## _cr16389 ## Source details **Canonical URL:** [_cr16389](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr16389.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr16389.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr16389.pdf.json) --- ### Executive Summary - Extended Credit Facility Arrangement: - Arrangement approved on June 26, 2014; fourth review completed on May 18, 2016. - Disbursements to Grenada under the arrangement: SDR 10.04 million (about US$14.3 million). - SDR 2 million (about US$2.9 million) to be made available upon Executive Board completion of the Fifth Review. - Debt restructuring: - Comprehensive public debt restructuring nearing completion. - Agreements implementing the 2015 Paris Club Agreed Minute signed with two creditors. - Agreement reached with a domestic bank holding T-bills and government-guaranteed debt. - Program performance and structural reform progress: - All quantitative performance criteria for the Fifth Review were met. - Delays in some structural benchmarks; corrective actions taken. - Reforms advanced in tax administration, public finance management, and business environment. - Selected recent indicators: - Real GDP growth: 6.2 percent in 2015; projected 3.1 percent in 2016. - Unemployment: total 29 percent in 2015; youth 41.7 percent in 2015. - Headline CPI: 3.0 percent (y/y) in June 2016; annual headline inflation projected at 2.0 percent for 2016. - Core CPI: rose by 2.6 percent in 2015 and projected to increase by about 6.8 percent in 2016. - Current account deficit: expected 14.5 percent of GDP in 2016. - Imputed international reserves: US$194 million (5.3 months of imports). - Lending rates: fell by 40 basis points (y/y) in June 2016. - Total credit to private sector: grew 0.4 percent y/y in June 2016. - Financial sector soundness: - NPLs declined from 10 percent at end-2015 to 7.9 percent in June 2016. - Loan loss provisioning increased from 44 percent to 49 percent. - Capital adequacy at end-June 2016: 13 percent of risk weighted assets (regulatory requirement 8 percent). - Credit union NPLs: about 5 percent at end-June 2016; credit union capital positions around 12 percent of assets (regulatory minimum 10 percent). - Quantitative program targets (end-June 2016, Fifth Review) — status highlights: - Cumulative floor on central govt. primary balance (EC$ mln): Program adjusted 39; Actual 86; Difference 38; Status Met. - Cumulative ceiling on central govt. primary spending (EC$ mln): Program adjusted 268; Actual 284; Difference -5; Status Met. - Floor on social spending by central government (EC$ mln): Program adjusted 7.0; Actual 7.0; Difference 0.0; Status Met. - Wage bill target (excluding retroactive payments) (EC$ mln): Program adjusted 110; Actual 105; Difference -5; Status Met (monitoring). - Public employment (excluding IMANI) (number): Program adjusted 7000; Actual 6810; Difference -190; Status Met (monitoring). - Structural benchmarks (selected): - Public sector wage bill management Plan: Approved by Cabinet in November; full Strategy due by end-March 2017. - GIDC Act: Parliamentary approval of amendments obtained November 16 (prior action). - Revised Labor Code: Approved by Parliament on November 16 (prior action). - Citizenship-by-Investment statistics for three quarters of 2016 published (structural benchmark met). - SEED MIS update completed; SEED spending met EC$7 million end-June indicative target. *Source: IMF staff report — EXECUTIVE SUMMARY (Grenada), November 29, 2016.* ### Medium-term outlook and near-term risks - Growth and inflation: - Economic growth expected to average 2.7 percent annually over the medium term (at potential). - Higher international oil prices expected to push CPI inflation to 2.9 percent in 2017. - Public debt projections: - Debt relief already provided: 8.8 percent of 2016 GDP; additional 5.6 percent to be received in 2017 conditional on program completion. - Staff baseline projection: public debt-to-GDP ratio projected to fall to 57.5 percent by 2020 (baseline) ― 6 percentage points lower than at the Fourth Review. - Full restructuring scenario: debt-to-GDP ratio of 55.2 percent by 2020 (assumes remaining debts restructured on comparable terms). - Public debt remains substantially above the regional average and regional 60 percent-of-GDP target. - Key downside risks: - Further depreciation of the Pound or slower U.K. growth related to “Brexit” (UK accounts for one-fifth of arrivals). - Zika infections could deter tourism. - Fiscal risks from higher-than-expected public sector wage increases and delays in wage-bill reforms. - Fiscal performance: - Primary surplus reached 4 percent of GDP at end-August 2016. - Target of 3.5 percent of GDP for final year of program achieved ahead of schedule. - Underlying fiscal adjustment since 2014 increased to 8.5 percent of GDP. ### Fiscal policy, 2017 budget requirements, and contingency - 2017 budget requirements and structural benchmarks (parliamentary approval required by December 31, 2016): - Target a primary surplus of at least 3.5 percent of GDP. - Cap wage bill spending at 8.8 percent of GDP (Cabinet approved November 15; prior action); FRA ceiling is 9 percent of GDP. - Project realistic CBI revenues for 2017 at EC$32.5 million. - NTF capital grants transferred to the budget in 2016 projected at EC$22 million (compared with EC$100 million envisaged previously). - Contingency: - Government will allocate 2 percent of its revenues in the 2017 budget for contingency needs (consistent with the PFMA). ### Asset-liability management and interest burden - Government deposits: EC$137 million at end-August 2016 (roughly half earmarked for externally funded capital projects and debt service in November). - Staff recommendation: consider using unencumbered deposits and additional savings to accelerate debt reduction given roll-over of short-term debt at interest yields of 5-6 percent. - Projected interest burden: 2.8 percent of GDP in 2017. ### Public finance management and institutional reforms - PDMA and regulations entered into force in August. - Medium-Term Debt Strategy for 2016-19 approved by Cabinet in June. - Reorganization of DMU underway; Public Debt Coordinating Committee established. - Proposed structural benchmark: quarterly debt statistics bulletin from end-December 2016. - New Chart of Accounts (CoA) conversion completed in August; full implementation for 2017 budget. - Tax and customs administration reforms advanced; FAD peripatetic advisor installed in June. ### Structural reforms to support competitiveness and growth (selected) - Business environment: - Online title search facility for deeds and land registry introduced in August 2016. - Plans for e-business systems including online business register; anticipated improvements to Doing Business ranking in 2018. - Labor market: - Assistance sought for improved Labor Force Survey; quarterly surveys from 2017 proposed. - Staff recommendations: review education curriculums, broaden technical and vocational training, improve apprenticeships and job search methods. - Energy: - Electricity Supply Act and Public Utilities Regulatory Commission Act came into force in August. - Legal framework to open energy sector, promote renewables and introduce independent national regulator. - Agriculture: - National strategy approved in May to reduce vulnerability to climate change and support sustainable growth. ### Financial sector issues and reforms - Correspondent banking relationships: - No direct loss of CBRs recorded; one bank voluntarily terminated a CBR. - Banks securing additional CBRs, increasing scrutiny of higher-risk customers, curtailing some CBI-related customers and money transfer operator business. - Authorities strengthening due diligence of CBI program, enforcing AML/CFT, and implementing mechanisms for FATCA and OECD CRS reporting. - Bank stability and resolution: - Balance sheet repair continued; recent asset quality review found no shortfalls. - Indigenous bank considering capital augmentation including a public offering. - Eastern Caribbean Asset Management Corporation commitment and ECCB collateral appraisal/valuation regulations in draft. - Bankruptcy and Insolvency Act effective in September expected to help curb NPLs. - Non-bank oversight: - CARTAC recommendations progressed; recruitment for GARFIN; work on crisis management plan and strengthening legal/regulatory frameworks for credit unions, insurance and pensions. ### PRSP (GPRS) implementation and social priorities - GPRS pillars: Building Resilience; Developing Competitiveness with Equity; Reducing Vulnerability; Strengthening Governance and Security. - Implementation mixed: legal and institutional frameworks advanced; social spending broadly in line with GPRS; SEED targeting and spending improved. - Capacity and resource constraints partially addressed with development partner support. ### Quantitative projections and key indicators (selected exact values) - Real GDP (annual percent change): 2012: -1.2; 2013: 2.4; 2015: 7.3; 2016 (4th review): 6.2; projections 2017–21: 3.0, 3.1, 2.7, 2.7, 2.7. - Public debt (incl. guaranteed) (percent of GDP): 2012: 103.3; 2013: 108.1; 2015: 101.8; 2016: 91.7; projections 2017–21: 89.2, 84.3, 72.9, 67.2, 62.2, 57.5, 54.2. - Net imputed international reserves (months of imports): 2012: 2.9; 2013: 4.1; 2015: 4.6; 2016: 5.4; projections 2017–21: 5.4, 5.0, 4.7, 4.6, 4.6, 4.5, 4.4. - Central government revenue (percent of GDP): 2012: 20.8; 2013: 20.9; 2015: 24.5; 2016: 24.8; projections 2017–21: 24.6, 25.1, 24.6, 24.5, 24.3, 24.2, 24.1. - Primary balance (percent of GDP): 2012: -2.5; 2013: -3.9; 2015: -1.1; 2016: 2.2; projections 2017–21: 3.1, 4.8, 4.1, 4.0, 3.8, 3.5, 2.3. ### Debt and arrears developments (selected exact values) - Public debt stock at end-June 2016: US$868.2 million, or 84.3 percent of projected 2016 GDP (compared to 91.7 percent of GDP at end-2015). - Membership contribution arrears to international organizations: reduced from US$22.8 million at end-2015 to US$15.1 million in June 2016. - Exchange of 2025 bond completed; first payments on newly issued bonds executed in May and November. - No new non-concessional external debt contracted and no new external arrears accumulated (outside of restructuring negotiations). ### Financing assurances and external borrowing program (presented figures, US million) - Sources of debt financing: - 37.0; 24.6; 13.0; 10.0. - Concessional debt, of which: - 10.0; 3.9; 0.0; 0.0. - Non-concessional debt (NCD), of which / Semi-concessional debt: - 27.0; 20.7; 13.0; 10.0. - Use of debt financing: - 37.0; 24.6; 13.0; 10.0. - Project financing (US million): - 17.0; 11.3; 13.0; 10.0. - Budget financing (US million): - 20.0; 13.3; 0.0; 0.0. ### Safeguards and capacity to repay - ECCB safeguards assessment: governance framework provides independent oversight; transparency and external audit mechanism sound. - Debt service to the Fund declined as percent of GDP and exports, reflecting improved external position and growth outlook. - Disbursement profile unchanged; progress in debt restructuring expected to strengthen capacity to repay the Fund. ### Staff appraisal — policy recommendations (selected) - Approve 2017 budget in line with new fiscal rule to meet debt reduction goals. - Maintain spending discipline; prudent management of CBI inflows per NTF rules; strengthen revenue administration and compliance. - Operationalize new legislative framework and follow through on implementation. - Accelerate regularization of all arrears and remaining debts; conclude by end of ECF-supported program. - Use government deposits in excess of prudent reserves to reduce domestic short-term debt. - Finalize public wage bill management strategy by Sixth Review and implement structural reforms to boost growth and employment. ### Staff support - Staff supports completion of Fifth Review under the ECF-arrangement, modification of performance criteria request, and the financing assurances review, given adequate safeguards and continued adjustment efforts. ### Key program disbursement schedule (SDR, percent of quota) - Total available: SDR 14.04; 85.610 percent of quota. - Disbursement installments (selected): - June 26, 2014: SDR 2.040; 12.439 percent of quota. - September 30, 2016: SDR 2.000; 12.195 percent of quota (completion of fifth review). - March 31, 2017: SDR 2.000; 12.195 percent of quota (completion of sixth review). - Note: Quota increased from SDR 11.7 million to SDR 16.4 million, effective March 23, 2016. ### Reporting and program monitoring (selected) - Ministry of Finance to supply quarterly CBI-related statistics beginning July 31, 2015, including numbers of applications received/approved/rejected, numbers of new citizens, total NTF revenues, CBI application fees, transfers of NTF funds to central government, and central government spending financed by CBI revenues. - Fiscal reporting: central government budget and outturn — Monthly — 30 days after the end of month. - Debt reporting (DMU): external and domestic debt and guaranteed debt (by creditor) — Monthly — 30 days after the end of month. - GARFIN to supply consolidated balance sheets for credit unions and insurance companies — Quarterly — 30 days after the end of quarter. ### Annexes and supplementary material (high-level) - Annex II: Strengthening Wage Bill Management in Grenada (see separate section below). - Annex V: Risk Assessment Matrix (see separate section below). - Debt sustainability analysis, tables and stress tests summarized in staff report. *Source: IMF staff report chapter and annexes (content unit: _cr16389).