiscal and debt sustainability are improving.
- Lower international oil prices and a recovery in tourism have helped narrow external imbalances.
- Broader competitiveness indicators (exchange rates, labor costs, tourism market share) present a mixed picture.
- Staff will revisit assessments when pending significant revisions to balance of payments statistics are finalized.

### 1. Nominal and real effective exchange rates
- Nominal effective exchange rate (NEER) has appreciated by 10.7 percent since mid 2014, largely owing to the strengthening U.S. dollar (to which the regional currency is pegged).
- Real effective exchange rate (REER) appreciated by 2.8 percent during the same period; nominal appreciation was partially offset by deflation in Grenada.
- With domestic deflation, Grenada’s REER is much lower than Caribbean peers, helping to lower the current account deficit.
- Outlook: Nominal appreciation expected to continue as stronger U.S. growth and higher interest rates keep the dollar strong; inflation projected to remain muted for most of 2016 due to lower energy prices, providing countervailing pressures.

### 2. Equilibrium real exchange rate estimates and new balance of payments data
- EBA-lite estimates using current BoP data (BPM5-based) indicate REER misalignment ranges from -8.0 percent (under-valuation) to +43.2 percent (overvaluation), depending on methodology.
- Current account regression approach (BPM5)
  - Current account actual: -15.5 percent of GDP (2014)
  - Estimated “norm”: -6.9 percent of GDP
  - Current account gap: -8.6 percent of GDP
  - Elasticity: -0.20
  - Implied REER gap (depreciation needed): 43.2
- External sustainability approach (BPM5)
  - Implied REER adjustment needed toward medium term: 13.1
- REER regression approach (BPM5) indicates REER broadly in line with estimated norm; overall range includes -8.0 percent.
- ECCB provisional BoP data (BPM6, January 2016; provisional and incomplete, to be finalized late-2016) suggest major improvements due to improved recording of travel expenditures and new surveys (offshore universities, tourism).
  - Provisional BoP implies current account deficit at -7.8 percent of GDP (an improvement of over 10 percent of GDP relative to earlier estimates).
  - Table (ECCB BOP Revisions: Grenada, 2014, EC$, million / 2014, % of GDP):
    - Current Account: BPM5 = -453.78 (2014, EC$, million); BPM6 = -192.82 (2014, EC$, million) — BPM5 = -18.43 (2014, % of GDP); BPM6 = -7.83 (2014, % of GDP)
    - Goods: BPM5 = -683.71; BPM6 = -714.97 — BPM5 = -27.77; BPM6 = -29.04
    - Services: BPM5 = 253.16; BPM6 = 738.27 — BPM5 = 10.28; BPM6 = 29.99
    - of which: Travel: BPM5 = 354.82; BPM6 = 1155.46 — BPM5 = 14.41; BPM6 = 46.93
    - FDI: BPM5 = 107.75; BPM6 = -114.53 — BPM5 = 4.38; BPM6 = -4.65
    - Portfolio: BPM5 = 32.26; BPM6 = -35.62 — BPM5 = 1.31; BPM6 = -1.45
    - Other Investment: BPM5 = 144.61; BPM6 = 42.72 — BPM5 = 5.87; BPM6 = 1.74
    - Reserve Assets: BPM5 = 61.71; BPM6 = 38.95 — BPM5 = 2.51; BPM6 = 1.58
    - Net errors and Omissions: BPM5 = 54.56; BPM6 = -64.9 — BPM5 = 2.22; BPM6 = -2.64
- EBA assessment using provisional BPM6 data
  - Current account regression approach: no misalignment of Grenada’s RER (illustrative)
  - External sustainability approach: 13.8 percent undervaluation implied
- Caveat: EBA models have a poor fit for small/micro economies; estimates should be treated with caution and assessed with other indicators. Staff to continue improving external statistics and exchange rate assessment with the authorities.

### 3. Reserve adequacy
- Imputed reserves at end-2015: US$188.5 million.
- Coverage: 5.7 months of imports; 24 percent of broad money.
- Adequacy: Appears adequate for cushioning external shocks and preventing disorderly market conditions.
- Comparison: Stronger than the 3.1 months of imports optimal level suggested by a risk-based model tailored to low-income economies.
- Note: This assessment does not consider cushions needed for natural disasters.

### 4. Labor costs and productivity
- Labor productivity (real output per worker) fell sharply from 2006–2013; real wages did not fully adjust, leading to rising unit labor costs.
- Large public sector employment (more than one third of total formal employment) and rigid wage-setting contributed to labor cost inflexibility.
- Recovery: Labor productivity started to recover in 2014, narrowing the real wage gap.
- Policy implications: Labor market reforms and anticipated modernization of the public sector (program structural benchmark) are necessary to reduce rigidities, update worker skills, and strengthen job search to support long-run productivity growth and reduce relative labor costs.

### 5. Tourism: arrivals, market share, and price
- Market share: Grenada’s tourism market share recovered beginning in 2014 but remains below pre-2005-hurricane levels.
  - Causes of recovery: intensified marketing, establishment of new Grenada Tourism Authority, opening of a large brand-name luxury resort.
- Visitor composition: Stay-over arrivals, particularly from the U.S. and Canada, have recovered; recent surge from Canada has slowed, likely due to depreciation in the Canadian dollar making Grenada more expensive for Canadian tourists.
- Prices and competitiveness:
  - While Caribbean tourism costs are high relative to other global beach destinations, comparisons with other Caribbean countries suggest holiday prices in Grenada are competitive (indices based on common baskets and sources).
- Policy takeaway: Ongoing efforts needed to increase productivity and lower domestic costs to sustain and expand tourism market share.

*IMF staff will monitor developments closely, particularly as balance of payments statistics are revised and finalized.*

*Italic source attribution: Annex I. Grenada: Risk Assessment Matrix; Annex II. Grenada—External Sector and Competitiveness Assessment (extracted from the supplied IMF content).*

### Appendix I. Letter of Intent

### Appendix I. Letter of Intent

### Programme status and IMF requests
- All continuous and end-December 2015 quantitative performance criteria were met and strong progress was made on the structural reform agenda.
- The Government requests that the Executive Board of the IMF:
  - complete the fourth review of the arrangement under the ECF and the financing assurances review,
  - approve the request for a waiver of a performance criterion,
  - approve the request for modification of a performance criterion,
  - approve the requested rephasing of structural benchmarks,
  - approve the fifth disbursement under the arrangement of the equivalent of SDR 2 million.

### Key fiscal outcomes and targets
- The Government achieved the first primary surplus in a decade in 2015: 2.2 percent of GDP (including 0.5 percent of GDP in budgetary revenue from the Citizen-By-Investment (CBI) programme).
- Total fiscal adjustment since the start of the home-grown adjustment programme: 6.1 percent of GDP.
- 2016 Budget primary surplus target: 3.5 percent of GDP (excluding one-off severance payments), consistent with the Fiscal Responsibility Act (FRA).
- Additional consolidation required in 2016 to meet the target: 1.3 percent of GDP.
- With potential one-off severance payments, the Government anticipates achieving a primary balance of at least 3.1 percent of GDP in 2016.
- If severance spending in 2016 for Grenada Postal Corporation and Grenada Concrete and Emulsion Production Corporation (GCEPC) exceeds the US$4 million allowed under the ECF programme adjustor, the Government will take corrective measures to safeguard compliance with programme targets.

### Revenue and expenditure management measures
- Strong revenue growth in 2015 was driven by a strong economic recovery, improvements in tax administration, and higher-than-anticipated revenue yield of tax policy measures introduced in 2015.
- VAT on fee-based banking services was legislated in 2015 (meeting the end-December 2015 structural benchmark); revenues from this VAT are expected to begin in April 2016.
- Public employment and the wage bill were maintained below their monitored targets in 2015; the Government will maintain public sector employment below its end-2015 level and lower the associated monitoring target to reflect this commitment.
- The Government committed not to award salary increments (automatic pay grade increases) for the 2014-16 period but recognized potential contractual liabilities; it will engage stakeholders and implement, with FAD guidance, a new rules-based wage bill management system and regular performance-based assessments.

### Citizen-By-Investment (CBI) and National Transformation Fund (NTF)
- The 2016 Budget assumes the receipt of EC$82 million of grant financing from the National Transformation Fund (NTF).
- Commitments regarding NTF resources:
  - Reallocate recurrent mandates from NTF-financed to non-grant-financed spending and reduce expenditure allocations for non-grant-financed spending to programmed levels.
  - Specify quarterly capital budget allocations for non-grant-financed spending consistent with achieving quantitative programme targets.
  - Prioritize non-recurrent infrastructure projects to be financed with NTF resources; execution will start only when sufficient NTF resources have been accumulated to finance project completion and maintenance.
  - Ensure NTF spending is limited to non-recurrent and productive infrastructure spending as required under NTF regulations.
- Accounting improvements: continue efforts to ensure proper accounting of capital spending under the new Chart of Accounts (CoA).

### Severance and SOE/SB restructuring
- Expected severance payments in 2016 to support restructuring:
  - Approximately US$4.9 million in severance to workers at Grenada Postal Corporation and GCEPC.
- The Government commits to:
  - Provide for all spending related to ongoing restructuring of SOEs and SBs, including severance, in budget estimates.
  - Adhere to fiscal rules set out in the FRA.
  - Work within the expenditure ceiling to address outstanding salary obligations consistent with ECF targets and the FRA.

### Contingent fiscal measures
- The Government has identified contingent fiscal measures (outlined in the June 2014 MEFP and its December 2014 Supplement) and remains committed to enacting them should fiscal risks materialize.

### Debt restructuring and regularization of arrears
- External debt restructuring:
  - Private creditors: Debt exchange for holders of Grenada’s 2025 international bonds concluded on November 12, 2015. High creditor participation triggered the collective action clause ensuring universal participation. Half of the 50 percent haircut became effective immediately, with the remainder to be effective upon completion of the sixth review of the current ECF arrangement. The new bonds have an annual coupon rate of 7 percent and a maturity of 15 years. The Government expects to conclude restructuring claims of holdouts by end-June 2016.
  - Official creditors: An Agreed Minute was reached with Paris Club creditors on November 18, 2015 to reschedule outstanding Paris Club debts and arrears; implementation actions have been initiated. Engagement with non-Paris Club bilateral official creditors for comprehensive restructuring continues.
- Domestic debt restructuring:
  - National Insurance Scheme (NIS) restructuring agreements:
    - E.C. dollar 2025 bonds restructured into a new long-term instrument with a 25-year term, 10-year grace period and a 3 percent interest rate; expected NPV savings to the government of 73 percent.
    - NIS holdings of Government of Grenada 2014/16 Serial Bond restructured on equivalent terms.
    - A privately held Treasury bill restructured into a 7-year bond with a 2-year grace period and an interest rate of 3 percent; expected NPV savings of 31 percent.
    - Government contribution arrears to the NIS restructured into a 5-year bond with an interest rate of 3 percent; total expected NPV savings of 19 percent.
    - Remaining NIS holdings concentrated in 365-day Treasury bills are expected to be converted into longer-maturity instruments with lower interest rates upon maturity.
  - Port Authority (GPA): In February 2016, agreement finalized to restructure a privately placed Treasury bill held by the GPA into a 15-year Government of Grenada bond with a 3.5 percent interest rate. A 50 percent haircut will be applied to outstanding principal and interest arrears and is expected to result in a 0.7 percent of GDP decline in the stock of government debt.
  - Remaining domestic creditors: Negotiations continue to restructure outstanding claims on terms comparable to external bond terms (excluding sharing of any CBI flows); plan to convert outstanding privately placed Treasury bills into new instruments with longer maturities and lower interest rates to reduce rollover risks.
- Government guaranteed debt:
  - Restructuring agreements reached with the NIS for domestic debt owed by the Housing Authority of Grenada and the Maurice Bishop International Airport (guaranteed by central government); these agreements are not expected to provide nominal debt relief but should improve SOE ability to service guaranteed debt.
  - Marketing and National Importing Board (MNIB) reached agreement with its external private creditor to restructure its debt with the objective of removing the government guarantee; execution expected in 2016.
- Arrears progress:
  - External debt arrears fell to 4.9 percent of GDP at end-2015 from a peak of 10.1 percent in2013 due to debt restructuring agreements.
  - The Agreed Minute with Paris Club creditors is expected, once executed, to reduce external debt arrears by a further 1.8 percent of GDP.
  - Domestic debt arrears fell from 2.1 percent of GDP in 2014 to 1.7 percent of GDP at end-2015 due to restructuring agreements, and will decline by a further 0.7 percent of GDP due to the Port Authority agreement in early 2016.
  - The Government cleared all budget expenditure arrears by end-2015.
  - The Government has not incurred additional arrears outside of ongoing debt restructuring and is committed to staying current on all obligations.

### Cash management, commitment control, and fiscal transparency
- Strengthening cash management, including cash flow forecasting to support budget execution, is a continued focus.
- Implementing commitment control to support efforts to remain current on liabilities.
- Continued efforts to improve fiscal accounting and reporting under the new Chart of Accounts (CoA).

_Appendix I. Letter of Intent, May 2, 2016_

### 10.      We remain focused on strong implementation of our new fiscal policy framework. To

### 10.      We remain focused on strong implementation of our new fiscal policy framework. To

### Fiscal policy framework — NTF, CBI, and oversight
- Adhere to the regulations for the NTF (put in place in August 2015).
- Forty percent of the monthly inflows into the NTF will be saved for general budget financing purposes, including contingency spending, natural disasters and debt reduction.
- All NTF‑financed capital spending will be fully integrated into the Government’s public sector investment programme (PSIP) and the central government Budget and will be aligned with the objectives of Grenada’s Growth and Poverty Reduction Strategy (GPRS) 2016-18 and National Plan 2030.
- Establish a Board of Directors for the NTF by end-2016, vested with primary responsibility for allocating NTF resources (as required by NTF regulations).
- Commit to transparent management of CBI receipts and to publish all CBI statistics on the Ministry of Finance website on a quarterly basis (structural benchmark, per the TMU ¶20).

### Debt management and Public Debt Management (PDM) Act implementation
- Put in place the regulations needed to support implementation of the 2015 PDM Act and bring the Act into force by end-2016.
- Finalize medium-term debt strategy by mid-2016.
- Restructure the Debt Unit within the Ministry of Finance to vest it with additional resources and formal oversight responsibility for all debt contracted.
- Explicitly require inclusion of the Debt Unit in the negotiation process for all central government and central government guaranteed debt in the new PDM regulations.

### Public financial management (PFM), Chart of Accounts, and cash control
- 2016 Budget prepared according to requirements of the 2015 PFM Act and accompanied by:
  - an assessment of performance for the previous fiscal year;
  - information summarizing the financial condition of each SOE and SB;
  - a medium-term fiscal framework as the foundation of the 2016 Budget estimates.
- Ministry of Finance to prepare fiscal impact assessments for all proposed policy decisions (as required by the PFM Act).
- Strengthen the Government’s PSIP through a new PSIP manual to ensure project selection aligns with PFM Act prioritization and selection criteria and that PSIP reporting is consistent with the PFM Act.
- Receiving IMF Fiscal Affairs Department TA to prepare manuals on budget preparation and budget execution to guide compliance with the 2015 PFM Act.
- Implemented the final appropriation for the 2016 budget under the new Chart of Accounts (CoA) (end-2015 structural benchmark); monthly budget accounting and reporting converted to the new CoA starting January 2016.
- Acknowledged incomplete reclassification under the new CoA (e.g., reclassification of some recurrent spending items such as wage spending related to capital projects not completed); agreed to seek CARTAC support to review CoA implementation and advise on further changes if necessary.
- Established a cash forecasting unit within the Accountant General’s Department to strengthen cash management.
- Continue to broaden the cash forecasting model to include the Budget Department in monthly reporting and to integrate it into monthly/quarterly expenditure allocations.
- Strengthen commitment control by requiring SmartStream generated purchase orders for all goods (automatically commits expenditure), and mandate that all capital and services spending, regardless of revenue stream, be initiated through SmartStream generated purchase orders.

### Tax policy and administration reforms
- Implement the new tax incentive regime (completed in early March 2016):
  - Amendments to various tax acts in 2015 clarified incentives for large scale investments in priority sectors.
  - Income Tax Act amended to remove the Sixth Schedule and to outline requirements for an investment to qualify as a priority investment.
  - Investment (Priority Sectors) Regulations issued under the Investment Act of 2014.
  - Customs (Duties Exemptions) Order of 2016 issued to remove discretion from granting customs duty exemptions (with support from CARICOM partners).
- Bring the new tax incentive regime into full force as a prior action for completion of the review.
- Expect the transition to the new tax incentive regime to be broadly revenue neutral; will actively monitor revenue performance and implement identified contingent fiscal measures (¶8) if impact larger than anticipated.
- If by end-May 2016 revenue (on a cumulative basis) is below the programme forecast of EC$251 million by more than EC$1 million, corrective action will be taken to safeguard compliance with programme targets.
- Parliament approved the new Tax Administration Act in February 2016 (end-November 2015 structural benchmark); aim to bring the new Act into force by mid-2016.
- Inland Revenue Department reforms (with CARTAC and IMF TA):
  - Large and Medium Taxpayer Service Unit (LMTU) and Small Taxpayers Service Unit are operational (end-December 2015 structural benchmark), despite a small delay.
  - Focus on enhancing the LMTU’s ability to facilitate compliance by the largest taxpayers and providing sufficient resources to IRD.
  - 2016 priorities: finalize updated Corporate Strategic Business Plan and put in place a detailed Taxpayer Compliance Strategy.

### Public sector wage bill reform
- Priority in 2016 to improve management of the public sector wage bill to safeguard fiscal progress and build a rational wage bill control system including:
  - pay and grading reform;
  - compensation related to performance and market comparators;
  - systematic indicators to guide regular wage negotiations based on parameters like productivity growth, inflation and cost of living adjustments.
- Requested TA from FAD in March 2016 to prepare the wage bill strategy; aim to host TA mission in May 2016.
- Submit to Cabinet by mid-2016 a focused reform strategy based on TA recommendations; request to rephase the structural benchmark (Cabinet approval of reform strategy) to take place by September 30, 2016.
- Reform will guide wage negotiations, complement revisions to the Public Service Bill, and improve quality and effectiveness of public goods and services to promote private sector growth.

### SOE and Statutory Body (SB) financial position and reforms
- Continue implementation of strategic plan to strengthen financial position of SOEs and SBs and put in place effective oversight framework.
- Strengthen the oversight committee by appointing new representatives.
- Allocate additional resources to the Policy Unit within the Ministry of Finance to strengthen monitoring of SOE and SB compliance with reporting requirements and to assess financial positions and required reforms.
- Note uneven reporting compliance across institutions; additional outreach by the oversight committee and Policy Unit required.
- Continue to monitor compliance with guidance on salary negotiations and dividend policy for SOEs/SBs.
- Progress on individual SOE reforms:
  - Received US$5 million in late 2015 from the World Bank to complete restructuring of Grenada Postal Corporation (GPC) and Gravel, Concrete and Emulsion Production Corporation.
  - GPC expected to be commercialized in the first half of 2016.
  - Gravel, Concrete and Emulsion Production Corporation expected to be commercialized through a joint venture with a private investor.
  - Reforms to other SOEs expected to advance after completion of these restructurings.
  - Committed to resolving revenue weakness in the National Water and Sewerage Authority and the Solid Waste Management Authority; will consider revamping tariff‑setting regimes if required.

### Structural reforms to support competitiveness and growth
- GPRS 2014-18 remains the program’s guiding framework; GPRS implementation centered on the Government’s capital budget with capital projects aligned to GPRS priorities.
- Establishing a management information system to align the public sector investment management system with Financial Management and PFM Acts.
- PSIP to be guided by GPRS priorities; new management system will enable:
  - full integration into capital budgeting process;
  - ex ante analysis of debt implications of loan‑financed investment project proposals.
- Continue to strengthen monitoring and evaluation framework for the GPRS; expect to finalize the framework by June 2016.
- GPRS will be the cornerstone for the National Sustainable Development Plan 2030; national steering committee guiding plan development.
- Expect to submit the draft National Sustainable Development Plan 2030 for public consultation by mid-2016 and to finalize the plan before the next budget cycle.

### Business environment and investment readiness
- Actions taken to improve business environment and investment readiness:
  - Introduced new insolvency legislation: Bankruptcy and Insolvency Bill approved by Parliament in March 2016 to modernize bankruptcy and insolvency framework for individuals and companies.
  - Reformed Grenada Industrial Development Corporation (GIDC): strategic realignment and corporate restructuring completed; investment promotion positioned as a key function.
  - Will revise the GIDC Act with Commonwealth Secretariat assistance and obtain parliamentary approval of the revised act by end-June 2016 (on track with structural benchmark).
- Working with IMF staff and private sector stakeholders to identify impediments to Doing Business ranking decline, with preliminary findings pointing to:
  - high trading (port) costs;
  - lengthy customs procedures;
  - difficult access to credit;
  - lack of fully digitized land registration system and building quality control regulations;
  - inefficiencies in the judicial system.
- Planned steps include establishing accurate property records, streamlining property registration, simplifying customs procedures, strengthening building quality control and regulation, and promoting regional solutions (e.g., region‑wide credit registry).

### Labour market and human capital
- Labour market elevated as a key element to strengthen growth and competitiveness; reforms aimed at reducing unemployment and lowering labour costs.
- Legislative reforms:
  - Drafted new Employment Act, Labour Relations Act, and Occupancy Safety and Health Act guided by International Labour Standards and Conventions.
  - Submitted the draft Occupation Safety and Health Act to the ILO and seek further TA for finalization and regulations.
  - Anticipate submitting Employment Act and Labour Relations Act to Parliament in June 2016 for approval (on track to meet end-August 2016 structural benchmark).
- Strengthen labour market statistics:
  - With World Bank TA, expect to finalize and publish the 2015 Labour Force Survey (LFS) by the end of the first quarter; 2015 LFS will include a new section on multidimensional poverty indicators compiled with assistance from the Oxford Poverty and Human Development Initiative.
  - Commit to continuing the survey on an annual basis.
  - Completed Job Opening and Labour Turnover Study data collection as part of a regional initiative; engaging the World Bank for assistance in processing data, with results expected by year-end.
- Active labour market policies:
  - National Training Agency (Grenada) conducted a labour market needs assessment and developed the National Vocational Qualification to guide tailored training programs.
  - Developing a website for vacancy posting and online job center to improve skills matching.
  - Seeking investor support to include job training and skills development in investment planning.
  - Collaborating with IMF staff to assess the labour market and identify further policies.