* ### Annex II — Strengthening Wage Bill Management in Grenada (summary) - Context and recent actions: - Cabinet approved a public wage bill reform plan in November to be implemented over 2016-2019. - FAD technical assistance provided in July–September 2016; short-term measures reduced wage bill from 10.7 percent of GDP in 2013 to 8.1 percent in 2015. - Attrition policy: 3 replacements for every 10 departures; nominal wage freeze and step increment deferral contributed about one fourth of the decline. - Controls set to expire end-2016; not sustainable long term. - Structural problems identified: - Automatic step increments cost on average 2.4 percent increase in wage bill annually. - Retro-active obligations of step increments costing $7.5 million (0.3 percent of GDP) scheduled to be paid in Q1 2017. - Outdated pay grid, misallocation across ministries, varying contractual arrangements, limited performance appraisal application, delayed wage negotiations. - Consequences: - Challenges recruiting, training, motivating workers; inequitable remuneration affects productivity. - Recommended reforms (options and measures): - Data-driven negotiated wage increases within FRA parameters; no retro-active increases. - Institutionalize DPA hiring controls; move toward “right sizing.” - Establish IT-based human resource registry by March 31, 2017. - Replace attrition policy with global workforce ceiling pending functional review. - Reform increments: options include lengthen step duration to three years; link increments to performance; link increments to macro-variables; or eliminate increments. - Revamp performance appraisal and link to compensation; conduct job evaluation and update pay-grid periodically. - Strengthen payroll system and conduct functional review with HR audit. - Timeline: - Full Strategy to be finalized by March 2017 after consultations. - Government plans to implement reforms by December 2018 to be in place in 2019. - Human resource registry to be functioning by March 31, 2017. *Source: Annex II — IMF staff report excerpt (content as provided).* ### Annex V — Risk Assessment Matrix (selected risks and policy responses) - Structurally weak growth in advanced economies: - Likelihood: High; Time horizon: Medium Term; Expected impact: High. - Policy response: Carry through programmed fiscal adjustment and structural reforms. - Zika Virus: - Likelihood: High; Time horizon: Near Term; Expected impact: High. - Policy response: Raise public awareness; proactive prevention (e.g., mosquito fogging). - Protracted post-Brexit uncertainty: - Likelihood: Medium; Time horizon: Near to Medium Term; Expected impact: Medium. - Policy response: Build resilience via fiscal adjustment and structural reforms; consider regional approach. - Reduced correspondent banking services: - Likelihood: High; Time horizon: Short Term; Expected impact: Medium. - Policy response: Strengthen AML/CFT and financial supervision; regional strategy to strengthen bank balance sheets. - Higher-than-expected public sector wage increases and delays in wage reforms: - Likelihood: High; Time horizon: Near to Medium Term; Expected impact: Medium. - Policy response: Agree reform strategy per structural benchmark; agree wage contracts prior to budget completion. - Natural disasters (hurricanes): - Likelihood: Medium; Time horizon: Medium Term; Expected impact: High. - Policy response: Save CBI receipts to NTF per rules; increase disaster insurance coverage; adhere to FRA; donor-supported resilience building. *Source: Annex V — IMF staff report (content as provided).* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Extended Credit Facility Arrangement and Disbursements - The arrangement was approved on June 26, 2014 and the fourth review completed on May 18, 2016. - Disbursements equivalent to SDR 10.04 million (about US$14.3 million) have been made to Grenada so far under the arrangement. - The equivalent of SDR 2 million (about US$2.9 million) will be made available upon Executive Board completion of the Fifth Review. ### Debt Restructuring - Grenada’s comprehensive public debt restructuring is nearing completion. - Agreements implementing the 2015 Paris Club Agreed Minute were signed with two creditors. - Authorities have reached agreement with a domestic bank holding T-bills and government-guaranteed debt. ### Program Performance and Structural Reform Progress - Overall program implementation remains solid; all quantitative performance criteria for the Fifth Review were met. - There have been delays with some structural benchmarks, but corrective actions have been taken. - Authorities advanced reforms to strengthen tax administration, improve public finance management, and strengthen the business environment. ### Fifth Review Focus and Structural Benchmarks - Discussions focused on completing the programmed fiscal consolidation for 2016 and developing a 2017 budget consistent with the Fiscal Responsibility Act ― a proposed structural benchmark. - Staff refined the structural benchmark on public wage bill management to strengthen commitment while allowing time to draw on technical assistance received in September. - Another proposed structural benchmark seeks to enhance debt management. ### Perspective and Policy Imperatives - Under the ECF-supported program, fiscal adjustment, debt restructuring and reduction, and legislative reforms have been noteworthy. - Public debt and unemployment remain high; decisions in 2017 will test laws and regulations for fiscal sustainability. - Commitment to reform and medium term goals remain key to safeguarding progress and securing lasting prosperity. ### Recent Developments (Selected Indicators and Trends) - Real GDP expanded by 6.2 percent in 2015; growth is projected to slow to 3.1 percent in 2016. - Total unemployment was 29 percent in 2015; youth unemployment was 41.7 percent. - Headline CPI increased to 3.0 percent (y/y) in June 2016. Core CPI rose by 2.6 percent in 2015 and is projected to increase by about 6.8 percent in 2016. Annual headline inflation is projected at 2.0 percent for 2016. - The current account deficit is expected to narrow slightly to 14.5 percent of GDP in 2016. - Imputed international reserves increased to US$194 million (5.3 months of imports). - Real exchange rate: depreciated by 0.8 percent relative to other tourism competitors in 2015, appreciated by 4 percent relative to main tourism customers. - Lending rates fell by 40 basis points (y/y) in June 2016. - Lending by credit unions rose by 4.6 percent in the first half of 2016; their market share of total credit increased to almost 23 percent. - Total credit to the private sector grew 0.4 percent y/y in June 2016 (first increase in over three years). ### Financial Sector Soundness - Commercial bank profitability improved after two years in the red, supported by lower interest costs, increased asset sales and investment income. - Non-performing loans (NPLs) declined from 10 percent of total loans at end-2015 to 7.9 percent in June 2016. - Loan loss provisioning increased from 44 percent to 49 percent over the same period. - Capital adequacy at end-June 2016 was 13 percent of risk weighted assets (regulatory requirement 8 percent). - Credit union NPLs declined to about 5 percent at end-June 2016; credit union capital positions around 12 percent of assets (regulatory minimum 10 percent). ### Performance Under the Program — Quantitative Targets (End-June 2016, Fifth Review) - Cumulative floor on central govt. primary balance (EC$ mln): Program adjusted 39; Actual 86; Difference 38; Status Met. - Cumulative ceiling on central govt. primary spending (EC$ mln): Program adjusted 268; Actual 284; Difference -5; Status Met. - Ceiling on stock of central govt. budget expenditure arrears (EC$ mln): Program adjusted 0; Actual 0; Difference 0; Status Met. - Ceiling on accumulation of external debt arrears (continuous): Program adjusted 0; Actual 0; Difference 0; Status Met. - Ceiling on contracting of non-concessional external borrowing by the central govt. (continuous): Program adjusted 0; Actual 0; Difference 0; Status Met. - Cumulative ceiling on net change in central government and central government guaranteed debt (EC$ mln): Program adjusted 13; Actual -85; Difference -78; Status Met (indicative target). - Floor on social spending by central government (EC$ mln): Program adjusted 7.0; Actual 7.0; Difference 0.0; Status Met. - Wage bill target (excluding retroactive payments): Program adjusted 110; Actual 105; Difference -5; Status Met (monitoring). - Public employment (excluding workers under the IMANI program): Program adjusted 7000; Actual 6810; Difference -190; Status Met (monitoring). ### Structural Benchmarks (Progress and Outcomes) - Public sector wage bill management reform Plan: Approved by Cabinet in November. The original full strategy (due end-September) was delayed; full Strategy now due by end-March 2017 and will establish guidelines for wage setting and compensation processes and for improving public goods and services in 2017-2019. Technical assistance from FAD was received in September. - Grenada Industrial Development Corporation (GIDC) Act: New Act prepared by late summer; amendments agreed with staff in September to align with fiscal legislation (FRA, PFMA, PDMA) and tax incentive regime. Parliamentary approval of amendments obtained November 16 (prior action for completing the Review). Staff notes the Act’s mandate may be overly broad and urges consideration of future amendment. - Revised Labor Code: Approved by Parliament on November 16 (prior action). Revisions clarify provisions regarding workers’ rights and industrial relations to set the stage for labor market programs. - Citizenship-by-Investment (CBI) statistics for the three quarters of 2016 were published, meeting the associated structural benchmark. Budgetary receipts from applications approved in the first half of 2016 were used as general financing as agreed under the program. - SEED Management Information System (MIS) update completed; SEED spending met the EC$7 million end-June indicative target. In August 2016 authorities began phasing-out persons no longer eligible while accepting new applicants. ### Debt and Arrears Developments - Exchange of the 2025 bond successfully completed; first payments on newly issued bonds executed in May and November. - Membership contribution arrears to international organizations were reduced from US$22.8 million at end-2015 to US$15.1 million in June 2016. - At end-June 2016, public debt stock stood at US$868.2 million, or 84.3 percent of projected 2016 GDP (compared to 91.7 percent of GDP at end-2015), below the indicative target ceiling on net change in public debt. - No new non-concessional external debt contracted and no new external arrears accumulated (outside of debt under restructuring negotiations). *Source: IMF staff report — EXECUTIVE SUMMARY (Grenada), November 29, 2016.