### Energy sector regulatory reform
- Committed to reforming regulatory environment for energy to regain price competitiveness.
- Amendments to PURCA and a new Electricity Supply Act (ESA) drafted under the World Bank funded ECERA project and revised after public consultations in 2015.
- Final stage of facilitated dialogue with the electricity company; expect to conclude discussions and approve new legislations by mid-2016.
- New legislative framework will:
  - establish an independent national regulatory authority responsible for tariff‑setting among other functions, supported by ECERA;
  - introduce competition in the electricity sector;
  - guide Grenada’s transition to renewable energy.
- Receiving international assistance to review draft legislation and undertake viability studies of renewable energy alternatives.

### Agriculture sector productivity and competitiveness
- Efforts to expand productive capacity and output in agriculture to improve sustainable growth prospects:
  - Government initiatives include infrastructure (road access) investments and facilitation of private investment through commercialization of government estates.
  - Strategic focus of MNIB to boost farmer confidence, create jobs, increase efficiencies and farmers’ income.
  - National agriculture strategy submitted to Cabinet for approval; aligns with GPRS objectives and targets environmentally sustainable development and climate resilience.
  - Strategy identifies strategic crops to capitalize on potential export markets, increase scale and range of value added products, and strengthen linkages with tourism.

*Source: Excerpt from IMF staff report (content unit: _cr16133 - 10.      We remain focused on strong implementation of our new fiscal policy framework. To).*

### 20.      The Government will work to strengthen social protection under the SEED programme.

### _cr16133 - 20.      The Government will work to strengthen social protection under the SEED programme.

### SEED programme: implementation, delays, and planned phase-out
- Due to technical delays populating the new Management Information System (MIS), implementation of the testing tool was delayed; new applicants were accepted beginning in late 2015 after screening by field officers.
- With additional beneficiaries, monthly spending increased in the last quarter of 2015; the end December 2015 indicative floor was missed by EC$1.6 million.
- All beneficiary data are being entered into the new MIS in final preparation for implementing the phase-out policy approved in August 2015.
- Timeline and next steps:
  - Anticipated completion of data entry by end-March 2016.
  - Submit draft phase-out plan to Cabinet thereafter.
  - Expect to implement the phase-out plan and start accepting new applicants using the new MIS and testing tool in 2016.
- Adjustment provisions in the programme:
  - The floor on the central government primary balance will be adjusted upward for any shortfall in the targeted cash transfers (SEED) from their indicative target (TMU ¶5.iv).
  - The performance criterion on primary spending will be adjusted downward for any shortfall in the targeted cash transfers (SEED) from their indicative target (TMU ¶7.iv).

### Financial sector reforms and supervision activities
- Banking sector:
  - Commitment to the ECCU regional strategy to strengthen the banking sector, including addressing results of the regional asset quality review (AQR) and viability assessments on indigenous banks and regional assessment of potential mergers/groupings of assets and liabilities.
  - Private sector solutions are to be considered as first-best options; authorities will act immediately as necessary to strengthen commercial banks while safeguarding fiscal sustainability.
  - Work with the ECCB to determine an appropriate strategy within a sustainable fiscal framework consistent with IMF-supported programme commitments and resumption of debt sustainability.
- Nonbank financial sector and GARFIN (Grenada Authority for the Regulation of Financial Institutions):
  - Following CARTAC recommendations, increasing staff to strengthen oversight; developing a national crisis management plan with CARTAC as part of a regional project.
  - Credit union sector: implemented risk-based supervision; with CARTAC support will start credit quality reviews and stress testing of credit unions.
  - Legislative changes: amendments to the Cooperative Societies Act to standardize capital adequacy requirements and provide guidance for investments; expect to bring the revised Act into force by the third quarter of 2016.
  - Interim measure: issue uniform ECCU regulations for the credit union sector to support the Cooperative Societies Act.
- Insurance sector and regional regulator:
  - Support establishment of the Eastern Caribbean Financial Services Regulatory Commission as regional regulator/supervisor of the proposed single insurance market in the ECCU.
  - Regional public consultations on the regional Insurance Act are ending; draft Act expected to be submitted to the ECCB Monetary Council by end-2016.
  - Expect the single regulatory framework to be formally put into place in 2018.
  - GARFIN will continue off-site supervision of insurers, on-site examinations ongoing, and plan to start risk-based supervision in the next year.
- Pensions:
  - GARFIN has completed registering most pension plans in Grenada; offsite supervision completed for two-thirds of pension funds through audited financial statements and actuarial reports.
  - Introduced detailed interim reporting forms for pension funds in October 2015; anticipate compiling consolidated statistics on financial performance and membership.
  - Held a second training workshop for trustees in December 2015.
  - Expect to start on-site supervision of pension funds covering asset/investment quality and corporate governance in the next year.
- AML/CFT:
  - Importance placed on strengthening AML/CFT framework; recognize heightened AML/CFT risks from the CBI programme.
  - Committed to continued strengthening of due diligence framework for the CBI programme and oversight targeted to applicants and new citizens.
  - Completion of a national money laundering and terrorist financing risk assessment is critical; authorities are sourcing technical assistance from international partners given limited domestic capacity.

### Programme monitoring and review schedule
- The programme will be subject to semiannual reviews and semiannual performance criteria, indicative targets and structural benchmarks, and continuous performance criteria (set out in Tables 1–2 and TMU).
- Anticipated timing:
  - Fifth review on or after September 30, 2016.
  - Sixth review on or after March 31, 2017.
  - These reviews will require observance of the continuous performance criteria and of conditionality for end-June 2016 and end-December 2016, respectively.
- Commitments:
  - Provide detailed statistical information as specified in the TMU.
  - Progress in implementation may be monitored quarterly through staff visits.

### Quantitative programme targets and selected outcomes (Table 1 highlights)
- Performance criteria (selected entries, EC$ mn unless otherwise indicated):
  - A. Cumulative floor on central govt. primary balance (from end-December previous year): -2 (Act. Status Met), -28 (Act. Status Met), 37 (Act. Status Met), 31 (Prog.), 39 (Adj Prog.), 58 (Met), 39 (Prog.), 94 (Status).
  - B. Cumulative ceiling on central govt. primary spending (EC$ mn): 285 (Met), 630 (Met), 281 (Met), 550 (Prog.), 619 (Adj Prog.), 601 (Met), 268 (Prog.), 526 (Status).
  - C. Ceiling on stock of central govt. budget expenditure arrears (EC$ mn): 94 (Met), 79 (Met), 53 (Not met), 0 (Prog.), 0 (Adj Prog.), 0 (Met), 0 (Prog.), 0 (Status).
  - E. Ceiling on contracting of non-concessional external debt by the central govt. (continuous, US$ mn): 0 (Met), 10 (Not met), 0 (Met), 0 (Prog.), 0 (Adj Prog.), 0 (Met), 0 (Prog.), 0 (Status).
- Indicative targets and monitoring:
  - F. Cumulative ceiling on net change in central govt. and central govt. guaranteed debt (EC$ mn): 31 (Met), 48 (Met), -30 (Met), 66 (Prog.), -58 (Adj Prog.), -66 (Met), 13 (Prog.), 15 (Status).
  - G. Floor on social spending by central govt. (EC$ mn): 6.2 (Not Met), 11.4 (Not met), 5.4 (Not met), 13.4 (Prog.), 13.4 (Adj Prog.), 11.8 (Not met), 7.0 (Prog.), 14.0 (Status).
  - H. Wage bill target: 111 (Met), 219 (Met), 109 (Met), 220 (Prog.), 220 (Adj Prog.), 215 (Met), 110 (Prog.), 219 (Status).
  - I. Public employment target: 7,168 (Met), 7,515 (Met), 7,096 (Met), 7,484 (Prog.), 7,484 (Adj Prog.), 7,003 (Met), 7,000 (Prog.), 7,000 (Status).
- Memorandum items:
  - Projected new concessional external debt (US$ mn): 21, 0, 10 (note: actual does not include financing from CDB on behalf of GSWMA because the loan had not been disbursed).
- Notes and adjustors:
  - Ceiling modified to include adjustors for debt instruments issued for debt restructuring limited to the amount of nominal debt restructured for a given period, and for borrowing from the CDB and WB for development and debt management purposes up to cumulative maximums of US$30 mllion from each institution (TMU ¶10). 

### Structural conditionality and implementation status (Table 2 highlights)
- Prior actions and structural benchmarks (selection with timing and status):
  - Prior action: Signing into force of the new tax incentive regime and Investment Act 2014.
  - Parliamentary approval of the revised Investment Promotion Act — November 30, 2014 — Met.
  - Parliamentary approval of 2015 budget consistent with program commitments — December 31, 2014 — Not met, but corrective action taken.
  - Parliamentary approval of 2016 Budget consistent with program commitments and Fiscal Responsibility Legislation — December 31, 2015 — Not met, corrective action taken.
  - Parliamentary approval of fiscal adjustment measures for 2016 — December 31, 2015 — Met.
  - Publication of all citizenship-by-investment statistics on a quarterly basis — Quarterly, beginning July 31, 2015 — Met.
  - Parliamentary approval of a tax administration act — November 30, 2015 — Met in February 2016.
  - Implementation of the new Chart of Accounts for the 2016 Budget — December 31, 2015 — Not met, action taken.
  - Establishment and operationalization of the LMTS and Small Taxpayers Service Units — December 31, 2015 — Met in January 2016.
  - Parliamentary approval of the revised GIDC Act — June 30, 2016 (timing).
  - Parliamentary approval of a new Grenada Labor Code — August 31, 2016 (timing).
  - Approval by Cabinet of a focused reform strategy to manage the public sector wage bill — September 30, 2016 — Proposed.

### Technical Memorandum of Understanding (TMU): definitions and adjustments
- Coverage and debt definition:
  - Central government covers all items included in the government budget.
  - External debt defined as central government contracted or guaranteed debt owed to creditors residing outside of Grenada; domestic debt covers debt owed to residents of Grenada.
  - Securities issued at the Regional Government Securities Market (RGSM) and debt owed to the ECCB are considered domestic debt for monitoring.
- Measurement of central government primary balance:
  - Above-the-line: total revenues and grants of central government less total non-interest expenditure; project grants recorded to the extent spent; budgetary grants treated as project grants and recorded when spent on capital outlays; transfers from the National Transformation Fund (NTF) for settlement of arrears recorded as non-tax revenue and treated similarly to CBI receipts.
  - Expenditures recorded on an accrual basis: (a) budget execution data reported by MOF; (b) data on unprocessed claims to be collected and reported by MOF.
- Below-the-line monitoring components include:
  - i. Net domestic bank financing measured by change in domestic banking system credit to central government minus government deposits in banking system (sum of ECCB and commercial banks’ financing).
  - ii. Net nonbank financing measured by net changes in holdings of government securities by nonbanks and net borrowing from nonbank institutions (reported by MOF and GARFIN).
  - iii. Net government issuance in RGSM excluding holdings by domestic banking and nonbanking systems.
  - iv. Net external financing: net disbursements of project and non-project loans (including securitization), net proceeds from issuance of external debt, and reduction in cash deposits held outside the domestic financial system.
  - v. Change in stock of arrears measured as net change in unpaid checks issued, unprocessed claims, pending invoices, interest payments past due, and other expenditures recorded above the line but not paid (including contributions to NIS).
  - vi. Gross receipts from divestment (privatization/divestment proceeds).
  - vii. Any exceptional financing (including rescheduled principal and interest).
  - viii. Less domestic and external interest payments on a due basis.
  - ix. Less grants received but unutilized.
- Reconciliation threshold for primary balance:
  - If difference between above-the-line and below-the-line measures is larger than EC$6 million in 2015 and EC$3 million in 2016 the MOF will consult with IMF staff (TMU ¶4).
- Adjustments to the floor on central government primary balance (TMU ¶5):
  - Upward by non-tax revenues from the CBI programme and transfers from the NTF for settlement of arrears.
  - Upward by one half of revenue over-performance (excluding CBI and NTF transfers) for end-June 2016; safeguard allows increasing capital budget allocations for last two quarters up to 2/3 of the over-performance.
  - Upward by half of the amount of budgetary grants received in excess of projections.
  - Upward for any shortfall in targeted cash transfers (SEED) from their indicative target.
  - Downward for the cost of severance payments associated with restructuring of Grenada Concrete Emulsion and Production Corporation and the Grenada Postal Corporation (up to a cumulative maximum of US$4 million).
  - Downward by amounts paid by the government to reimburse policy holders of failed regional insurance companies BAICO and CLICO, less the grant-financed share.
- Adjustments to the primary spending ceiling (TMU ¶7):
  - Upward by one half of revenue over-performance for end-June 2016 and by the full amount for end-December 2016.
  - Upward by full amount of additional capital grants received in excess of programmed levels; downward by half of any shortfall in capital grants compared to programmed levels.
  - Upward by half of budgetary grants received and spent on capital outlays in excess of programmed levels.
  - Downward for any shortfall in targeted cash transfers (SEED) from their indicative target.
  - Upward by the cost of specified severance payments (up to cumulative maximum of US$4 million).
  - Upward by amounts paid to reimburse BAICO and CLICO policy holders.
- Programmed 2016 revenues and capital spending (EC$ millions):
  - Non grant revenue: Jun. 298.0; Dec. 580.1.
  - Budgetary grants: Jun. 0; Dec. 0.
  - Capital spending 2/: Jun. 88.8; Dec. 178.8.
  - Of which financed by capital grants: Jun. 42.9; Dec. 85.7.
  - Note: figures are cumulative from end of the previous year; quarterly allocation of non-grant financed capital spending is less than projection to provide a buffer to achieve program QPCs.

*Source: _cr16133 - 20.      The Government will work to strengthen social protection under the SEED programme.*

### 8.      Budget expenditure arrears are defined as the sum of: (i) any invoice that has been received

### _cr16133 - 8.      Budget expenditure arrears are defined as the sum of: (i) any invoice that has been received

### Definition of Budget Expenditure Arrears
- Budget expenditure arrears are defined as the sum of:
  - (i) any invoice that has been received by a spending agency from a supplier of goods, services, and capital goods delivered and verified, and for which payment has not been made within the contractually agreed period (taking into account any applicable contractual grace period),or in the absence of a grace period, within 60 days after the due date;
  - (ii) wages, pensions, or transfers (including to the Solid Waste Company), for which payment has been pending for longer than 60 days to domestic or foreign residents; and
  - (iii) interest and amortization payments on domestic debt for which payment has not been made within the contractually agreed period (taking into account any applicable contractual grace period).
- Arrears resulting from the nonpayment of debt service for which a clearance framework has been agreed or a rescheduling agreement is being sought are excluded from this definition.
- The data will be reported by the Accountant General’s office.

### Non-Accumulation of External Debt Arrears (Continuous)
- The central government will not incur new arrears in the payment of their external obligations (contracted or guaranteed) at any time during the arrangement.
- Arrears are defined as a payment of debt which has not been made within the contractually agreed period (taking into account any applicable contractual grace period).
- Exclusions from this definition:
  - Overdue membership fees to regional and international organizations.
  - Arrears resulting from the nonpayment of debt service for which a clearance framework has been agreed or for which the government or the institution with government guaranteed debt is actively and in good faith pursuing a debt restructuring.
- The performance criterion will be applied on a continuous basis under the programme.

### Ceiling on Contracting of Non-Concessional External Debt by the Central Government (Continuous)
- The ceiling applies to contracting or guaranteeing by the central government of medium and long-term external debt (maturity greater than one year).
- The ceiling includes adjustors for borrowing from:
  - the Caribbean Development Bank and the World Bank (for development and debt management purposes), and
  - debt instruments to be issued as part of a debt restructuring to improve the overall public debt profile, limited to the nominal amount of debt restructured during a given period.
- Specific limits:
  - The total amount of contracting of non-concessional external debt from the World Bank under the adjustor will be strictly limited to US$30 million, and the total amount of contracting of non-concessional external debt from the Caribbean Development Bank under the adjustor will be strictly limited to US$30 million, both on a cumulative basis from the beginning of 2016.
- Borrowing from the World Bank and the Caribbean Development Bank will be closely monitored in cooperation with these institutions.
- Monitoring and reporting:
  - The Debt Management Unit (DMU), after reconciliation with the Accountant General’s office, will monitor and report monthly to Fund staff.
  - The government will consult with IMF staff on the terms and concessionality of any proposed new debt in advance of contracting such external debt.
  - The performance criterion will be applied on a continuous basis under the programme.

### Concessionality and Valuation Rules
- A debt is non-concessional if the grant element in net present value (PV) terms relative to face value is less than 35 percent.
- The discount rate used for this purpose is 5 percent.
- For debts carrying a variable interest rate in the form of a benchmark interest rate plus a fixed spread:
  - The PV of the debt would be calculated using a programme reference rate plus the fixed spread (in basis points) specified in the debt contract.
  - The programme reference rate for the six-month USD LIBOR is 3.34 percent and will remain fixed for the duration of the programme.
  - Spreads over six-month USD LIBOR:
    - six-month Euro LIBOR: -250 basis points
    - six-month JPY LIBOR: -300 basis points
    - six-month GBP LIBOR: -100 basis points
    - For interest rates on currencies other than Euro, JPY, and GDP, the spread over six-month USD LIBOR is -200 basis points.
  - Where the variable rate is linked to a benchmark interest rate other than the six-month USD LIBOR, a spread reflecting the difference between the benchmark rate and the six-month USD LIBOR (rounded to the nearest 50 bps) will be added.
- Note: The programme reference rate and spreads are based on the “average projected rate” for the six-month USD LIBOR over the following 10 years from the October 2014 World Economic Outlook (WEO).

### Indicative Targets: Cumulative Ceiling on Net Change in Central Government and Central Government Guaranteed Debt
- Definition:
  - Net change is the difference in the stock of central government and central government guaranteed debt between two specified periods.
  - For programme purposes, the stock is measured under the disbursement basis.
- Treatment of PPPs:
  - Where the government facilitates financing of PPP projects by concessionaires, central government debt will be increased by the present value (at the inception of the lease) of all lease payments expected to be made during the period of the agreement excluding payments that cover operation, repair or maintenance.
- Adjustors to the ceiling:
  - Upward by the amount paid by the government to reimburse the policy holders BAICO and CLICO, less the grant-financed share of these payments.
  - Upward to a maximum amount of 5 percent of GDP to accommodate PPP related expenditures.
  - Downward by the amount of nominal debt forgiveness in the case of debt restructuring.
  - Upward for the cost of severance payments associated with the restructuring of Grenada Concrete Emulsion and Production Corporation and the Grenada Postal Corporation (up to a cumulative maximum of US$4 million).
- Data provision:
  - Data used to monitor the net change will be provided by the DMU, after reconciliation with the Accountant General’s office, on a monthly basis.

### Indicative Floor on Social Spending
- The indicative floor applies only to expenditures incurred by the central government on the SEED programme (Support for Education Empowerment and Development).
- Spending under the SEED programme will be reported by the Ministry of Finance on a quarterly basis.

### Monitoring Targets and Memoranda Items
- Wage Bill Target:
  - The wage bill of the central government includes expenditures toward payment of wages, salaries and personnel allowances.
  - Reported by the Ministry of Finance on a quarterly basis.
- Public Employment:
  - Public employment includes established (permanent), unestablished (temporary) workers, and project workers.
  - Reported by the Ministry of Finance on a quarterly basis.

### Quarterly Capital Budget Allocation (Non-Grant Financed)
- Non-grant financed capital spending will be allocated to Ministries/Departments consistent with the quarterly allocation:
  - 2016Q1: 23.4
  - 2016Q2: 17.5
  - 2016Q3: 23.6
  - 2016Q4: 23.6

### Publication of Citizenship-by-Investment (CBI) Statistics
- The Ministry of Finance, on a quarterly basis beginning July 31, 2015, will supply to the IMF and publish on its external website all CBI-related statistics including, but not limited to:
  - (i) the number of CBI applications received, by type of application (National Transformation Fund (NTF) donation or investment option),
  - (ii) the number of CBI-programme applications approved (NTF donation or investment option),
  - (iii) the number of new citizens under the CBI programme,
  - (iv) the number of CBI-programme applications rejected,
  - (v) the total amount of revenues received into the NTF,
  - (vi) the total amount of CBI programme application fees received by the central government,
  - (vii) total transfers of NTF funds from the NTF to the central government,
  - (viii) total central government spending financed by CBI-programme related revenue (direct central government financing and NTF-financed projects).
- The data will be reported as outlined in Table 1.