* ### 11. The outlook for the medium term is moderately favorable, but downside risks have ### 11. The outlook for the medium term is moderately favorable, but downside risks have increased slightly ### Medium-term outlook and near-term risks - Economic growth should continue to average 2.7 percent annually over the medium term, at potential. - Higher international oil prices are expected to push CPI inflation to 2.9 percent in 2017. - Key downside risks identified: - Further depreciation of the Pound or slower growth in the U.K. related to “Brexit”, with British visitors accounting for one-fifth of arrivals. - A recent jump in Zika infections could deter tourism, though so far there has been no material impact. - Fiscal risks from higher-than-expected public sector wage increases and delays in bill reforms. - Other risks are outlined in Annex V (as referenced in the source). ### Public debt developments and debt sustainability - Restructuring agreements reached so far provided debt relief amounting to 8.8 percent of 2016 GDP, with an additional 5.6 percent to be received in 2017, conditional on successful completion of the program. - Staff projection: public debt-to-GDP ratio is now projected to fall to 57.5 percent by 2020 in the baseline scenario―6 percentage points lower than at the Fourth Review. - Full restructuring scenario (assumes remaining debts restructured on terms comparable to those received so far) leads to a debt-to-GDP ratio of 55.2 percent by 2020. - Achieving these outcomes is contingent on meeting the program’s fiscal adjustment targets and complying with the new FRA. - Remaining challenges: - Public debt remains substantially above the regional average and the regional 60 percent-of-GDP target. - Tax policy and administration reforms have raised revenues by over 3 percent of GDP since 2013, but revenue levels remain lower than in most peers and the tax base can be broadened further. - Policy reversals would risk returning debt to an unsustainable path. ### Fiscal performance, targets, and policy actions - Fiscal results: - Primary surplus reached 4 percent of GDP at end-August 2016. - The target of 3.5 percent of GDP for the last year of the program was achieved well ahead of schedule. - Underlying fiscal adjustment since 2014 increased to 8.5 percent of GDP. - 2017 budget requirements and structural benchmarks (parliamentary approval required by December 31, 2016): - Target a primary surplus of at least 3.5 percent of GDP. - Cap wage bill spending at 8.8 percent of GDP (lower than the FRA ceiling of 9 percent of GDP); Cabinet approved the ceiling on November 15 (prior action). - Project realistic CBI revenues for 2017 at EC$32.5 million. - NTF capital grants transferred to the budget in 2016 are projected at EC$22 million (compared with EC$100 million envisaged previously). - Contingency and reserves: - Government will allocate 2 percent of its revenues in the 2017 budget for contingency needs (consistent with the PFMA). ### Asset-liability management - Government deposits reached EC$137 million at end-August 2016 (roughly half earmarked for externally funded capital projects, and debt service in November). - Staff recommendation: consider using some unencumbered deposits and additional savings to accelerate debt reduction given that Grenada rolls over short-term debt at interest yields of 5-6 percent. - Projected interest burden: 2.8 percent of GDP in 2017. ### Fiscal structural reforms and fiscal institutions - Wage bill management (top fiscal reform priority): - A comprehensive plan was approved by Cabinet on November 16 (prior action) outlining short-term actions and an agenda to implement a full reform by end-2018. - Institutional measures taken: (i) institutionalized role of the Department of Public Administration (DPA) to control hiring and monitoring of public service size; (ii) prepared a human resource registry based on existing systems data (prior actions). - Human resource registry expected to be completed and functional by March 31, 2017 (proposed structural benchmark). - Completion of the full Wage Bill Management Strategy targeted by March 31, 2017 (proposed structural benchmark). - Public debt management: - The PDMA and its regulations entered into force in August. - The Medium-Term Debt Strategy for 2016-19 was approved by Cabinet in June. - Reorganization of the debt management unit (DMU) underway; Public Debt Coordinating Committee established. - A quarterly debt statistics bulletin publication is a proposed structural benchmark from end-December 2016. - Tax and customs administration: - Legislative reforms completed; priorities include improved collaboration on taxpayer information, reprioritized audit plans, stronger risk management at the Customs and Excise Department (CED), and operational changes to support core functions. - FAD peripatetic advisor installed in June to help develop an action plan. - Public finance management: - Conversion to the new Chart of Accounts (CoA) completed in August; full implementation for the 2017 budget. - For transparency, expenditures for the remainder of 2016 will continue to be recorded using the old CoA to enable comparison with 2016 budget intentions. - Continued implementation of strategic plans to strengthen SOEs and SBs financial positions (MEFP ¶11). - Compliance with new fiscal framework instruments (FRA, PFMA, PDMA) requires determined follow through; Fund staff and CARTAC will continue support. ### Structural reforms to support competitiveness and growth - Business environment: - An online title search facility for deeds and land registry introduced in August 2016 to reduce time and costs of land registration. - Plans to establish e-business systems, including an online business register, to automate operations and expedite service delivery. - Authorities anticipate these reforms will improve Grenada’s Doing Business ranking in 2018 (were not completed in time to affect the 2017 ranking). - Labor market and unemployment: - Assistance sought from World Bank and Statistics Canada to improve annual Labor Force Survey and conduct quarterly surveys from 2017. - Additional assistance sought from ILO for a regional labor market information system. - Staff recommendations from May 2016 study: review education curriculums, broaden technical and vocational training, improve access and design of apprenticeships with private sector, and strengthen job search methods and tools. - Energy sector: - Electricity Supply Act and Public Utilities Regulatory Commission Act (PURCA) came into force in August. - Legal framework expected to open the energy sector to competition, promote transition to renewable energy, and introduce an independent national regulator to review tariffs and examine incentives for renewable energy (MEFP ¶18). - Agriculture: - Cabinet approved a national strategy in May to reduce the agriculture sector’s vulnerability to climate change and support sustainable growth (MEFP ¶19). - MNIB expanding value added in agro processing; scope remains to integrate agriculture production into the tourism supply chain by improving quality, reliability, and marketing. ### Financial sector issues and reforms - Correspondent banking relationships (CBRs): - No direct loss of CBRs recorded, but higher compliance demands and fee increases increased costs; one bank voluntarily terminated a CBR. - Banks are securing additional CBRs as contingency, subjecting higher-risk customers to greater scrutiny, reducing exposure to some CBI-related customers, and curtailing/discontinuing business with money transfer operators. - Disruptions to money transfer operators have important implications in remote, low-income parts of the country. - Authorities are strengthening due diligence of the CBI program, enforcing AML/CFT measures, and enhancing international tax cooperation; plans underway to implement mechanisms for automatic exchange of information to meet FATCA and OECD CRS reporting requirements. - Bank stability and resolution: - Banks continued repairing balance sheets; recent asset quality review found no shortfalls. - Indigenous bank is considering options to augment capital, including a public offering. - Indigenous banks in Grenada and St. Lucia signed an MOU for strategic functional collaboration. - Authorities committed to operationalizing the Eastern Caribbean Asset Management Corporation and new ECCB regulations on collateral appraisal and valuation (draft form circulating). - Bankruptcy and Insolvency Act became effective in September and is expected to help curb NPLs (MEFP ¶16). - Non-bank financial sector oversight: - CARTAC recommendations progressed with recruitment of additional staff for GARFIN. - Work continuing on a national crisis management plan and strengthening legal/regulatory/supervisory framework for credit unions, insurance sector, and pension plans (MEFP ¶22-25). ### PRSP (GPRS) implementation and social priorities - The Growth and Poverty Reduction Strategy (GPRS) focuses on four pillars: Building Resilience; Developing Competitiveness with Equity; Reducing Vulnerability; Strengthening Governance and Security. - Implementation results are mixed: - Legal and institutional framework establishment has been a strategic focus. - Social spending broadly in line with GPRS; targeting and spending of the SEED program have improved. - Scope remains to improve effectiveness of programs aimed at youth and the poor and vulnerable, and to strengthen monitoring and evaluation. - Capacity and resource constraints have been partially addressed with technical and financial support from development partners. *Source: IMF staff report chapter (as provided in the supplied content).