### Programme Reporting Requirements and Data Reporting Schedule (Summary of Table 1)
- Citizenship-by-Investment Program (reported by MOF):
  - Number of CBI-program applications received by type of application (NTF donation and investment options): Quarterly, 30 days after the end of quarter.
  - Number of CBI-program applications approved (NTF donation and investment options): Quarterly, 30 days after the end of quarter.
  - Number of new citizens under the CBI program: Quarterly, 30 days after the end of quarter.
  - Number of CBI-program applications rejected: Quarterly, 30 days after the end of quarter.
  - Total amount of revenues received into the NTF: Quarterly, 30 days after the end of quarter.
  - Total amount of CBI program application fees received by the central: Quarterly, 30 days after the end of quarter.
  - Total transfers of NTF funds from the NTF to the central government: Quarterly, 30 days after the end of quarter.
  - Total central government spending financed by CBI-program related revenue (by direct central government financing and NTF-financed projects): Quarterly, 30 days after the end of quarter.
- Fiscal Sector (reported by AG / Budget Office unless otherwise noted):
  - Central Government budget and outturn: Monthly, 30 days after the end of month.
  - Grants (Budgetary grants; Project grants): Monthly, 30 days after the end of month.
  - Spending on SEED program: Monthly, 30 days after the end of month.
  - Employment data for established and un-established workers: Quarterly, 30 days after the end of quarter.
  - Financial statements of all statutory bodies: Annually, Within 12 months after year end.
  - Change in the stock of domestic arrears by creditor: Monthly, 30 days after the end of month.
  - Unpaid claims: Monthly, 30 days after the end of month.
  - Interest arrears: Monthly, 30 days after the end of month.
- Financial Sector (GARFIN):
  - Consolidated balance sheet for all credit unions: Quarterly, 30 days after the end of quarter.
  - Consolidated balance sheet for all insurance companies: Quarterly, By the end of subsequent quarter.
- Real and External Sector (CSO/MOF and others):
  - Updates on annual National Accounts: by sector: Annually, Within 6 weeks after availability.
  - Tier 1 high frequency indicators: Monthly, 60 days after the end of month.
  - Tier 2 high frequency indicators: Monthly, 6 weeks after the end of quarter.
  - Balance of Payments data: Annually, Within 3 months after year end.
  - Details of exports breakdown: Quarterly, By the end of subsequent quarter (Customs Dept.).
  - Details of imports breakdown: Quarterly, By the end of subsequent quarter (Customs Dept.).
  - Details of tourism data: Quarterly, By the end of subsequent quarter (CSO).
  - Customs revenue foregone: Monthly, 30 days after the end of month (Customs Dept.).
  - CPI: Monthly, 30 days after the end of month (CSO).
- Debt Reporting (DMU):
  - External and domestic debt and guaranteed debt (by creditor): Monthly, 30 days after the end of month.
  - Disbursements: Monthly, 30 days after the end of month.
  - Amortization: Monthly, 30 days after the end of month.
  - Interest payments: Monthly, 30 days after the end of month.
  - Stock of external debt: Monthly, 30 days after the end of month.
  - Stock of domestic debt: Monthly, 30 days after the end of month.
  - Arrears on interest and principal: Monthly, 30 days after the end of month.
  - Financial statement of Petrocaribe Grenada: Monthly, 30 days after the end of month (DMU/AG).
  - Gross receipts from divestment: Monthly, 30 days after the end of month (Budget Office).
  - Exceptional domestic financing: Monthly, 30 days after the end of month (DMU).
  - Proceeds from bonds issued abroad: Monthly, 30 days after the end of month (DMU).

*Source: _cr16133 - 8.      Budget expenditure arrears are defined as the sum of: (i) any invoice that has been received*

### 6. Copies of any new loan agreementsAs occurringDMU

### 6. Copies of any new loan agreementsAs occurringDMU

### Fund Relations (As of February 29, 2016)
- Membership Status: Joined: August 27, 1975; Article VIII.
- General Resources Account (SDR Million; Percent of Quota):
  - Quota 16.40100.00
  - Fund Holdings of Currency 15.2392.84
  - Reserve Position 1.187.16
- SDR Department (SDR Million; Percent of Allocation):
  - Net cumulative allocation 11.17100.00
  - Holdings 5.3647.97
- Outstanding Purchases and Loans (SDR Million; Percent of Quota):
  - ECF Arrangements 20.85127.16
- Latest Financial Arrangements:
  - ECF June 26, 2014 — Expiration June 25, 2017 — Amount Approved 14.04 (SDR Million) — Amount Drawn 8.04 (SDR Million)
  - ECF Apr 18, 2010 — Expiration Apr 17, 2013 — Amount Approved 8.78 — Amount Drawn 2.53
  - ECF1/ Apr 17, 2006 — Expiration Apr 13, 2010 — Amount Approved 16.38 — Amount Drawn 16.38
  - 1/ Formerly PRGF.
- Projected Obligations to Fund (SDR Million; based on existing use of resources and present holdings of SDRs):
  - Forthcoming 2016 2017 2018 2019 2020
  - Principal 3.33 3.47 3.47 2.00 1.35
  - Charges/Interest 0.00 0.00 0.00 0.03 0.02
  - Total 3.33 3.47 3.47 2.03 1.38
  - 2/ When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.
- Implementation of HIPC Initiatives: Not Applicable
- Implementation of Multilateral Debt Relief Initiative (MDRI): Not Applicable
- Implementation of Post-Catastrophe Debt Relief (PCDR): Not Applicable
- Safeguards Assessment (Eastern Caribbean Central Bank, ECCB):
  - Full safeguards assessment on a four-year cycle; previous assessments completed in 2003, 2007, and 2012.
  - Update assessment substantially completed: ECCB maintained generally strong controls; external audit and financial reporting practices sound; financial statements compliant with International Financial Reporting Standards and published on a timely basis.
  - Recommendations: internal audit function needs reform to align with leading international practices; oversight could be strengthened by enhancing financial expertise of the audit committee.
- Exchange Arrangement:
  - Member of ECCB; Eastern Caribbean dollar pegged to U.S. dollar at EC$2.70 per U.S. dollar since July 1976.
  - ECCB operates like a quasi-currency board with foreign exchange backing of its currency and demand liabilities close to 100 percent.
  - Grenada accepted obligations of Article VIII, Sections 2, 3, and 4 in January 1994; maintains exchange system free of restrictions on payments and transfers for current international transactions.
- Article IV Consultation: 24-month consultation cycle; last consultation concluded June 26, 2014 (IMF Country Report No. 14/196).
- FSAP Participation: Participated in regional ECCU FSAP conducted in September and October 2003 (Financial System Stability Assessment IMF Country Report No. 04/293).

### Technical Assistance (CARTAC, FAD, LEG, MCM)
- CARTAC delivery to Grenada over FY15-16 period to date: 93.2 weeks or 8.7 percent of total TA delivery.
- CARTAC TA areas and focus:
  - Public Finance Management: reform of state-owned enterprises and statutory bodies; cash forecasting and commitment control; development and transition to a new chart of accounts consistent with GFSM2014; PEFA assessment; strategic budget reform; SOE/SB reform strategy; dividend policy for SOEs; employment directive for SOEs and SBs; draft regulations for the National Transformation Fund; assessment of public pension reform options.
  - Tax Administration: strengthening IRD and Customs; establishing a Large and Medium Taxpayer Unit and a Design, Planning and Monitoring Section at IRD.
  - Financial Stability, Supervision and Regulation: support to GARFIN to implement risk-based supervision for non-banking sector; review of GARFIN supervisory framework; dynamic modeling (stress testing) as part of ECCU-wide initiative.
  - Macroeconomic framework and statistics: support to establish annual medium-term economic framework; TA for balance of payments statistics according to BPM6; initiate production of IIP statistics.
- Other Technical Assistance (2014–16):
  - FAD and LEG: extensive assistance in tax policy and administration, public financial management, public expenditure rationalization; drafting of PFM legislation and Tax Administration legislation; reforms of income tax, property, VAT, excise tax Acts; comprehensive TA to draft the Fiscal Responsibility Act of 2015.
  - MCM: TA on medium-term debt management strategy and institutional changes to strengthen debt management; together with LEG, TA to draft the Public Debt Management Act of 2015.
- IMF Technical Assistance missions (selected start and end dates listed for 2014–2016; source: ICD RAP database for FY 14-16). Examples include:
  - 1/6/2014–1/17/2014 Public Financial Management
  - 1/28/2014–1/30/2014 Tax Administration
  - 3/2/2014–7/2/2014 Tax Administration
  - 4/1/2014–11/4/2014 Tax Administration
  - 2/9/2015–10/2/2015 Public Financial Management
  - 3/26/2015–7/4/2015 Macro-fiscal
  - 12/7/2015–11/12/2015 Financial Stability Analysis
  - 3/21/2016–3/25/2016 Balance of Payments Statistics
  - 4/18/2016–4/22/2016 Tax Administration

### Relations with the World Bank Group (As of March 22, 2016)
- OECS Regional Partnership Strategy (RPS) FY15-19 objective: contribute to foundations for sustainable inclusive growth; three engagement areas: competitiveness, public sector modernization, resilience.
- RPS contributions:
  - IFC and MIGA provide selective investment support; IFC focus on crisis response, job creation and inclusive growth, innovation, competitiveness, integration, climate change; MIGA limited by small market size.
- Comprehensive Debt Framework (CDF, 2010): four pillars to address high debt and low growth in small island states—promote private-sector led growth; strengthen fiscal management; build resilience to natural disasters; improve debt management.
- Indicative IBRD lending program for six OECS countries: expected around US$120 million for FY15-19 (up to a maximum of US$20 million per OECS country), subject to conditions.
- IDA17 (FY15-17) allocation for the OECS: SDR61.3 million (increase of around 22 percent over IDA16 allocation SDR50.3 million); Grenada’s IDA-17 allocation: SDR 14.1 million (roughly USD 19.7 million at today’s exchange rate).

### World Bank Projects in Grenada (selected)
- Second Programmatic Resilience Building Development Policy Credit and Loan (DPL/DPC):
  - Proposed amount equivalent of US$15 million (SDR7.2 million equivalent to US$10 million and US$5 million).
  - Approved by World Bank Board on October 28, 2015.
  - Programmatic series of three DPC/DPLs to support national development strategy: sustain economic growth, restore fiscal sustainability, build resilience to adverse weather events.
  - Pillars: (1) improve business environment (tourism regulatory framework, agribusiness modernization, PPP policy framework); (2) improve public resource utilization (public procurement strengthening, social safety net targeting); (3) build resilience to natural disasters and banking sector resilience improvements.
  - Part of multi-donor engagement complementing IMF 36-month Extended Credit Facility and Caribbean Development Bank.
- Caribbean Regional Communications Infrastructure Program (CARCIP):
  - Phase 1 approved May 22, 2012 with Grenada US$10 million IDA; St. Lucia US$6 million IDA; St. Vincent and the Grenadines US$6 million IDA.
  - Menu options: ICT Connectivity; E-Government; IT Industry. Project currently going through restructuring.
- Eastern Caribbean Energy Regulatory Authority (ECERA) Project (Grenada and St. Lucia):
  - Approved June 2011.
  - Grenada and Saint Lucia used IDA credit US$2.8 million each (total US$5.6 million) for design and operationalization of ECERA.
  - Component A: create and launch ECERA; legal and consultative process for treaty, self-financing options, tariff review, renewable energy incentives.
  - Component B: initial three years of ECERA operations—tariff and investment plan reviews; regional licensing framework for electricity market participants; facilitate integration of renewable electricity.
  - Project currently going through restructuring.
- OECS Disaster Vulnerability Reduction Project (approved June 2011):
  - Grenada total US$26.2 million, including US$10 million zero-interest IDA credit (repayable in 35 years with 10-year grace period); US$8 million grant from PPCR; US$8.2 million zero-interest PPCR loan (repayable in 40 years with 10-year grace period).
  - Components: resilience interventions for public buildings and infrastructure; regional capacity building for risk assessment and integration into development; re-categorize/add financing for early recovery subject to declaration of emergency and recovery action plan; strengthen institutional capacity for project management and implementation.
- Grenada Safety Net Advancement Project (approved June 2011 for US$5 million):
  - Objectives: strengthen consolidated Conditional Cash Transfer (CCT) architecture and MOSD capacity; improve coverage of poor households; improve education outcomes and health monitoring for vulnerable households.
  - Component 1: finance cash transfers disbursed against performance milestones for business model adoption in institutions, budget and coverage, beneficiary outreach and targeting, MIS, payment systems, communications, monitoring and evaluation.
  - Component 2: technical assistance to MOSD for management, coordination, supervision, monitoring, evaluation; design of PMT, MIS, and impact evaluation.
  - Project currently going through restructuring.
- World Bank Country Portfolio Performance Review (spring 2015) — main findings for Grenada:
  - Need to better understand and incorporate country context during project preparation.
  - Institutional strengthening beyond PIUs needed to build national capacity.
  - Training (particularly fiduciary) critical.
  - More comprehensive and flexible procurement approach for small states needed.
  - Government processes can be complex or slow, causing delays.
  - Collaboration needs improvement both internally and at the Bank for consistent messaging and clear communication.
  - Lack of technical staff causes delays in completing activities by deadline.