* ### 30. Modifications to the definition of debt and the continuous QPC on the non- ### _cr16389 - 30. Modifications to the definition of debt and the continuous QPC on the non- ### Modifications to definitions and continuous QPCs - Proposed change to the definition of debt in the TMU (TMU ¶2): - Substitute “authorized or ratified” for “ratified” by Parliament to comply with Grenadian law. - Proposed change to the continuous QPC on the non-accumulation of external debt arrears (TMU ¶9): - Delete the words “actively and in good faith” to further specify the definition in the TMU and to bring it in line with PCs in other Fund-supported programs. ### Financing assurances and arrears - Financing situation and needs: - With a primary surplus, financing needs are confined to debt service requirements and the need to clear remaining external arrears. - Grenada’s membership arrears to international and regional organizations: US$15 million, for which the authorities have presented a clearance strategy. - Authorities remain in arrears to four non-Paris Club official bilateral creditors (Algeria, Libya, Trinidad and Tobago, and Venezuela), who have consented to Fund financing notwithstanding these arrears. - Financing needs in the next 12 months are expected to be fully covered by the IMF, World Bank, and CDB and the roll-over of existing domestic debt instruments. - No new external debt issuance in the market is envisioned, in line with the PC. - Note on Paris Club bilateral agreements: - While the deadline to conclude the bilateral agreements with two Paris Club creditors to implement the 2015 Agreed Minute expired in May, staff assesses that these arrears can be deemed away, in light of the authorities’ best efforts to reach agreements. ### Summary Table on External Borrowing Program for 2016-17 (presented figures) - Sources of debt financing (US million 1/): - 37.0 - 24.6 - 13.0 - 10.0 - Concessional debt, of which 2/ (US million 1/): - 10.0 - 3.9 - 0.0 - 0.0 - Multilateral debt (US million 1/): - 10.0 - 3.9 - 0.0 - 0.0 - Bilateral debt (US million 1/): - 0.0 - 0.0 - 0.0 - 0.0 - Non-concessional debt (NCD), of which 3/ (US million 1/): - 27.0 - 20.7 - 13.0 - 10.0 - Semi-concessional debt 4/ (US million 1/): - 27.0 - 20.7 - 13.0 - 10.0 - Commercial terms 5/ (US million 1/): - 0.0 - 0.0 - 0.0 - 0.0 - Use of debt financing (US million 1/): - 37.0 - 24.6 - 13.0 - 10.0 - Project financing (US million 1/): - 17.0 - 11.3 - 13.0 - 10.0 - Budget financing (US million 1/): - 20.0 - 13.3 - 0.0 - 0.0 - Debt restructuring (US million 1/): - 0.0 - 0.0 - 0.0 - 0.0 - Explanatory footnotes from the table (verbatim excerpts included in the source): - 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. ### Safeguards, external position, and capacity to repay - Safeguards assessment: - The 2016 safeguards assessment update found that the ECCB continues to maintain a governance framework that provides for independent oversight. - Transparency in financial reporting has been maintained and the external audit mechanism is sound. - The ECCB is taking steps to restructure the internal audit and risk management functions to align them with leading international practices. - Capacity to repay the Fund: - Debt service to the Fund has declined as a percent of GDP and percent of exports of goods and services, in line with the upward revision to the growth outlook and improvement in Grenada’s external position. - The disbursement profile remains unchanged. - Progress made in debt restructuring will also help strengthen Grenada’s capacity to repay the Fund. ### Staff appraisal — progress, vulnerabilities, and policy recommendations - Progress and accomplishments: - Grenada has made solid progress toward restoring macro sustainability. - Noteworthy accomplishments include fiscal adjustment, debt restructuring and reduction, and an overhaul of fiscal legislation. - Remaining vulnerabilities and risks: - The economy remains vulnerable because public debt and arrears are still elevated. - High unemployment has important socio-economic implications that need attention and could pose risks. - Fiscal performance under the program: - All quantitative performance criteria for the Fifth Review were met and the government has exceeded the fiscal targets in 2016 by a wide margin. - Expansion in revenues reflects both stronger activity and improvements in administration; the government has exercised firm control of expenditures. - Key policy priorities and recommendations: - Approve a 2017 budget in line with Grenada’s new fiscal rule to keep on track to meet debt reduction goals. - Maintain spending discipline, prudent management of the CBI inflows according to NTF rules, and firm efforts to strengthen revenue administration and compliance. - Shift policies and operations to comply with the new, comprehensive legislative framework and follow through on implementation. - Accelerate efforts to regularize all arrears and remaining debts to domestic and external creditors; conclude this process by the end of the ECF-supported program. - Use government deposits in excess of amounts needed as a prudent level of reserves to reduce the stock of domestic short-term debt. - Structural reform implementation: - Challenges were experienced implementing structural benchmarks in 2016: preparing a strategy for wage bill management reform, revising the labor code, and drafting a new Act for the GIDC took longer than expected due to broad stakeholder consultation and multi-disciplined expertise requirements. - A modification of the structural benchmark on public wage bill management is proposed to strengthen commitment; the government should finalize the strategy by the time of the Sixth Review. - Growth and labor market policies: - Continue policies to foster growth, including the new GIDC Act to promote investment and steps to remove impediments to private sector activity. - To lower unemployment, staff urges review of education systems to better align skills with labor market needs, and to advance training, opportunities, and job search tools in collaboration with the private sector. - Establish conditions for fair competition in electricity and telecom markets to foster supply conditions for higher growth. - Financial sector and AML/CFT: - Continue strengthening banks and non-bank financial institutions, prepare for and mitigate the impact of potential losses of CBRs, improve due diligence of the CBI program, enforce AML/CFT measures, and strengthen international tax co-operation frameworks. - Continue developing a national crisis management plan and strengthen regulation and supervision of the non-bank financial sector. *IMF staff report excerpt (page section provided).* ### 42. Staff supports the completion of the Fifth Review under the ECF-arrangement, the ### 42. Staff supports the completion of the Fifth Review under the ECF-arrangement, the request for modification of performance criteria, and the financing assurances review ### Staff judgement and endorsement - Staff supports: - the completion of the Fifth Review under the ECF-arrangement, - the request for modification of performance criteria, - the financing assurances review, - on the basis that adequate safeguards remain in place for the further use of the Fund’s resources in Grenada’s circumstances, and that Grenada’s adjustment efforts have not been undermined by developments in debtor-creditor relations. ### Recent economic developments (summary findings) - Output and demand: - "The economic recovery has continued, with the output gap closed in 2015." - Growth drivers cited: "robust external demand for tourism and strong growth in construction." - Growth projection: "Growth is expected to decline in 2016 to a level marginally higher than long-term potential." - Tourism outlook: "tourism is likely to continue its strong momentum." - Inflation and prices: - "Headline inflation is picking up despite the decline in food prices..." - Inflation drivers: "...a consequence of increases in the prices of telecoms services." - Specific series and indicators presented (figures and captions preserved): - Grenada: Actual and Potential Real GDP (levels in millions of 2006 EC$; growth in percent) - Grenada: Real GDP Growth (contribution to growth, percentage points) - Grenada: Economic Growth (in percent) - Tourist Arrival Growth by Country (contribution to growth, in percent yoy) - Grenada: Inflation (percentage point contribution to growth) - Grenada: Retail Petroleum Product Prices (Monthly, US$ per gallon, assumes 100% passthrough) - Note: "1/ From WEO, simple average of Brent, WTI and Dubai Fateh spot prices." ### External developments (summary findings) - Exchange rate and current account: - "The real effective exchange rate continues to decline." - "the current account improved, though the level is high relative to other Caribbean countries." - Trade and financing: - "Tourism service exports increased and imports fell in line with weak domestic demand and low oil prices." - "The current account deficit in 2016 is being financed by FDI, capital transfers and some debt." - Reserves and external position: - "Imputed reserves reached 5 months of prospective imports due to the improvement in the current account..." - "And the net foreign liabilities position continued to improve." - Specific series and indicators presented: - Real Effective Exchange Rate (Based on CPI, index, 2010=100, without Botswana) - Current Account Balances of Small Tourism-Dependent Countries 1/ (in percent of GDP) - Trade and Current Account Deficit (in percent of GDP) - Current Account Financing (in percent of GDP) - Imputed Reserves (months of imports; CA balance, imputed reserves - US$m) - Grenada: Net Foreign Assets (in percent of GDP) - Note: "1/Countries include Anguilla, Antigua&Barbuda, Bahamas, Barbados, Belize, Cape Verdo, Cyprus, Dominica, Fiji, Grenada, Jamaica, Lebanon, Maldives, Mauritius, Montserrat, Samoa, Seychelles, St. Kitts & Nevis, St. Lucia, St. Vincent & Gren. Vanuatu" ### Monetary developments (summary findings) - Banking sector and credit: - "Banks’ net domestic assets have continued to decline.... driven by a contraction in credit to the private sector." - "The contraction in credit has occurred despite a moderate expansion in broad money.... as banks have expanded net foreign assets." - Liquidity and reserves: - "Banks’ excess reserves at the central bank continue to build..." - "while lending rates declined as pass through from reduction in the minimum savings rate in 2015." - Specific series and indicators presented: - Commercial Banks' Net Domestic Assets (contribution to growth, y-o-y) - Private Sector Credit Growth (year-over-year) - Components of Broad Money Growth (M2) (contribution to growth, y-o-y) - Commercial Banks Net Foreign Assets (in millions of EC$) - Deposits and Bank Excess Reserves (Deposit: indices, 100=sample average for each deposit type; Excess Reserves: percent of total deposits) - Interest Rates (in percent): Policy Rate (ECCB), Lending Rate (Grenada), U.S. Bank Prime Rate, Deposit Rate (Grenada), Interbank Rate (ECCB) - Sources: ECCB; Haver Analytics. ### Fiscal developments (summary findings) - Revenue and expenditure dynamics: - "Tax revenue has recovered under the program," - "with government spending kept under strict control," - government staffing: "the government’s attrition policy that helped lower public employment and wage spending," - "Fiscal consolidation under the program has been stronger and faster than originally envisaged," - "which also contributed to rebalancing external imbalances," - "and, along with more favorable debt dynamics and savings from debt restructuring, a downward trajectory of public debt." - Key fiscal outcomes shown in figures and tables: - Total Tax Revenue (in percent of GDP) with series values (e.g., 16.6, 18.2, 19.9) - Current Primary Expenditure (in percent of GDP) with series values (e.g., 17.8, 16.4, 14.2) - Public Employment and Wage Bill (Quarterly) - Public Sector's Contribution to Rebalancing (BOP current account deficit, in percent of GDP) - Grenada: Fiscal Adjustment (Over program period, in percent of GDP) — Revenue and Expenditure - Grenada: Public Sector Debt (in percent of GDP) with decomposition: "Debt reduction by debt restructuring 1/, Debt reduction by automatic debt dynamics, Debt reduction by primary surplus" - Note: "1/ Includes only agreed restructuring." ### Financial sector developments (summary findings) - Asset quality and provisioning: - "Though declining, nonperforming loans remain elevated across the banking system...." - "....and provisioning for NPLs has improved particularly for indigenous banks." - Profitability and margins: - "Interest margins-to-gross income recovered in indigenous banks but are generally still low ...." - "...while bank profitability remains weak although it is improving." - Capital and liquidity: - "Banks’ reported capital adequacy is above the regulatory minimum... and their liquidity has begun to stabilize." - Specific series and indicators presented: - Nonperforming Loans (in percent of total loans) by bank type - Provisions to Nonperforming Loans (provisions for loan losses to non-performing loans, in percent) - Interest Margin/Gross Income (in percent) - Return on Average Assets (Net Profit before Taxes/Average Assets, in percent) - Commercial Banks' Capital Adequacy (Total Capital/Risk Weighted Assets, in percent) with "Regulatory Minimum" - Commercial Banks' Liquidity (Liquid Assets/Total Assets; Total Liquid Assets/Total Deposits; Net Liquid Assets/Total Deposits; Liquid Assets/Total Deposits plus Liquid Liabilities) (in percent) - Source: ECCB. ### Key numeric indicators and projections (selected exact values preserved) - From Table 1: Selected Economic and Financial Indicators, 2012–21 (selected rows): - Real GDP (annual percent change): 2012: -1.2; 2013: 2.4; 2015: 7.3; 2016 (4th review): 6.2; projections 2017–21: 3.0, 3.1, 2.7, 2.7, 2.7. - Nominal GDP (annual percent change): 2012: 2.7; 2013: 5.3; 2015: 8.2; 2016: 8.0; projections 2017–21: 4.6, 4.6, 6.0, 5.1, 5.0, 5.0, 5.0. - Consumer prices, end of period: 2012: 1.8; 2013: -1.2; 2015: -0.6; 2016: 1.0; projections 2017–21: -0.2, 2.1, 2.6, 2.0, 2.0, 2.1, 2.1. - Output gap (percent of potential GDP): 2012: -6.9; 2013: -6.7; 2015: -2.2; 2016: 1.3; projections 2017–21: 0.5, 1.6, 1.6, 1.5, 1.5, 1.4, 1.4. - Central government revenue (in percent of GDP): 2012: 20.8; 2013: 20.9; 2015: 24.5; 2016: 24.8; projections 2017–21: 24.6, 25.1, 24.6, 24.5, 24.3, 24.2, 24.1. - Total expenditure and net lending (in percent of GDP): 2012: 26.7; 2013: 28.1; 2015: 29.2; 2016: 26.0; projections 2017–21: 24.8, 23.5, 23.3, 22.7, 22.6, 22.5, 23.5. - Primary balance (percent of GDP): 2012: -2.5; 2013: -3.9; 2015: -1.1; 2016: 2.2; projections 2017–21: 3.1, 4.8, 4.1, 4.0, 3.8, 3.5, 2.3. - Overall balance (percent of GDP): 2012: -5.9; 2013: -7.3; 2015: -4.7; 2016: -1.2; projections 2017–21: -0.2, 1.6, 1.3, 1.8, 1.8, 1.7, 0.6. - Public debt (incl. guaranteed) (percent of GDP): 2012: 103.3; 2013: 108.1; 2015: 101.8; 2016: 91.7; projections 2017–21: 89.2, 84.3, 72.9, 67.2, 62.2, 57.5, 54.2. - Net imputed international reserves (months of imports of goods and services): 2012: 2.9; 2013: 4.1; 2015: 4.6; 2016: 5.4; projections 2017–21: 5.4, 5.0, 4.7, 4.6, 4.6, 4.5, 4.4. - External debt (gross, percent of GDP): 2012: 141.0; 2013: 144.3; 2015: 144.4; 2016: 136.7; projections 2017–21: 136.2, 132.5, 122.3, 116.6, 112.0, 107.2, 103.5. - From Table 2a / 2b: Central government operations (selected exact values) - Total revenue and grants (EC$ million) 2015 Act.: 602.8; 2016 Budget: 658.2; 2016 4th review: 658.2; 2017 Proj.: 776.2; 2018–21 Proj: 662.6, 698.7, 725.1, 758.0, 791.5, 826.8, 863.9. - Tax revenue (EC$ million) 2015 Act.: 448.1; 2016 Budget: 511.6; 2016 4th review: 511.6; 2017 Proj.: 526.2; 2018–21 Proj: 539.6, 569.8, 588.4, 616.1, 644.5, 674.6, 706.1. - Grants (EC$ million) 2015 Act.: 100.5; 2016 Budget: 87.2; 2016 4th review: 87.2; 2017 Proj.: 201.6. - Total expenditure and net lending (EC$ million) 2015 Act.: 717.6; 2016 Budget: 690.6; 2016 4th review: 690.6; 2017 Proj.: 775.9. - Interest payments (EC$ million): 2015 Act.: 87.2; 2016 Budget: 89.9; 2016 4th review: 89.9; 2017 Proj.: 103.3; 2018–21 Proj: 88.4, 87.6, 82.9, 68.2, 65.3, 62.0, 58.9. - Public Debt (EC$ million, selected): 2012: 2,231.8; 2013: 2,458.4; 2015: 2,504.5; 2016 4th review: 2,429.0; 2017 Proj.: 2,437.7; 2018–21 Proj: 2,402.3, 2,344.4, 2,150.0, 2,080.2, 2,021.9, 1,964.6, 1,941.4. - Memo: Nominal GDP (EC$ million) 2015 Act.: 2,461; 2016 4th review: 2,575; projections 2017–21: 2,657; 2,709; 2,692; 2,780; 2,947; 3,097; 3,251; 3,414; 3,585. ### Medium-term financing and debt operations (selected exact values) - From Table 3 (In millions of EC$): - Stock of deposits at beginning of the period: 2015: 94.0; 2016–21: 142.1 repeated. - Inflows (2015–21): 2015: 1501.5; 2016: 587.4; 2017: 675.8; 2018: 515.7; 2019: 508.9; 2020: 506.9; 2021: 505.3. - Primary surplus (component of inflows): 2015: 57.5; 2016: 133.0; 2017: 120.8; 2018: 122.9; 2019: 123.6; 2020: 119.4; 2021: 82.0. - Debt placement (component of inflows): 2015: 493.2; 2016: 401.4; 2017: 398.5; 2018: 377.7; 2019: 385.3; 2020: 387.6; 2021: 423.3. - Outflows (Eriko) and Outflows: 2015: 1,460.3 (listed repeatedly for 2016–21 framework). - Interest bill (Outflows component): 2015: 89.9; 2016: 87.3; 2017: 82.9; 2018: 68.2; 2019: 65.3; 2020: 62.0; 2021: 58.9. - Scheduled Amortization (Outflows component): 2015: 425.5; 2016: 460.0; 2017: 434.2; 2018: 430.2; 2019: 436.9; 2020: 438.3; 2021: 439.8. - Stock of deposits at the end of the period: 142.1 for 2015–21. - Public Debt (EC$ million) 2015: 2,437.7; 2016: 2,344.4; 2017: 2,150.0; 2018: 2,080.2; 2019: 2,021.9; 2020: 1,964.6; 2021: 1,941.4. - Public Debt (in percent of GDP) 2015: 91.7; 2016: 84.3; 2017: 72.9; 2018: 67.2; 2019: 62.2; 2020: 57.5; 2021: 54.1. - Memo: Stock of arrears (2015–21): 146.6; 128.8; 126.7; 109.5; 102.9; 96.3; 89.7. - Notes on Table 3: Includes references to debt stock reduction from debt exchange for the 2025 bonds and other restructuring; "2/ Includes new debt issued under restructuring agreements executed with the Export-Import Bank of Taiwan Provice of China," "3/ Remaining stock of arrears in 2016 is comprised of bilateral debt, contribution arrears to organizations, and domestic debt. They have a corresponding imputed repayment under arrears clearance starting in 2016." ### Public sector debt stock (selected exact values) - From Table 4 (Year end, in millions of U.S. dollars; selected entries): - Public Sector debt (2013–2016 series headings present): Examples shown include totals and percent of GDP indicators; lines include "Public Sector debt 910.5 100.0 108.1 927.6 100.0 101.8 902.9 100.0 91.7 868.2 100.0 84.3" and "Central government debt 860.8 94.5 102.2 881.6 95.0 96.7 862.4 95.5 87.6 835.2 96.3 86.2" (values preserved as presented in the table excerpt). - External debt and central-government components listed (e.g., "External debt 596.5 65.5 70.8 616.8 66.5 67.7 616.4 68.3 62.6 599.8 69.1 58.2"). - A. Central Government row entries: "570.3 62.6 67.7 593.3 64.0 65.1 595.8 66.0 60.5 583.0 67.2 56.6." *International Monetary Fund staff report excerpt.* ### 1. Multilateral223.124.526.5247.126.627.1280.031.028.5278.732.127.1 ### 1. Multilateral223.124.526.5247.126.627.1280.031.028.5278.732.127.1 ### A. Multilateral creditors - CDB118.113.014.0125.013.513.7134.714.913.7132.115.212.8 - IDA54.25.96.466.27.17.377.78.67.978.29.07.6 - IBRD11.31.21.310.51.11.114.91.71.514.31.71.4 - IMF27.93.13.329.53.23.229.33.23.029.73.42.9 - Other Multilateral11.61.31.415.91.71.723.42.62.424.32.82.4 ### B. Official bilateral creditors - Official bilateral104.211.412.497.610.510.797.110.89.996.611.19.4 - Paris Club 1/10.21.11.210.51.11.110.81.21.110.51.21.0 - France4.20.50.54.40.50.54.50.50.54.50.50.4 - Russian Federation0.20.00.00.20.00.00.30.00.00.30.00.0 - U.S.2.90.30.32.90.30.33.00.30.32.60.30.3 - U.K.2.90.30.32.90.30.33.20.30.33.20.40.3 - Other94.010.311.287.29.49.686.29.68.886.19.98.4 - Kuwait 19.02.12.218.01.92.017.01.91.716.81.91.6 - Taiwan Province of China 2/25.22.83.019.42.12.119.42.12.019.42.21.9 - Trinidad and Tobago32.93.63.932.93.53.632.93.63.332.93.83.2 - Venezuela10.01.11.210.01.11.110.01.11.010.01.21.0 - Other Bilateral6.90.80.86.90.70.86.90.80.76.90.80.7 ### C. Commercial debt - Commercial debt 202.422.224.0202.421.822.2192.621.319.6183.221.117.8 - US$ 2040 Bonds 5/193.521.323.0193.520.921.2183.720.318.7174.720.117.0 - Other Bonds8.91.01.18.91.01.08.91.00.98.51.00.8 ### D. External arrears - External arrears on interests 19.32.12.322.22.42.43.40.40.33.80.40.4 ### E. Overdue membership fees - Overdue membership fees21.32.32.523.92.62.622.82.52.320.82.42.0 ### F. Central-government guaranteed - Central-government guaranteed26.12.93.123.52.52.620.62.32.116.81.91.6 ### G. Domestic debt (aggregate) - Domestic debt314.134.537.3310.833.534.1286.431.729.1268.330.926.1 - A. Central Government290.531.934.5288.431.131.6266.629.527.1252.229.024.5 ### H. Domestic debt instruments and arrears - 1. Treasury bills120.113.214.3125.313.513.8117.913.112.0113.513.111.0 - RGSM 3/34.24.14.136.94.04.135.94.03.735.94.13.5 - 3 month initial maturity14.81.81.814.81.61.613.01.41.313.01.51.3 - 1 year initial maturity19.42.32.322.12.42.423.02.52.323.02.62.2 - Private placements85.99.410.288.49.59.782.09.18.377.68.97.5 - National Insurance Scheme22.12.42.622.12.42.414.81.61.514.81.71.4 - Petrocaribe Grenada34.83.84.134.83.83.834.83.93.534.84.03.4 - Other private placements29.03.23.431.53.43.532.43.63.327.93.22.7 - 2. Bonds90.610.010.890.69.89.9111.412.311.3116.713.411.3 - EC$ 2040 Bonds 5/68.17.58.168.17.37.568.97.67.067.37.76.5 - RGSM 3/0.00.00.00.00.00.00.00.00.00.00.00.0 - Private Placements17.92.02.117.91.92.037.94.23.944.85.24.4 - Other Bonds4.60.50.54.60.50.54.60.50.54.60.50.4 - 3. Domestic arrears on interests3.10.30.410.91.21.24.40.50.40.10.00.0 - 4. Compensation claims14.81.61.814.81.61.614.81.61.514.81.71.4 - 5. Commercial Bank Loans10.71.21.38.50.90.97.00.80.75.80.70.6 - 6. Overdraft 6.10.70.73.30.40.40.00.00.00.00.00.0 - 7. Supplier arrears34.63.84.129.23.23.20.00.00.00.00.00.0 *Source: _cr16389 - 1. Multilateral223.124.526.5247.126.627.1280.031.028.5278.732.127.1* ### 8. Other 4/10.51.21.25.70.60.611.11.21.11.30.20.1 ### 8. Other 4/10.51.21.25.70.60.611.11.21.11.30.20.1 ### External and Domestic Arrears (2013–2016) - Total arrears (US$ mln and % of GDP): - 2013: 107.8; 25.3 - 2014: 133.1; 15.8 - 2015: 83.1; 33.1 - 2016 Q2 (prel.): 116.2; 12.7 - 2016: 51.3; 7.8 - 2016 (another row): 59.1; 6.0 - 2016 (another row): 40.1; 3.9 - 2016 (another row): 44.0; 4.3 - External arrears breakdown (selected items, US$ mln and % of GDP): - Total external arrears (various years): 67.3; 19.5 | 86.8; 10.3 | 45.1; 22.2 | 67.3; 7.4 | 45.3; 3.4 | 48.6; 4.9 | 37.2; 3.8 | 41.0; 4.0 - Bilateral (total): 39.1; 10.1 | 49.2; 5.8 | 14.7; 1.5 | 16.2; 1.8 | 15.4; 2.9 | 18.3; 1.9 | 15.2; 3.3 | 18.5; 1.8 - Paris Club total and key creditors (selected): - Paris Club: 2.6; 0.4 | 2.9; 0.3 | 3.8; 0.4 | 4.3; 0.5 | 4.8; 0.9 | 5.7; 0.6 | 3.7; 0.8 | 4.5; 0.4 - France: 1.1; 0.3 | 1.4; 0.2 | 1.7; 0.3 | 2.0; 0.2 | 2.3; 0.3 | 2.6; 0.3 | 2.2; 0.3 | 2.6; 0.3 - Russia: 0.2; 0.0 | 0.2; 0.0 | 0.2; 0.0 | 0.2; 0.0 | 0.1; 0.1 | 0.2; 0.0 | 0.1; 0.1 | 0.2; 0.0 - UK: 0.8; 0.1 | 0.9; 0.1 | 1.1; 0.1 | 1.2; 0.1 | 1.1; 0.3 | 1.3; 0.5 | 1.8; 0.2 | 1.3; 0.5 | 1.8; 0.2 - US: 0.5; 0.0 | 0.5; 0.1 | 0.8; 0.1 | 0.9; 0.1 | 1.1; 0.1 | 1.2; 0.0 | 1.0; 0.0 | 0.0; 0.0 - Non‑Paris Club bilateral: 36.6; 9.7 | 46.3; 5.5 | 10.8; 1.0 | 11.9; 1.3 | 10.6; 2.0 | 12.6; 1.3 | 11.6; 2.4 | 14.0; 1.4 - Algeria: 1.9; 0.0 | 1.9; 0.2 | 1.9; 0.0 | 1.9; 0.2 | 1.9; 0.0 | 1.9; 0.2 | 1.9; 0.0 | 1.9; 0.2 - Libya: 5.0; 0.0 | 5.0; 0.6 | 5.0; 0.0 | 5.0; 0.5 | 5.0; 0.0 | 5.0; 0.5 | 5.0; 0.0 | 5.0; 0.5 - Trinidad: 1.8; 0.7 | 2.5; 0.3 | 2.7; 1.0 | 3.7; 0.4 | 3.6; 2.0 | 5.6; 0.6 | 4.1; 2.3 | 6.4; 0.6 - Venezuela: 0.0; 0.0 | 0.0; 0.0 | 0.0; 0.0 | 0.0; 0.0 | 0.0; 0.0 | 0.0; 0.5 | 0.2; 0.7 | 0.1 - Commercial creditors (selected): 6.1; 8.9 | 15.0; 1.8 | 6.5; 20.7 | 27.2; 3.0 | 7.2; 0.7 | 7.5; 0.8 | 6.9; 0.5 | 7.4; 0.7 - Unpaid contributions to organizations: 21.3; 0.0 | 21.3; 2.5 | 23.9; 0.0 | 23.9; 2.6 | 22.8; 0.0 | 22.8; 2.3 | 15.1; 0.0 | 15.1; 1.5 - Budget expenditure arrears and domestic debt: - Budget expenditure arrears (US$ mln and % of GDP): 40.5; 5.8 | 46.3; 5.5 | 37.9; 10.9 | 48.9; 5.4 | 6.1; 4.4 | 10.5; 1.1 | 2.9; 0.1 | 3.0; 0.3 - Domestic debt (incl. under restructuring) (US$ mln and % of GDP): 5.9; 5.8 | 11.8; 1.4 | 8.7; 10.9 | 19.6; 2.2 | 6.1; 4.4 | 10.5; 1.1 | 2.9; 0.1 | 3.0; 0.3 - Supplier arrears: 34.6; 0.0 | 34.6; 4.1 | 29.2; 0.0 | 29.2; 3.2 | 0.0; 0.0 | 0.0; 0.0 ### Balance of Payments Summary and Projections (2012–2021) - Current account (US$ mln): - 2012: -168.5 - 2013: -195.5 - 2014: -150.5 - 2015: -162.8 - 2016: -149.2 - 2017: -166.4 - 2018: -180.4 - 2019: -195.3 - 2020: -208.7 - 2021: -232.1 - Trade balance for goods and services (US$ mln): - 2012: -164.4 | 2013: -184.2 | 2014: -141.9 | 2015: -145.3 | 2016: -128.7 | 2017: -154.0 | 2018: -172.1 | 2019: -188.8 | 2020: -203.9 | 2021: -229.0 - Exports of goods and services (US$ mln) and components: - Exports: 2012: 231.2 | 2013: 240.0 | 2014: 255.1 | 2015: 268.1 | 2016: 290.2 | 2017: 303.7 | 2018: 319.7 | 2019: 336.9 | 2020: 354.8 | 2021: 