### Non-Lending Activities (World Bank)
- Caribbean Growth Forum (CGF):
  - Multi-stakeholder platform to identify, prioritize and implement activities to improve growth enabling environment; engaged more than 2,500 representatives.
  - Themes: Logistics and Connectivity; Investment Climate; Skills and Productivity.
  - Outcomes: twelve countries established national CGF chapters and completed first phase of national dialogue; draft action plans with accountabilities, milestones, timeline, funding; periodic reporting every 4-5 months; independent monitoring by private sector and civil society.
- Comprehensive Debt Framework rollout in OECS, including Grenada, supporting policy measures to stimulate growth and reduce debt.
- Analytical and advisory outputs completed and disseminated (selected studies and reports listed in source).

### Financial Relations (World Bank projects — summary figures and disbursements)
- Project-level financing (Original Principal, Undisbursed Balance*, Disbursed*):
  - Second Programmatic Resilience Building Development Policy Credit: IDA 57340 10,000,000.00 0.00 10,071,288.00; IBRD 85460 5,000,000.00 0.00 5,000,000.00
  - Caribbean Regional Communications Infrastructure Program: IDA 51190 10,000,000.00 6,820,896.36 2,271,238.64
  - Eastern Caribbean Energy Regulatory Authority (ECERA): IDA 49350 2,800,000.00 1,395,854.67 1,121,967.33
  - Grenada Safety Net Advancement Project: IDA 49930 5,000,000.00 2,029,059.11 2,447,068.89
  - Regional Disaster Vulnerability Reduction APL1: TF 19396 3,800,000.00 0.00 3,800,000.00; IDA 49850 10,000,000.00 3,050,670.07 5,621,827.93; TF 11131 8,200,000.00 5,385,963.71 2,814,036.29
  - Total 54,800,000.00 — Undisbursed Balance* 22,482,443.92 — Disbursed* 29,347,427.08
  - *Amounts may not add up to original principal due to changes in the SDR/USD exchange rate.
- Disbursements and Debt Service (calendar year, in millions of U.S. dollars; *As of February 29, 2016):
  - Disb. Amt. by year: 2010 10.67; 2011 1.67; 2012 3.88; 2013 6.27; 2014 16.96; 2015 20.30; 2016* 0.01
  - Repay Amt. by year: 2010 2.03; 2011 2.02; 2012 1.97; 2013 2.09; 2014 2.08; 2015 2.25; 2016* 0.36
  - Net Amt. by year: 2010 8.64-0.35? 1.91? 4.18? 14.88? 18.06-0.35 (source table contains formatting; exact annual net amounts shown in source in tabular form)
  - Charges and Fees by year: Charges 0.36 0.36 0.33 0.29 0.24 0.20 0.05; Fees 0.31 0.35 0.34 0.37 0.44 0.50 0.07

### Relations with the Caribbean Development Bank (As of March 31, 2016)
- CDB approvals to Government of Grenada (1970-2015): US$250.36 million (net) in loans, contingent loans, equity and grants; representing 6.3% of total approvals to CDB’s borrowing member countries.
- CDB Country Assistance Strategy 2014-18 priority sector outcomes:
  - (i) Improved macroeconomic management: Two Policy-Based Loans (PBLs) US$10 million each disbursed in 2014 and 2015; part of a programmatic series of three loans totaling US$30 million.
  - (ii) Increased access to high quality education and training: support for school infrastructure restoration; focus on quality and relevance; alignment of education and training with economy; policy development; strengthen strategic leadership and planning.
  - (iii) Improved access by the poor to basic infrastructure and services through community-driven development: BNTF Seventh and Eighth programs for education/human resource development, water and sanitation, access and drainage.
  - (iv) Enhanced social policy/social protection and research: assistance with Gender Policy development; new poverty assessment for poverty monitoring and evidence-based decision-making.
  - (v) Improved environmental sustainability and land use management: interventions for land use policy, adaptation measures for select communities, environmentally sound solid waste options.
  - (vi) Enhanced energy efficiency and renewable energy development: assist in removing binding constraints to achieve energy efficiency and renewable energy policy targets.
  - (vii) Improved economic infrastructure: assist financing for redevelopment of town of Grenville through improvements in key urban infrastructure (three of four sub-components already complete).
- Major projects under implementation include those aligned with the above outcomes.

*Information prepared by Western Hemisphere Department; May 3, 2016 (contents reflect material in the supplied document).*

*Source: _cr16133 - 6. Copies of any new loan agreementsAs occurringDMU_*

### 1. Grenville Market Square Development—this project was designed to address issues of

### _cr16133 - 1. Grenville Market Square Development—this project was designed to address issues of

### Project interventions and objectives
- Grenville Market Square Development
  - Addressed: poor quality infrastructure in the market square, unhygienic practices in relation to the slaughter of animals, and vehicular and pedestrian congestion due to a bus terminal within the environs of the market.
- Schools Rehabilitation and Reconstruction Project II
  - Addressed: inadequacy of the physical learning environment, need for curricula refocusing, and enhancement of instructional modalities in the school system.
- Market Access and Rural Enterprise Development (jointly funded with IFAD)
  - Objective: enhance livelihoods of rural communities by strengthening and establishing rural businesses/clusters, upgrading technical and business skills, and providing affordable credit.
- Rehabilitation and Reconstruction - Extreme Rainfall Event
  - Objective: reduce risks associated with landslides and flood hazards in the parishes of St. Mark and St. John via rehabilitation and reconstruction of damaged roads including landslip repairs, bridge restoration, and flood mitigation works.

### Loan disbursements (Grenada)
- Net Disbursement (in millions of U.S. dollars):
  - 2010: 5.52
  - 2011: 0.41
  - 2012: 0.83
  - 2013: (0.22)
  - 2014: 6.43
  - 2015: 9.12
- Disbursement:
  - 2010: 9.65
  - 2011: 5.00
  - 2012: 4.70
  - 2013: 6.70
  - 2014: 11.88
  - 2015: 15.72
- Amortization:
  - 2010: 4.13
  - 2011: 4.59
  - 2012: 3.87
  - 2013: 6.92
  - 2014: 5.45
  - 2015: 6.60
- Interest and charges:
  - 2010: 3.23
  - 2011: 3.11
  - 2012: 2.38
  - 2013: 4.39
  - 2014: 3.20
  - 2015: 3.21
- Net resource flow:
  - 2010: 2.29
  - 2011: (2.70)
  - 2012: (1.55)
  - 2013: (4.61)
  - 2014: 3.23
  - 2015: 5.91

### Statistical issues and data adequacy (As of March 31, 2016)
- Overall
  - General: Data provision has some shortcomings, but is adequate for surveillance.
- National Accounts
  - A rebased GDP series (base year 2006) released October 2010 improved coverage, data sources, and methodology.
  - Administrative data from revenue agencies supplement survey-based results for industries such as hotels and restaurants, manufacturing, and wholesale and retail trade.
  - Education, health and social work now identified as separate industries; public components reclassified out of government.
  - Weaknesses: GDP by expenditure not available at constant prices; current price GDP unreliable due to weaknesses in estimating gross capital formation; private final consumption expenditure estimated as a residual.
- Prices and high frequency statistics
  - Regular data provided on consumer prices, retail sales, agricultural production and purchases, motor vehicles registration, total cargo handled, fish production and export, industrial production, imports of construction material, water and electricity production.
  - 2010 CPI revisions brought series to international standards; new CPI basket developed using 2007/08 HIES data. Strong recommendation: conduct HIES on a five-year cycle instead of ten-year.
  - New series re-referenced to January 2010 and historical CPI series back to 2001 recalculated.
  - Producer prices, export and import price indices are not available.
- Labor statistics
  - Improvements: annual Labor Force Survey introduced in 2013 and completed in 2014 and 2015; first labor demand survey (Job Opening and Labor Turnover Survey) conducted in 2015 but results not finalized or released.
  - Population census completed in 2011.
  - Regular wage data not available except partial data from the National Insurance Scheme.
  - CSO conducted Country Poverty Assessment in 2008; working with ILO to improve labor market coverage.
- Government finance statistics
  - Central government reporting improved; monthly data provided to ECCB, IMF in Fund economic classification format with lags of about 4–6 weeks.
  - Challenges remain: (i) composition of public expenditure inaccurate (many current items classified as capital); (ii) donor-financed capital spending data often not available until year-end as they are not reported to or do not pass through central government accounts.
  - New Chart of Accounts introduced in 2016 expected to help ameliorate challenges.
  - Coverage of rest of public sector improved but remains limited; no consolidated public sector accounts.
  - For first time, financial information on selected public enterprises included in Budget 2016.
  - PFM Act of 2015 requires Minister of Finance to present statement of overall performance of all enterprises to Parliament with budget proposals; public enterprises must submit annual financial statements no later than three months from fiscal year end to Director of Audit and Minister of Finance.
- Monetary statistics
  - Compiled by the ECCB monthly and reported regularly to the Fund; broadly adequate for surveillance.
- Balance of payments
  - Being strengthened: ECCB preparing new BOP survey forms to include trade in services and better FDI coverage; medium-term allows presentation in EBOPS and preparation of IIP.
  - Delays in software update mean new data incomplete and not finalized until late-2016.
  - Merchandise trade statistics are traditionally more reliable and available by SITC classification quarterly.
- External and domestic debt statistics
  - Central government external debt database is comprehensive with detailed breakdowns of disbursements, debt service, and future projections.
  - Detailed database on domestic government securities maintained by RGSM providing auction results and outstanding securities.
  - Stock information on privately placed domestic T-bills, loans, bonds, and overdraft facilities available monthly but no reliable future projections.
  - Limited data on government-guaranteed debt and public enterprise debt; no data on private external debt.
- Data standards and reporting
  - Grenada has participated in GDDS since March 2001, but most metadata not updated since late 2002.
  - Reporting to STA: IFS includes exchange rates, international liquidity, monetary statistics, prices, balance of payments, national accounts, and population. Authorities do not report fiscal data for publication in IFS. ECCB provides data to IMF for Balance of Payments Yearbook. Grenada has not provided fiscal data for GFS Yearbook. ECCB disseminates Grenada’s quarterly GFS data in its Economic and Financial Review.