373.5 - Tourism: 146.3 | 147.1 | 160.5 | 172.2 | 193.7 | 204.2 | 215.0 | 226.1 | 237.7 | 249.8 - Student receipts: 24.7 | 25.8 | 26.3 | 26.8 | 27.6 | 28.8 | 29.8 | 30.8 | 31.8 | 32.9 - Nutmeg: 6.9 | 6.8 | 6.1 | 4.9 | 6.9 | 6.6 | 6.7 | 6.9 | 7.1 | 7.2 - Imports of goods and services (US$ mln) and components: - Imports: 395.7 | 424.3 | 397.1 | 413.4 | 418.9 | 457.7 | 491.7 | 525.7 | 558.7 | 602.5 - Mineral fuels: 91.3 | 82.2 | 77.5 | 46.0 | 40.7 | 49.4 | 54.5 | 59.2 | 64.7 | 70.1 - Foodstuffs: 71.4 | 76.4 | 77.4 | 73.4 | 80.1 | 85.7 | 90.9 | 97.3 | 104.0 | 111.0 - Net income (US$ mln): -34.3 | -29.6 | -34.7 | -39.5 | -48.0 | -40.4 | -37.2 | -37.3 | -37.6 | -37.8 - Current transfers (US$ mln): 30.3 | 18.3 | 26.1 | 22.0 | 27.5 | 28.0 | 28.9 | 30.8 | 32.7 | 34.7 - Capital and financial account (US$ mln): 139.1 | 208.0 | 125.2 | 186.3 | 154.8 | 151.1 | 194.0 | 207.3 | 219.3 | 240.2 - Capital transfers: 58.6 | 43.9 | 82.5 | 107.7 | 69.6 | 122.9 | 78.8 | 81.9 | 85.0 | 88.3 - Foreign direct investment: 31.5 | 113.1 | 39.9 | 97.4 | 85.9 | 93.8 | 99.2 | 110.2 | 115.7 | 121.5 - Public sector borrowing (net): 5.1 | 60.4 | 40.1 | -38.3 | -28.8 | -56.9 | -13.4 | -12.9 | -18.8 | -17.4 - NFA of commercial banks (US$ mln): 18.5 | -57.0 | -62.2 | -69.9 | -31.8 | -16.9 | -9.0 | -9.2 | -9.7 | -10.2 - Overall balance (US$ mln): -7.7 | 9.4 | 36.2 | 23.5 | 5.6 | -15.3 | 13.6 | 12.0 | 10.5 | 8.1 - Financing items (selected): - Change in ECCB NFA (US$ mln): 1.9 | -31.4 | -22.9 | -30.3 | -2.9 | -2.7 | -8.7 | -9.2 | -8.6 | -6.1 - Net use of Fund resources (US$ mln, projections): 0.0 | 0.0 | 0.0 | 5.6 | 5.6 | 2.8 | 0.0 | 0.0 | 0.0 | 0.0 - World Bank (projections): 0.0 | 0.0 | 0.0 | 15.0 | 0.0 | 10.0 | 0.0 | 0.0 | 0.0 | 0.0 - CDB (projections): 0.0 | 0.0 | 0.0 | 10.0 | 0.0 | 10.0 | 0.0 | 0.0 | 0.0 | 0.0 - Ratios (percent of GDP and selected years): - Current account (percent of GDP): -21.1 | -23.2 | -16.5 | -16.5 | -14.5 | -15.2 | -15.7 | -16.2 | -16.5 | -17.5 - Exports of goods and services (percent of GDP): 28.9 | 28.5 | 28.0 | 27.2 | 28.2 | 27.8 | 27.9 | 28.0 | 28.1 | 28.1 - Imports of goods and services (percent of GDP): 49.5 | 50.4 | 43.6 | 42.0 | 40.7 | 41.9 | 42.9 | 43.7 | 44.2 | 45.4 - Memorandum items: - Gross external debt (US$ mln): 141.0 | 144.7 | 144.8 | 137.1 | 132.8 | 122.5 | 116.8 | 112.4 | 107.9 | 106.1 - External public and publicly guaranteed debt (US$ mln): 67.6 | 70.8 | 67.7 | 62.6 | 59.9 | 51.9 | 47.4 | 44.1 | 40.6 | 38.0 - Nominal GDP (US$ mln): 799.9 | 842.6 | 911.6 | 984.1 | 1,029.8 | 1,091.5 | 1,147.2 | 1,204.1 | 1,264.5 | 1,327.9 ### Banking System and Monetary Aggregates (2012–2019) - Net foreign assets (US$ mln, banking system total): - 2012: 113.8 | 2013: 352.4 | 2014: 582.2 | 2015: 852.5 | 2016: 971.9 | 2017: 946.4 | 2018: 999.3 | 2019: 1,048.2 | 2020 proj.: 1,100.9 - ECCB net imputed reserves (US$ mln): 280.8 | 365.6 | 427.3 | 509.0 | 542.7 | 516.9 | 524.1 | 548.8 | 576.7 - Commercial banks (net) (US$ mln): -167.0 | -13.2 | 154.8 | 343.5 | 429.2 | 429.5 | 475.2 | 499.4 | 524.2 - Broad money (US$ mln): - 2012: 1,862.2 | 2013: 1,938.7 | 2014: 2,018.0 | 2015: 2,122.4 | 2016: 2,220.9 | 2017: 2,222.4 | 2018: 2,355.7 | 2019: 2,475.7 | 2020 proj.: 2,598.6 - Money (M1) and Quasi-money (US$ mln) (selected years): - Money: 333.3 | 381.2 | 466.5 | 543.0 | 608.0 | 608.4 | 644.9 | 677.8 | 711.4 - Quasi-money: 1,528.9 | 1,557.6 | 1,551.5 | 1,579.4 | 1,612.8 | 1,614.0 | 1,710.8 | 1,798.0 | 1,887.2 - Credit to private sector (US$ mln): 1,803.2 | 1,700.4 | 1,613.9 | 1,552.4 | 1,553.5 | 1,603.4 | 1,659.4 | 1,744.0 | 1,830.6 - Annual percentage change (selected): - Net foreign assets (annual % change): -31.4 | 209.7 | 65.2 | 46.4 | 14.0 | 11.0 | 5.6 | 4.9 | 5.0 - Broad money (annual % change): 0.7 | 4.1 | 4.1 | 5.2 | 4.6 | 4.7 | 6.0 | 5.1 | 5.0 ### Capacity to Repay the Fund (2014–2022) - Existing Fund credit (stock): - In percent of quota: 174.3 | 180.7 | 119.1 | 97.9 | 76.8 | 64.6 | 56.3 | 45.2 | 33.0 - In millions of SDRs: 20.4 | 21.1 | 19.5 | 16.1 | 12.6 | 10.6 | 9.2 | 7.4 | 5.4 - In millions of US$: 29.7 | 29.3 | 27.3 | 22.5 | 17.6 | 14.8 | 12.9 | 10.4 | 7.6 - In percent of GDP: 3.3 | 3.0 | 2.7 | 2.1 | 1.5 | 1.2 | 1.0 | 0.8 | 0.5 - Proposed Extended Credit Facility (stock) (projections): - In percent of quota: 0.0 | 0.0 | 12.3 | 24.5 | 24.5 | 24.5 | 24.6 | 24.6 | 20.8 - In millions of SDRs: 0.0 | 0.0 | 2.0 | 4.0 | 4.0 | 4.0 | 4.0 | 4.0 | 3.4 - In millions of US$: 0.0 | 0.0 | 2.8 | 5.6 | 5.6 | 5.6 | 5.6 | 5.6 | 4.8 - In percent of GDP: 0.0 | 0.0 | 0.3 | 0.5 | 0.5 | 0.5 | 0.4 | 0.4 | 0.3 - Outstanding Fund credit (end of period) (selected): - In percent of quota: 174.3 | 180.7 | 131.4 | 122.4 | 101.3 | 89.1 | 80.8 | 69.8 | 53.9 - In millions of SDRs: 20.4 | 21.1 | 21.5 | 20.1 | 16.6 | 14.6 | 13.3 | 11.4 | 8.8 - In millions of US$: 29.7 | 29.3 | 30.2 | 28.1 | 23.2 | 20.4 | 18.6 | 16.0 | 12.4 - Fund obligations based on existing credit (annual repayments and repurchases, US$ mln): - 2014: 1.8 | 2015: 3.2 | 2016: 1.4 | 2017: 3.5 | 2018: 3.5 | 2019: 2.0 | 2020: 1.4 | 2021: 1.8 | 2022: 2.0 - Fund obligations based on existing and prospective credit (In millions of US$ and percent of exports/debt service): - In millions of US$: 2.7 | 4.5 | 2.0 | 4.9 | 4.9 | 2.9 | 2.0 | 2.6 | 3.7 - In percent of exports of goods and services: 1.1 | 1.7 | 0.7 | 1.6 | 1.5 | 0.9 | 0.5 | 0.7 | 0.9 - In percent of debt service: 2.2 | 4.2 | 3.7 | 8.6 | 8.3 | 4.9 | 3.6 | 4.6 | 6.3 - Memorandum items: - Exports of goods and services (US$ mln): 255.1 | 268.1 | 290.1 | 303.7 | 320.0 | 337.6 | 355.9 | 374.9 | 395.8 - Debt service (US$ mln): 121.3 | 107.7 | 54.6 | 56.3 | 59.2 | 58.5 | 54.8 | 55.8 | 59.1 - GDP (US$ mln): 911.6 | 984.1 | 1,029.8 | 1,091.5 | 1,147.2 | 1,204.1 | 1,264.5 | 1,327.9 | 1,394.6 - Imputed Net International Reserves (US$ mln): 158.3 | 188.5 | 191.4 | 194.1 | 203.3 | 213.6 | 224.4 | 232.8 | 241.5 - Quota (SDR mln): 11.7 | 11.7 | 16.4 | 16.4 | 16.4 | 16.4 | 16.4 | 16.4 | 16.4 ### Financial Sector Indicators (2012–2016, latest availability) - Capital and asset quality (latest available Jun-16 unless noted): - Regulatory capital to risk-weighted assets: 13.9 | 13.6 | 13.0 | 12.2 | 13.0 (Jun-16) - Regulatory Tier 1 capital to risk-weighted assets: 13.2 | 12.2 | 11.7 | 10.2 | 10.6 (Jun-16) - Nonperforming loans net of provisions to capital (percent): 49.7 | 61.6 | 59.5 | 41.0 | 30.3 (Jun-16) - Nonperforming loans to total gross loans: 11.8 | 13.8 | 14.6 | 10.0 | 7.9 (Jun-16) - Profitability and income structure (Jun-16): - Return on assets: 0.5 | -1.8 | -0.1 | 1.5 | 0.4 (Jun-16) - Return on equity: 3.1 | -22.3 | -2.5 | 15.4 | 3.8 (Jun-16) - Net interest income to Total income: 51.9 | 50.6 | 51.1 | 56.0 | 58.5 (Jun-16) - Noninterest expenses to gross income: 70.0 | 109.0 | 86.5 | 73.8 | 68.4 (Jun-16) - Liquidity and exposures (Jun-16 unless noted): - Liquid assets to total assets: 22.9 | 27.7 | 32.8 | 37.5 | 37.7 (Jun-16) - Liquid assets to short-term liabilities: 25.0 | 29.8 | 34.9 | 40.0 | 40.3 (Jun-16) - Net foreign currency exposure to total capital: 37.7 | 65.2 | 102.7 | 124.1 | 187.3 (Jun-16) - Market rates and external indicators (latest available): - U.S. treasury bill rate (percent p.a.): 0.1 | 0.1 | 0.0 | 0.3 | 0.3 (Sep-16) - Treasury bill rate (365-day) (percent p.a.): 6.0 | 6.0 | 6.0 | 6.0 | 6.0 (Sep-16) - Exchange rate (per US$, end of period): 2.7 for 2012–2016 (Sep-16) - REER appreciation (percent change, 12-month basis, end of period): -1.0 | -1.9 | 0.2 | -1.3 | -0.3 (Jul-16) - Gross international reserves of the ECCB (US$ mln): 1,181.1 | 1,222.4 | 1,457.1 | 1,598.9 | 1,751.1 (Jul-16) - Public gross external debt (US$ mln): 540.5 | 593.2 | 613.1 | 612.6 | 613.9 (Sep-16) - Public gross external interest payments to fiscal revenue (percent): 8.9 | 8.0 | 7.9 | 9.3 | 7.8 (Sep-16) - Central government overall balance (after grants, percent of GDP): -5.9 | -7.3 | -4.7 | -1.2 | 1.7 (Sep-16) - Public and publicly-guaranteed gross external debt (percent of GDP): 103.3 | 107.8 | 101.5 | 91.6 | 84.1 (Sep-16) ### Proposed Schedule of Disbursement Under the Extended Credit Facility - Total available: SDR 14.04; 85.610 percent of quota - Disbursement installments and conditions: - June 26, 2014: SDR 2.040; 12.439 percent of quota — Executive Board approval of the arrangement - September 30, 2014: SDR 2.000; 12.195 — Observance of continuous and end-June 2014 performance criteria and completion of the first review - March 31, 2015: SDR 2.000; 12.195 — Observance of continuous and end-December 2014 performance criteria and completion of the second review - September 30, 2015: SDR 2.000; 12.195 — Observance of continuous and end-June 2015 performance criteria and completion of the third review - March 31, 2016: SDR 2.000; 12.195 — Observance of continuous and end-December 2015 performance criteria and completion of the fourth review - September 30, 2016: SDR 2.000; 12.195 — Observance of continuous and end-June 2016 performance criteria and completion of the fifth review - March 31, 2017: SDR 2.000; 12.195 — Observance of continuous and end-December 2016 performance criteria and completion of the sixth review - Note: Quota increased from SDR 11.7 million to SDR 16.4 million, effective March 23, 2016. ### Recent and Ongoing Legislative Reform (selected items) - Fiscal Policy Framework and Public Financial Management Reforms (entered into force and program-related where indicated): - Fiscal Responsibility Act 2015 and Fiscal Responsibility (Amendment) Act 2016 — entered into force; program-related - Public Debt Management Act 2015 and Public Debt Management (Amendment) Act 2016 — entered into force; program-related - Public Finance Management Act 2014, 2015 — entered into force; program-related - Public Procurement and Disposal of Property Act 2014 — entered into force; program-related - Tax, customs and revenue measures (selected): - Value Added Tax (Amendment) Act 2014 and Order 2014 — entered into force; program-related - Income Tax (Amendment) Act 2014 — entered into force; program-related - Tax Administration Act 2015 — entered into force; program-related - Customs Act 2015 and Customs (Amendment) Act 2016 — entered into force (status: entered into force; program-related markings vary) - Financial sector, business environment, and other reforms (selected): - Banking Act 2015 — entered into force - Citizenship by Investment - CBI (Amendment) Act 2014, 2015, 2016 — entered into force; program-related - Bankruptcy and Insolvency Act 2016 — entered into force - Securities (Amendment) Act and Regulations 2015 — approved/entered with program relevance - Employment (Amendment) Act 2016; Labor Relations (Amendment) Act 2016 — applicable and pending in some instances - Notes on status markers in table: *Approved by Cabinet; **Applicable and pending; + Approved by Parliament but not entered into force. ### Quantitative Program Targets (selected indicators and status) - Performance criteria (selected, EC$ mn): - A. Cumulative floor on central govt. primary balance (from end-Dec previous year): examples - Dec. 2014 Act.: -28 — Met - Jun. 2015 Act.: 37 — Met - Dec. 2015 Act.: 58 — Met - Jun. 2016 Prog.: 48; Act.: 39; Status: 86 Met; subsequent Act.: 94 - B. Cumulative ceiling on central govt. primary spending (EC$ mn): examples - Dec. 2014 Act.: 630 — Met - Jun. 2015 Act.: 281 — Met - Dec. 2015 Act.: 601 — Met - Jun. 2016 Prog./Act.: 268/289; 284 Met; 526 - C. Ceiling on stock of central govt. budget expenditure arrears (EC$ mn): - Dec. 2014 Act.: 79 — Met - Jun. 2015 Act.: 53 — Not met (note: June 2015 budget expenditure arrears were revised up after the Third Review resulting in nonobservance of the June 2015 performance criteria ex post) - Dec. 2015 Act.: 0 — Met - Jun. 2016 Prog/Act.: 0; 0; Met - D. Ceiling on accumulation of external debt arrears (continuous): 0 — Met across listed periods - E. Ceiling on contracting of non-concessional external debt by central govt. (continuous, US$ mn): - Dec. 2014 Act.: 10 — Not met - Jun. 2015 Act.: 0 — Met - Dec. 2015 Act.: 0 — Met - Jun. 2016 Prog.: 15; Act.: 15 — Met; subsequent Act.: 0 - Indicative targets and monitoring (selected): - F. Cumulative ceiling on net change in central govt. and central govt. guaranteed debt (EC$ mn): example entries show Met, -30 Met, -67 Met, 13, -7, -85 Met, 15 - G. Floor on social spending by central govt. (EC$ mn): entries include 11.4 Not met; 5.4 Not met; 11.8 Not met; Jun/Dec targets and one Met at 14.0 - H. Wage bill target (EC$ mn): 219 Met; 109 Met; 215 Met; subsequent targets 110/110/105 Met; 219 - I. Public employment target (number): 7,515 Met; 7,096 Met; 7,003 Met; target 7,000 with Act. 6,810 Met; 7,000 - Memorandum item: - Projected new concessional external debt (US$ mln): 0 | 0 | 8 | 10 (selected entries) *Sources: Grenadian authorities and Fund staff estimates; Ministry of Finance and Planning; ECCB; Fund staff estimates and projections.* ### 1. Parliamentary approval of the revised GIDC Act ### 1. Parliamentary approval of the revised GIDC Act ### Structural benchmarks: recent status and timing - Items listed for program monitoring and implementation: - Parliamentary approval of the revised Investment Promotion Act — November 30, 2014 — Met - Parliamentary approval of 2015 budget consistent with program commitments — December 31, 2014 — Not met, corrective action taken - Parliamentary approval of 2016 Budget consistent with program commitments and Fiscal Responsibility Legislation — December 31, 2015 — Not met, corrective action taken - Parliamentary approval of fiscal adjustment measures for 2016 — December 31, 2015 — Met - Parliamentary approval of 2017 Budget consistent with parameters of the FRA and realistic CBI program-related revenue projections. 1/ — December 31, 2016 — Proposed - Parliamentary approval of the revised PFM legislation — August 31, 2014 — Met - Cabinet approval of a strategic plan for the statutory bodies — October 31, 2014 — Met in February 2015 - Parliamentary approval of the revised legislation on tax incentive regime — November 30, 2014 — Met in June 2015 - Parliamentary approval of the legislation for the fiscal policy framework — December 31, 2014 — Met in June 2015 - Minister of Finance approval of regulations for the National Transformation Fund — February 28, 2015 — Met in August 2015 - Parliamentary approval of a public debt management law — March 31, 2015 — Met in June 2015 - Minister of Finance approval of regulations for the revised PFM legislation — June 30, 2015 — Met in September 2015 - Publication of all citizenship-by-investment statistics on a quarterly basis — Quarterly, beginning July 31, 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 - Signing into force of the new tax incentive regime and Investment Act 2014 — December 31, 2015 — Met - Cabinet approval of a strategic plan to modernize the public sector — March 31, 2016 — Not met, rephased and revised - Parliamentary approval of the revised GIDC Act, with amendments — June 30, 2016 — Met in November 2016 - Parliamentary approval of a new Grenada Labor Code — August 31, 2016 — Met in November 2016 - Cabinet approval of a focused reform plan to manage the public sector wage bill — September 30, 2016 — Not met - Publication of the debt statistics bulletin on a quarterly basis — Quarterly, beginning December 31, 2016 — Proposed - Cabinet approval of a comprehensive public sector wage bill management reform strategy — March 31, 2017 — Proposed - Complete and make functional the human resource registry for the public service — March 31, 2017 — Proposed - Additional program actions (listed separately at the top of the unit): - Parliamentary approval of the revised GIDC Act - Parliamentary approval of the revised Grenada Labor Code - Cabinet approval of a wage bill for 2017 at or below 8.8 percent of GDP. - Cabinet approval to make permanent DPA control of hiring and the size of the public service. - Preparation of a human resource registry based on exising HR systems information. - Cabinet approval of a wage bill management reform Plan. ### Debt Sustainability Analysis — Key findings - Overall assessment: - Grenada’s external debt remains “in distress” until all arrears to official creditors are regularized. - Public domestic debt was 30 percent of GDP at end-2015. - Baseline projections incorporating executed debt restructuring agreements: - Public debt projected to decline to 84.3 percent of GDP at end-2016. - Public debt projected to trend down toward 57.5 percent of GDP by 2020. - Public external debt projected to decline from 62.6 percent of GDP in 2015 to 40.8 percent of GDP by 2020. - Threshold breaches and their nature: - The DSA update finds that the debt thresholds on the present value of the debt-to-GDP, debt service-to-revenue, and debt-to-exports ratios are breached. - These breaches are temporary in nature as amortization of the 2030 bonds leads to a rapid decline in the present value of external debt. - Despite improvements, external debt remains “in distress” because of unresolved arrears to official creditors. - Debt reduction attributable to restructuring: - Total debt reduction directly attributed to restructuring savings thus far amounts to 17.1 percent of projected 2016 GDP. - One half of that was already executed and the rest is expected to be granted in the future contingent on program completion. ### Macroeconomic outlook and risks - Growth performance and projections: - Growth in 2015 increased by 6.2 percent relative to the initial estimate of 4.6 percent. - Growth is projected to maintain its momentum in 2016 before converging to its potential in the medium-term. - Fiscal consolidation: - Fiscal consolidation advanced faster and stronger than envisaged by the program, contributing to accelerating debt reduction. - The projected primary surplus above 3.5 percent of GDP through 2020 is a key assumption underpinning the baseline DSA. - The second-step haircut on the 2030 bonds (about 8 percent of GDP) hinges on adherence to the fiscal framework to ensure successful completion of the ECF-supported adjustment program. - Key risks: - Return to lax fiscal policies would put public debt back on an unsustainable path (historical scenario). - The tourism sector is exposed to macroeconomic conditions in advanced economies and to natural disaster risk. - Shocks to imports, particularly fuel prices, pose further risks to the outlook. - Grenada also continues to have membership arrears to international organizations. ### Policy implications and recommended actions - Maintain a strong and credible medium-term fiscal framework that underpins the baseline DSA to ensure long-term sustainability of public debt and to secure debt relief measures tied to program completion. - Strict adherence to the Fiscal Responsibility Act (FRA) is essential to sustain the projected primary surplus above 3.5 percent of GDP through 2020. - Swiftly conclude the comprehensive debt restructuring and regularize arrears to official creditors to remove the “in distress” classification for external debt. - Implement and operationalize structural reforms to modernize public financial management, complete the human resource registry, and control the public sector wage bill (noting outstanding structural benchmarks and proposed dates). *Source: IMF staff report content unit "_cr16389 - 1. Parliamentary approval of the revised GIDC Act"* ### 2017. While payments on restructured debt instruments have been restored (including on the 2030 ### _cr16389 - 2017. While payments on restructured debt instruments have been restored (including on the 2030 ### Debt restructuring status and policy commitment - Payments on restructured debt instruments have been restored (including on the 2030 bonds). - Discussions have recently started or been intensified with the remaining more dispersed groups of creditors (see MEFP, paragraph 6). - Three and half years after default, it is imperative that Grenada normalize relations with creditors by clearing or regularizing arrears, an important step toward lowering the risk of debt distress. - The authorities reiterated their commitment to concluding the debt restructuring by the end of the ECF-supported program in 2017 and to adhering to the fiscal responsibility law. ### Key macroeconomic projections and balances (selected rows from IMF staff projections) - Non-interest current account balance: -20.3; -12.9; -14.4; -14.2; -14.4 - Real GDP growth (in percent): 1.2; 2.7; 2.8; 2.7; 2.7 - Growth of exports of G&S (USD terms, in percent): 3.0; 5.9; 5.8; 5.8; 5.8 - Current official transfer: 1.4; 0.6; 1.0; 0.4; 0.8 - Net FDI: 9.3; 8.1; 8.8; 8.7; 9.1 - Primary balance: -1.9; 3.4; 3.7; -0.7; -1.0 - Revenue and grants: 23.3; 25.3; 24.5; 25.5; 23.2 - of which: grants: 3.0; 3.1; 2.8; 3.1; 2.2 - Primary (noninterest) expenditure: 25.1; 21.9; 20.7; 26.2; 24.3 - Inflation rate (GDP deflator, in percent): 1.4; 2.3; 2.3; 2.3; 2.3 - Memorandum: 2015 Nominal GDP (in million USD): 953.6; 984.1 ### Public debt sustainability (Table A1.1 highlights) - Public sector debt (in percent of GDP): 108.1; 101.8; 91.7; 84.3; 72.9; 67.2; 62.3; 57.6; 54.2; 54.4; 54.2 - Foreign-currency denominated share (in percent of GDP): 70.8; 67.7; 62.6; 59.9; 51.9; 47.4; 44.1; 40.6; 38.0; 37.7; 37.0 - Change in public sector debt: 4.7; -6.3; -10.0; -7.4; -11.4; -5.8; -4.9; -4.7; -3.4; 0.0; 0.0 - Identified debt-creating flows: 2.0; -5.4; -12.7; -6.7; -11.4; -5.8; -5.0; -4.7; -3.4; -0.2; -0.3 - Primary deficit (in percent of GDP): 3.9; 1.1; -2.2; 1.9; 1.9; -4.8; -4.1; -4.0; -3.8; -3.5; -2.3; -3.7; 1.0; 1.0; 1.0 - Revenue and grants (in percent of GDP): 20.9; 24.5; 24.8; 25.1; 24.6; 24.5; 24.3; 24.2; 24.1; 23.5; 22.6 - Primary (noninterest) expenditure (in percent of GDP): 24.8; 25.6; 22.6; 20.3; 20.5; 20.5; 20.5; 20.7; 21.8; 24.5; 23.6 - Automatic debt dynamics contribution: -1.9; -4.6; -4.1; -0.9; -2.0; -1.4; -1.2; -1.2; -1.1; -1.2; -1.3 - PV of public sector debt (percent of GDP, memorandum): 77.8; 70.0; 59.0; 53.9; 49.5; 45.4; 42.4; 41.4; 43.7 - Gross financing need (percent of GDP): 7.3; 22.3; 17.3; 16.7; 13.4; 12.1; 11.7; 11.3; 11.9; 12.0; 8.6 - PV of public sector debt-to-revenue and grants ratio (in percent): 314.2; 278.5; 240.0; 220.0; 203.3; 187.4; 175.9; 176.1; 193.4 - Primary deficit that stabilizes the debt-to-GDP ratio: -0.8; 7.4; 7.8; 2.6; 7.3; 1.8; 1.1; 1.2; 1.1; 1.0; 1.0 ### External debt sustainability (Table A1.2 highlights) - External debt (nominal, percent of GDP): 144.7; 144.8; 137.1; 132.8; 122.5; 116.8; 112.5; 107.9; 104.3; 98.8; 88.6 - Public and publicly guaranteed (PPG) external debt (percent of GDP): 70.8; 67.7; 62.6; 59.9; 51.9; 47.4; 44.1; 40.6; 38.0; 37.7; 37.0 - Change in external debt: 3.7; 0.1; -7.7; -4.3; -10.3; -5.7; -4.3; -4.6; -3.6; -1.1; -0.9 - Non-interest current account deficit (percent of GDP): 21.4; 14.4; 14.1; 20.3; 4.3; 12.4; 13.3; 14.2; 14.8; 15.3; 16.4; 14.9; 14.1; 14.6 - Exports (percent of GDP): 28.5; 28.0; 27.2; 28.2; 27.8; 27.9; 28.0; 28.1; 28.1; 28.8; 31.0 - Imports (percent of GDP): 50.4; 43.6; 42.0; 40.7; 41.9; 42.9; 43.7; 44.2; 45.4; 44.0; 44.7 - Net FDI (negative = inflow, percent of GDP): -13.4; -4.4; -9.9; -9.3; 4.7; -8.3; -8.6; -8.6; -9.1; -9.1; -9.1 - PV of external debt (percent of GDP, memorandum): 123.2; 118.5; 108.6; 103.6; 99.7; 95.7; 92.5; 85.8; 78.1 - PV of PPG external debt (percent of GDP): 48.7; 45.6; 38.0; 34.1; 31.3; 28.4; 26.2; 24.8; 26.5 - Debt service-to-exports ratio (in percent): 6.5; 13.2; 16.7; 19.1; 17.2; 16.4; 14.7; 14.4; 13.4; 9.5; 7.3 - Total gross financing need (Millions of U.S. dollars): 82.4; 125.1; 85.8; 96.8; 103.7; 116.2; 118.1; 128.3; 145.8; 143.2; 202.0 - Non-interest current account deficit that stabilizes debt ratio (percent of GDP): 17.6; 14.3; 21.7; 16.7; 23.6; 19.9; 19.2; 19.9; 20.0; 16.0; 15.0 ### Sensitivity analysis and stress tests (Table A1.3 and A1.4 highlights) - PV of Debt-to-GDP