### Table of Common Indicators Required for Surveillance (As of March 31, 2016) — selected entries
- International Reserve Assets and Reserve Liabilities of the Monetary Authorities
  - Date of latest observation: Jan 2016
  - Date received: Mar 2016
  - Frequency of Data: M
  - Frequency of Reporting: M, with 1- to 2-month lag
  - Frequency of publication: A/Q
- Reserve/Base Money
  - Date of latest observation: Jan 2016
  - Date received: Mar 2016
  - Frequency of Data: M
  - Frequency of Reporting: M, with 1- to 2-month lag
  - Frequency of publication: A/Q
- Broad Money; Central Bank Balance Sheet; Consolidated Balance Sheet of the Banking System; Interest rates
  - Date of latest observation: Jan 2016
  - Date received: Mar 2016
  - Frequency: M
  - Reporting: M, with 1- to 2-month lag
  - Publication: A/Q
- Consumer Price Index
  - Date of latest observation: Feb 2016
  - Date received: Mar 2016
  - Frequency: M
  - Reporting: M, with 2- to 3-month lag
  - Publication: A/Q
- Revenue, Expenditure, Balance and Composition of Financing - Central Govt.
  - Date of latest observation: Feb 2016
  - Date received: Feb 2016
  - Frequency: M
  - Reporting: M, with 1- to 2-month lag
  - Publication: A
- Stocks of Central Government and Central Government-Guaranteed Debt
  - Date of latest observation: Feb 2016
  - Date received: Feb 2016
  - Frequency: M
  - Reporting: M, with 2- to 3-month lag
  - Publication: A
- External Current Account Balance
  - Date of latest observation: Dec 2014
  - Date received: Feb 2015
  - Frequency: A
  - Reporting: A, with long lag
  - Publication: A
- Exports and Imports of Goods and Services
  - Date of latest observation: Feb 2016
  - Date received: Mar 2016
  - Frequency: A
  - Reporting: A
  - Publication: A
- GDP/GNP
  - Date of latest observation: Dec 2015
  - Date received: Mar 2016
  - Frequency: A
  - Reporting: Staff mission
  - Publication: A
- Gross External Debt
  - Date of latest observation: Feb 2016
  - Date received: Feb 2016
  - Frequency: M
  - Reporting: M, with 2- to 3-month lag
  - Publication: A
- International Investment Position
  - Date of latest observation: NA
  - Date received: NA
  - Frequency of Data: NA
  - Frequency of Reporting: NA
  - Frequency of publication: NA

### Recent debt developments and Debt Sustainability Analysis (DSA) — key findings
- General assessment
  - While prospects for a restoration of external debt sustainability have improved significantly, Grenada’s external debt remains in distress absent completion of the broader debt restructuring and clearance of arrears to all official creditors.
  - The comprehensive restructuring of Grenada’s public debt is nearing completion. Agreements have been implemented with creditors representing over two thirds of total debt under negotiation.
  - Combined agreements to date are expected to reduce public debt by about 15 percent of GDP by 2018 and will provide cash flow relief.
  - All budget expenditure arrears were cleared by end-2015 and three fourths of arrears to external creditors regularized.
  - Completion of debt restructuring and continued fiscal discipline needed to keep debt on a downward path and restore sustainability.
- Baseline scenario and assumptions
  - DSA incorporates debt restructuring agreements executed with external and domestic creditors as of 2016Q1 and agreement in principle with Paris Club bilateral creditors to reschedule outstanding Paris Club debts and arrears.
  - Baseline scenario does not assume any additional debt restructuring on other debt (external or domestic) under restructuring negotiations.
  - Short-run outlook improved: activity remains strong driven by tourism and construction; growth revised upward compared to previous forecast; medium-term growth assumed to return to potential of 2.7 percent (revised upward from 2.5 percent).
  - Price inflation stayed slightly negative as energy prices remain low while unemployment is high at 30 percent.
  - External position strengthening owing to strong tourism receipts, lower oil prices and robust private capital inflows.
- Progress and quantitative impacts
  - Restructuring agreements reached with creditors representing about 64 percent of total debt under restructuring negotiations valued at 34 percent of GDP.
  - As of end-2015, agreements executed with external creditors lowered debt-to-GDP by 8 percentage points; once agreement with private bondholders fully executed, a further 6 percentage point decline anticipated in 2017.
  - Agreements to restructure domestic debt expected to lower debt-to-GDP by 1.1 percentage points in 2016.
  - In total, agreements reached thus far expected to reduce debt-to-GDP ratio by about 15 percentage points by 2018.
  - Total reduction in NPV of public debt from flow restructuring agreements estimated at 3 percent of 2015 GDP (assuming 5 percent discount rate). A 12 percent discount rate would yield an estimated NPV reduction of 4.5 percent of 2015 GDP.
- Public debt trajectory
  - Public debt: 2013 peak 107.6 percent of GDP; 2014: 101.4 percent; 2015: 94.3 percent.
  - Public debt expected to decline to 73 percent of GDP by 2018.
  - About 15 percentage points of the total reduction of 35 percent of GDP from the peak in 2013 attributed to debt restructuring; fiscal consolidation and automatic debt dynamics expected to account for remainder.
  - Restoration toward the 55 percent of GDP ceiling required in Grenada’s Fiscal Responsibility Act (FRA) of 2015 depends on completion of broader debt restructuring and ongoing fiscal consolidation.
- External public debt
  - Public external debt fell from peak of 70 percent of GDP in 2013 to 64 percent in 2015; expected to decline to 41 percent of GDP by 2020.
  - Baseline scenario finds breaches to debt thresholds on present value of debt-to-GDP, debt service-to-revenue, and debt-to-exports ratios; breaches are relatively minor and temporary, suggesting external risk of debt distress is a borderline high-moderate risk case.
  - Probability approach shows similar but accentuated breaches, lending support to a high external risk rating for Grenada.
  - Despite progress, ongoing restructuring and existence of arrears to official creditors means Grenada’s external debt remains in distress.

### Restructuring specifics and creditor treatment (selected)
- Example creditor terms (excerpted)
  - Export-Import Bank of Taiwan Province of China: Coupon 7% p.a.; Tenor 15 years; Grace Period 3.5 years; Repayment: Equal semiannual installments; Principal Reduction: 50% at closing; Past Due and Accrued Interest: 50% reduction, remainder capitalized; Memo NPV Haircut (12% exit yield): 59%; NPV Haircut (5% exit yield): 39%.
  - US$ and EC$ 2025 bonds: Coupon 7% p.a.; Tenor 15 years; Grace Period 0.5 years; Repayment: Equal semiannual installments; Principal Reduction: 50% at closing and 50% at completion of ECF-supported program; Past Due and Accrued Interest: 100% capitalized; Memo NPV Haircut (12% exit yield): 54%; NPV Haircut (5% exit yield): 32%.
  - 2014/16 Serial Bond: Coupon 3% p.a.; Tenor 25 years; Grace Period 10 years; Repayment: Mortgage style semiannual installments; Principal Reduction: n.a.; Past Due and Accrued Interest: 100% capitalized; Memo NPV Haircut (12% exit yield): 73%; NPV Haircut (5% exit yield): 52%.
  - Treasury Bill: Coupon 3% p.a.; Tenor 7 years; Grace Period 2 years; Repayment: Equal semiannual installments; Principal Reduction: n.a.; Past Due and Accrued Interest: 100% capitalized; Memo NPV Haircut (12% exit yield): 31%; NPV Haircut (5% exit yield): 8%.
  - Contribution arrears: Coupon 3% p.a.; Tenor 5 years; Grace Period 0; Repayment: Equal quarterly installments; Principal Reduction: n.a.; Past Due and Accrued Interest: n.a.; Memo NPV Haircut (12% exit yield): 19%; NPV Haircut (5% exit yield): 4%.
  - National Insurance Scheme: Past due treatment and NPV haircut measures noted in table.
- Central Government Restructurable Debt (2015Q4, EC$493, or 21% of central government debt)
  - Composition:
    - T-Bills*: EC$180 million
    - Bonds: EC$95 million
    - Bank Loans: EC$13 million
    - Other: EC$53 million
    - Total: EC$342 million
  - Official Bilateral: EC$131 million
  - Commercial: EC$15 million
  - Other: EC$5 million
  - Total: EC$151 million
  - Note: *EC$36 million of outstanding Treasury bills are listed on the RGSM and are not eligible for restructuring.

*Prepared by the staffs of the International Monetary Fund (IMF) and the International Development Association (IDA), May 3, 2016.*

### 5.      The DSA includes a shock scenario to assess the potential impact of a natural disaster on

### 5.      The DSA includes a shock scenario to assess the potential impact of a natural disaster on

### Historical context and vulnerability
- Grenada is described as a "small Caribbean island economy" that is "highly vulnerable to natural disasters (i.e. hurricanes)."
- Over 1980-2014 average annual damages from natural disasters in Grenada are estimated at 6.9 percent of GDP.
- Two particularly damaging hurricanes in 2004 and 2005 (Hurricanes Ivan and Emily) with estimated damages of 148 and 31 percent of GDP, respectively, account for the majority of average annual storm damages over this time period.
- Other storms during this period include Hurricane Lenny (1999), Arthur (1990) and Allen (1980).

### Shock scenario design and fiscal calibration
- The shock scenario assumes a natural disaster occurs in 2016.
- The fiscal response is calibrated to be consistent with the hurricanes experienced in 2004/2005.
- The government is assumed to increase its expenditure by a total of 5 percent of GDP in the two years following the hurricane (2.5 percentage points in each 2017 and 2018) to cover reconstruction costs following a simulated disaster in 2016.
- The response is calibrated off of the estimated response to a moderate storm (see Acevedo, S. “Debt, Growth, and Natural Disasters: A Caribbean Trilogy” IMF Working Paper No. 14/125).

### Growth and revenue effects
- Based on the estimated relationship between growth and natural disasters in the Caribbean and the ECCU (Acevedo, 2014), growth is expected to decline by 0.7 percentage points in 2016, and 1.3 percentage points in 2017.
- Revenues are expected to decline in line with the decrease in nominal growth, resulting in an unchanged revenue to GDP ratio.

### Debt impact and projection
- The shock results in a debt path that is about 8 percent of GDP higher than in the baseline by 2020.
- The accompanying figure (projection) separates public sector debt by Domestic and External components for 2010–2020, showing the projection period starting in 2016 and extending to 2020.

*Source: IMF staff analysis in the DSA chapter provided.*

### 6.      Absent completion of all debt restructuring steps and the clearance of arrears to all official

### _cr16133 - 6.      Absent completion of all debt restructuring steps and the clearance of arrears to all official

### Summary finding and policy recommendations
- Absent completion of all debt restructuring steps and the clearance of arrears to all official creditors, Grenada’s external debt remains “in distress”.
- Completion to date:
  - Restructuring with private creditors holding the U.S. and EC dollar commercial bonds and with the NIS have put public and external debt on a firm downward trajectory toward sustainability.
  - Execution of the recent Paris Club agreement will further assist in the restoration of debt sustainability.
- Remaining priorities (policy recommendations emphasized in the text):
  - Complete the broader restructuring with remaining external and domestic creditors to restore debt sustainability.
  - Clear arrears to all official creditors.
  - Continue strengthening debt recording and monitoring, including finalizing the planned medium-term debt strategy.
  - Complement debt restructuring with fiscal consolidation.

### Public Debt Sustainability (key projected indicators from Table 1)
- Public sector debt 1/ (in percent of GDP)
  - 2013: 107.6
  - 2014: 101.4
  - 2015: 94.3
  - 2016: 89.2
  - 2017: 78.8
  - 2018: 73.2
  - 2019: 68.3
  - 2020: 63.6
  - 2021: 58.9
  - 2026: 53.5
  - 2036: 51.0
- Of which: foreign-currency denominated (in percent of GDP)
  - 2013: 70.2
  - 2014: 67.1
  - 2015: 64.1
  - 2016: 61.9
  - 2017: 53.5
  - 2018: 48.8
  - 2019: 45.0
  - 2020: 41.3
  - 2021: 37.7
  - 2026: 36.9
  - 2022-36 Average: 41.0
- Change in public sector debt (in percent of GDP)
  - 2013: 4.3
  - 2014: -6.2
  - 2015: -7.0
  - 2016: -5.1
  - 2017: -10.4
  - 2018: -5.6
  - 2019: -4.9
  - 2020: -4.7
  - 2021: -4.7
  - 2026: -0.2
  - 2036: -0.1
- Primary deficit (in percent of GDP)
  - 2013: 3.9
  - 2014: 1.1
  - 2015: -2.2
  - 2016: 1.9
  - 2017: 1.9
  - 2018: -3.2
  - 2019: -3.5
  - 2020: -3.5
  - 2021: -3.5
  - 2026: -3.5
  - 2036: -3.4
  - Additional values listed: 1.0, 0.2, 0.7 (as in table)
- Revenue and grants (in percent of GDP)
  - 2013: 20.9
  - 2014: 24.5
  - 2015: 25.6
  - 2016–2021 (annual entries): 24.6, 25.4, 25.5, 25.5, 25.5, 25.5
  - 2022–36 Average: 25.5
- Primary (noninterest) expenditure (in percent of GDP)
  - 2013: 24.8
  - 2014: 25.6
  - 2015: 23.3
  - 2016–2021 (annual entries): 21.4, 21.9, 22.0, 22.1, 22.0, 22.1
  - 2022–36 Average: 25.7
- Automatic debt dynamics (contribution, in percent of GDP)
  - 2013: -1.9
  - 2014: -4.6
  - 2015: -0.9
  - 2016: -0.8
  - 2017: -1.4
  - 2018: -1.6
  - 2019: -1.4
  - 2020: -1.2
  - 2021: -1.2
  - 2026: -1.2
  - 2036: -1.4
- Gross financing need 2/ (in percent of GDP)
  - 2013: 7.3
  - 2014: 22.3
  - 2015: 17.8
  - 2016: 19.1
  - 2017: 16.3
  - 2018: 16.4
  - 2019: 16.7
  - 2020: 16.6
  - 2021: 16.4
  - 2026: 16.0
  - 2036: 9.8
- PV of public sector debt (percent of GDP) — selected entries
  - 2016 onward (as listed): 80.1, 73.1, 64.4, 59.6, 55.3, 51.1, 47.1, 40.4, 39.5
- PV of public sector debt-to-revenue and grants ratio (in percent) — selected entries
  - Values shown in table: 313.5, 296.8, 253.2, 233.9, 216.4, 200.4, 184.5, 158.3, 154.8
- Debt service-to-revenue and grants ratio (in percent) 4/
  - Values listed: 15.9, 86.6, 78.5, 90.4, 77.9, 77.9, 78.9, 78.9, 78.9, 77.7, 59.0, 37.9

Notes on definitions (as in source):
- 1/ Coverage of public sector to be indicated (e.g., general government or nonfinancial public sector); net or gross debt.
- 2/ Gross financing need = primary deficit + debt service + stock of short-term debt at end of last period.
- 4/ Debt service = interest + amortization of medium and long-term debt.
- 6/ Debt relief includes savings from restructuring agreements reached with external and domestic creditors.

### External Debt Sustainability (key projected indicators from Table 2)
- External debt (nominal) (in percent of GDP)
  - 2013: 144.1
  - 2014: 144.2
  - 2015: 140.2
  - 2016: 136.2
  - 2017: 125.5
  - 2018: 119.4
  - 2019: 114.2
  - 2020: 109.4
  - 2021: 104.6
  - 2026: 98.3
  - 2036: 92.6
- Of which: public and publicly guaranteed (PPG)
  - Mirrors the public foreign-currency denominated series in Table 1: 70.2, 67.1, 64.1, 61.9, 53.5, 48.8, 45.0, 41.3, 37.7, 36.9, 41.0
- Change in external debt (in percent of GDP)
  - 2013: 3.2
  - 2014: 0.1
  - 2015: -4.0
  - 2016: -4.1
  - 2017: -10.6
  - 2018: -6.1
  - 2019: -5.2
  - 2020: -4.8
  - 2021: -4.8
  - 2026: -0.4
  - 2036: -0.5
- Net non-interest current account deficit (in percent of GDP)
  - 2013: 21.4
  - 2014: 13.4
  - 2015: 11.9
  - 2016: 19.9
  - 2017: 5.0
  - 2018: 9.8
  - 2019: 12.2
  - 2020: 12.9
  - 2021: 13.7
  - 2026: 14.1
  - 2036: 14.4
- Net FDI (negative = inflow, in percent of GDP)
  - 2013: -13.4
  - 2014: -4.4
  - 2015: -6.9
  - 2016: -8.9
  - 2017: 4.7
  - 2018: -6.4
  - 2019: -8.1
  - 2020: -8.1
  - 2021: -8.7
  - 2026 and beyond: -8.7 (persistent)
- PV of external debt (in percent of GDP) — selected entries
  - 2016 onward: 126.0, 120.0, 111.1, 105.7, 101.2, 96.9, 92.8, 85.2, 81.0
- PV of PPG external debt (in percent of GDP) — selected entries
  - 2016 onward: 49.9, 45.8, 39.1, 35.2, 31.9, 28.8, 25.9, 23.8, 29.4
- PV of external debt (in percent of exports)
  - Selected entries: 436.1, 417.1, 374.1, 354.9, 337.6, 322.2, 307.4, 274.9, 244.2
- Debt service-to-exports ratio (in percent)
  - 2013: 6.5
  - 2014: 12.8
  - 2015: 16.2
  - 2016: 19.5
  - 2017: 16.9
  - 2018: 15.8
  - 2019: 14.9
  - 2020: 14.1
  - 2021: 13.1
  - 2026: 8.6
  - 2036: 6.9
- Total gross financing need (Billions of U.S. dollars)
  - 2013: 82.4
  - 2014: 116.3
  - 2015: 92.6
  - 2016: 89.6
  - 2017: 96.0
  - 2018: 105.0
  - 2019: 110.5
  - 2020: 118.4
  - 2021: 124.2
  - 2026: 140.3
  - 2036: 194.9

### Sensitivity analysis and stress tests (Tables 3 and 4; Figures 1–3)
- Baseline and projected stress outcomes (selected indicators, Table 3 & 4 highlights):
  - PV of debt-to-GDP ratio (percent)
    - Baseline: 2016: 46; 2017: 39; 2018: 35; 2019: 32; 2020: 29; 2021: 26; 2026: 24; 2036: 29
    - Scenario A1 (historical averages): 2016: 46; 2017: 45; 2018: 47; 2019: 49; 2020: 51; 2021: 53; 2026: 71; 2036: 100
    - Scenario A3 (Natural Disaster): 2016: 46; 2017: 43; 2018: 39; 2019: 36; 2020: 33; 2021: 30; 2026: 27; 2036: 30
  - PV of debt-to-exports ratio (percent)
    - Baseline: 2016: 159; 2017: 132; 2018: 118; 2019: 106; 2020: 96; 2021: 86; 2026: 77; 2036: 89
    - Scenario A1: 2016: 159; 2017: 152; 2018: 158; 2019: 164; 2020: 169; 2021: 174; 2026: 228; 2036: 300
  - PV of debt-to-revenue ratio (percent)
    - Baseline: 2016: 212; 2017: 175; 2018: 157; 2019: 142; 2020: 128; 2021: 115; 2026: 106; 2036: 131
    - Scenario A1: 2016: 212; 2017: 202; 2018: 210; 2019: 218; 2020: 227; 2021: 234; 2026: 315; 2036: 444
  - Debt service-to-exports ratio (percent)
    - Baseline: 2016: 19; 2017: 16; 2018: 15; 2019: 14; 2020: 13; 2021: 12; 2026: 8; 2036: 7
    - Scenario A1: 2016: 19; 2017: 17; 2018: 17; 2019: 17; 2020: 16; 2021: 16; 2026: 18; 2036: 27
  - Debt service-to-revenue ratio (percent)
    - Baseline: 2016: 25; 2017: 22; 2018: 20; 2019: 19; 2020: 18; 2021: 17; 2026: 11; 2036: 10
    - Scenario A1: 2016: 25; 2017: 22; 2018: 22; 2019: 22; 2020: 22; 2021: 22; 2026: 24; 2036: 40
- Bound tests and shocks summarized:
  - B1 (Real GDP growth at historical average minus one standard deviation in 2017–2018), B2 (Export value growth shock), B3 (US dollar GDP deflator shock), B4 (Net non-debt creating flows shock), B5 (combination of B1–B4 using one-half standard deviation shocks), B6 (One-time 30 percent nominal depreciation in 2017).
  - One-time 30 percent nominal depreciation (B6) shows large adverse effects in some indicators (e.g., PV of debt-to-GDP and PV-to-exports), with scenario-specific magnitudes reflected in Tables 3 and 4.
- Figure summaries (as labeled in source):
  - Figure 1: Indicators of public and publicly guaranteed external debt under alternative scenarios, 2016–36 — shows that the most extreme stress tests typically correspond to one-time depreciation and export shocks for different indicators.
  - Figure 2: Probability of debt distress under alternative scenarios, 2016–36 — indicates baseline, historical scenario, and most extreme shock (one-time depreciation) probabilities across time.
  - Figure 3: Indicators of public and publicly guaranteed external debt under alternative scenarios, 2016–36 — shows PV of Debt-to-GDP, PV of Debt-to-Revenue, and Debt Service-to-Revenue under scenarios including Natural Disaster and Fix Primary Balance.

### Key macroeconomic and fiscal assumptions (selected)
- Real GDP growth (in percent): 2.4, 5.7, 4.6, 0.7, 4.1, 3.0, 2.7, 2.7, 2.7, 2.7, 2.7, 2.7, 2.7, 2.7
- Average nominal interest rate on forex debt (in percent): 2.6, 3.0, 3.7, 2.5, 0.7, 3.4, 3.2, 2.7, 2.6, 2.5, 2.4, 2.8, 2.0, 1.8, 1.9 (as listed)
- Inflation rate (GDP deflator, in percent): 2.9, 2.4, 0.0, 1.4, 1.6, 1.5, 2.4, 2.6, 2.5, 2.3, 2.3, 2.3, 2.3, 2.3
- Grant element of new external borrowing (in percent): entries include 32.2, 34.8, 34.5, 33.2, 32.5, 29.7, 32.8, 29.7, 29.7 (as in tables)
- Government revenues (excluding grants, in percent of GDP): 19.5, 20.4, 22.2, 21.5, 22.4, 22.4, 22.5, 22.5, 22.5, 22.5, 22.4, 22.5

### Memoranda and auxiliary items (selected)
- Nominal GDP (Billions of US dollars): 84.2, 91.1, 95.3, 99.7, 104.8, 110.4, 116.2, 122.1, 128.3, 136.4, 164.6, 272.16, 8 (table shows a series of values under memorandum items)
- Gross workers' remittances (Billions of US dollars): 30.5, 31.2, 31.8, 32.7, 34.0, 35.5, 40.0, 44.7, 49.5, 60.9, 92.3 (as listed)
- Memorandum: Grant element assumed on residual financing = 28 (applies to stress scenarios except A2).

*Sources: Country authorities; and staff estimates and projections.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr16133.pdf_