Ratio (baseline projections, selected years): 70 (2016); 59 (2017); 54 (2018); 49 (2019); 45 (2020); 42 (2021); 41 (2026); 44 (2036) - PV of Debt-to-Revenue Ratio (baseline projections, selected years): 279 (2016); 240 (2017); 220 (2018); 203 (2019); 187 (2020); 176 (2021); 176 (2026); 193 (2036) - Debt Service-to-Revenue Ratio (baseline projections, selected years): 85 (2016); 71 (2017); 66 (2018); 64 (2019); 61 (2020); 59 (2021); 47 (2026); 34 (2036) - Alternative scenarios and bound tests produce materially higher ratios under shock scenarios: - Example (Table A1.4): PV of debt-to-GDP ratio baseline: 46 (2016); 38 (2017); 34 (2018); 31 (2019); 28 (2020); 26 (2021); 25 (2026); 26 (2036). - Alternative scenario A1 (historical averages) yields PV of debt-to-GDP: 46; 44; 45; 46; 48; 49; 68; 92 (2016-2036 selected). - Bound test B6 (One-time 30 percent nominal depreciation relative to the baseline in 2017) yields higher stress outcomes, e.g., PV of debt-to-GDP: 46; 54; 48; 44; 40; 37; 35; 37 (2016-2036 selected). - Figures underscore that the most extreme stress tests generally involve one-time depreciation and export shocks for different indicators; the "most extreme shock" is defined as the test yielding the highest ratio on or before 2026. ### Key macroeconomic and financing assumption highlights (from tables) - Real GDP growth (in percent): 2.4; 7.3; 6.2; 1.2; 4.7; 3.1; 2.7; 2.7; 2.7; 2.7; 2.7; 2.8; 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; 3.3; 3.1; 2.7; 2.6; 2.5; 2.5; 2.8; 2.0; 1.8; 1.9 - Inflation rate (GDP deflator, in percent): 2.9; 0.8; 1.6; 1.4; 1.5; 1.5; 3.2; 2.3; 2.2; 2.3; 2.3; 2.3; 2.3; 2.3; 2.3 - Growth of real primary spending (deflated by GDP deflator, in percent): 9.1; 10.8; -6.2; 1.9; 6.0; -7.3; 3.6; 2.7; 2.9; 3.6; 8.1; 2.3; 2.3; 2.4; 3.3 - Grant element of new external borrowing (in percent, selected): 29.1; 13.8; 33.5; 32.9; 32.6; 29.7; 28.6; 29.7; 29.7; 29.7 ### Policy implications and recommended actions (drawn from text) - Normalize relations with creditors by clearing or regularizing arrears to lower the risk of debt distress. - Conclude the debt restructuring by the end of the ECF-supported program in 2017. - Adhere to the fiscal responsibility law to support debt sustainability and macroeconomic stability. *Source: Grenadian authorities and IMF staff projections (IMF staff report content provided in the supplied PDF excerpt).* ### Annex II. Strengthening Wage Bill Management in Grenada ### Annex II. Strengthening Wage Bill Management in Grenada ### Context and recent actions - Cabinet approved a public wage bill reform plan in November to be implemented over the period 2016-2019. - The reform plan drew on FAD technical assistance provided in July–September 2016 and discussions with authorities in October 2016. - Short-term measures during the home-grown ECF-supported program reduced the wage bill from 10.7 percent of GDP in 2013 to 8.1 percent in 2015. - Measures included a nominal wage freeze and automatic step increment deferral, accounting for about one fourth of the decline. - Broad-based reduction in employment under a strict attrition policy: 3 replacements for every 10 departures. - Tight hiring controls by the Department of Public Administration (DPA) brought employment-to-population ratios into line with peers. - These wage and workforce control measures are set to expire at end-2016 and are characterized as not sustainable or desirable long term. ### Key structural problems identified - Automatic pay grade increases (step increments) and negotiated wage increases create an unsustainable wage bill trajectory. - Automatic increments cost on average a 2.4 percent increase in the wage bill annually. - Increment payments are divorced from performance and are a legal obligation (based on the Education Act and public service Statutory Rules and Orders). - Absent reforms, combined with retro-active payments (January 2014 to June 2016) and a resumption of increments and negotiated increases, the wage bill would breach the FRA ceiling of 9 percent of GDP next year. - Step increase was last paid in 2013; related retro-active obligations of step increments costing $7.5 million (0.3 percent of GDP) are scheduled to be paid in the first quarter of 2017. - Other structural issues hindering wage bill management: - (i) Outdated pay grid: maximum step within each grade averages 1.5 times the pay of the lowest step; on average, pay increases by 20 percent between grades. Relativities have been in place since job evaluation done in 1995 despite a review in 2005. - (ii) Hiring-control-induced misallocation: gaps in some ministries/areas (specialized doctors) and excess in others (teachers and nurses). - (iii) Varying employment/contractual arrangements (established, un-established, project) that are inconsistent with needs; budgets lack transparency on headcounts beyond established posts. - (iv) Limited application of the performance appraisal system due to complexity, lack of objectivity, and no enforcement. - (v) Delayed and lengthy wage negotiations not guided by market parameters, leading to unpredictably large retroactive payments. ### Consequences - Difficulty recruiting, training and motivating workers while ensuring quality service delivery. - An inequitable and irrational remuneration system can adversely affect productivity and effectiveness, especially in a small state where public service influences overall labor market conditions and economic productivity. ### Recommended reforms (summary of options and measures) - Overarching goal: improve wage bill management while limiting fiscal risks and balancing affordability, service delivery, and competitive pay to attract and motivate skilled staff. - (i) Make negotiated wage increases data driven and forward looking, within FRA parameters: - Use published annual reports with economic information (inflation, market comparators, eventually productivity). - Establish negotiation calendar concluding annually ahead of the start of the budget cycle, with no award of retro-active increases. - Note: recent successive years of deflation, alignment of public and private wages, and weak productivity estimates indicate wage increases for 2014-16 are not warranted. - (ii) Continue tight hiring controls while moving towards “right sizing” the public service: - Institutionalize DPA employment gate-keeping role consistent with ensuring quality service delivery. - (iii) Establish and maintain an IT-based human resource registry of all ministries, including headcount, salaries and job descriptions, by category and grade to facilitate redeployment and address understaffing. - (iv) Replace attrition policy with a global workforce ceiling, subject to fiscal affordability and other parameters, pending functional review. - (v) Reform automatic pay increments (including with legislation). Options to realize fiscal savings include: - (a) Lengthen the duration of each step to three years from the current automatic annual increment. - (b) Link increments to performance and restrict to the top third performing staff. - (c) Link increments to macro-variables (such as tax revenue performance and nominal GDP growth). - (d) Completely eliminate increments (noting risk to pay relativities and wage bargaining simplicity). - (vi) Revamp the performance appraisal system: - Simplify process with shorter form and unified ratings; adopt clear timelines. - Strengthen link between compensation and performance with restrictive distribution of ratings to reward top performers. - Adopt forward-looking objectives aligned with government needs and employee career development. - Include confidential subordinates’ evaluation of supervisors by subordinates. - Support reforms with a robust centralized IT system accessible by managers and timely records by the Public Service Commission. - (vii) Conduct job evaluation exercise to update pay-grid relativities periodically (at least once a decade); standardize contracting modalities with targeted mix of established posts, un-established posts, outsourcing and project workers; benchmark public and private wages annually. - (viii) Strengthen the payroll system to facilitate access by HR officers in line ministries to payroll data at the Accountant General’s office to assist HR audits. - (ix) Implement a functional review to identify overlaps/gaps across institutional functions (over- and understaffing), assess number and quality of staff for strategic needs, and accompany with HR audit to review service delivery procedures and potential for IT solutions. ### Next steps and timeline - Authorities have prepared a full Plan laying out components of reform and the timeline. - The strategy will be finalized by March 2017 after consultation across government and with labor organizations and stakeholders. - The government plans to implement all reforms noted above by December 2018 so they are in place in calendar year 2019. - The government is working on a detailed, sophisticated and automated human resource registry that will be completed and functioning by March 31, 2017. *Annex II. Strengthening Wage Bill Management in Grenada — IMF staff report (content as provided in the source).* ### Annex V. Risk Assessment Matrix ### Annex V. Risk Assessment Matrix ### Risk Assessment: Summary of Major Risks, Likelihoods, Time Horizons, Expected Impacts, and Recommended 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. - Zika Virus - Relative Likelihood: High - Time Horizon: Near Term - Expected Impact: High. If the virus becomes more widespread it could significantly discourage tourist arrivals, widen current account deficit and dampen growth. - Recommend Policy Response: Raise public awareness of the virus and related health issues and urge proactive prevention measures by tourism facilities (e.g. regular mosquito fogging). - Slowdown in commodity exporter (Trinidad and Tobago) - Relative Likelihood: Medium - Time Horizon: Near Term - Expected Impact: Medium. Grenada’s growth could be affected through lower tourism arrivals, remittances and FDI. Financial spillover channels could include a cutback in lending from Trinidadian banks and tightened liquidity in regional financial markets, posing 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 the FRA and focusing public investment to raise productivity and competitiveness. - Protracted post-Brexit uncertainty - Relative Likelihood: Medium - Time Horizon: Near to Medium Term - Expected Impact: Medium. The UK accounts for about 20 percent of tourism arrivals to Grenada. Slower growth in the UK and advanced economies adversely affected by Brexit could dampen growth through lower tourism arrivals, remittances, and FDI. The fiscal position could also worsen with weaker revenues. - Recommend Policy Response: Build resilience by carrying through with the programmed fiscal adjustment. Proceed with structural reforms to improve external competitiveness which could lead to some diversification in export markets. Consider regional approach. - Reduced financial services by global/regional banks (loss of correspondent banking services) - Relative Likelihood: High - Time Horizon: Short Term - Expected Impact: Medium. Shock to remittance flows could have a short-run impact on BOP net inflows and reduced consumption spending. Disrupted banking services could also hinder financial transactions in the tourism industry. - Recommend Policy Response: Continue efforts to strengthen AML/CFT and financial sector supervision. Implement regional strategy to strengthen bank balance sheets. - Higher than expected public sector wage increase and delays in public sector wage bill reforms - Relative Likelihood: High - Time Horizon: Near to Medium Term - Expected Impact: Medium. Higher than projected wage bill will jeopardize progress to put public finances on a sustainable path, crowd out fiscal space for productive public investment and could hurt competitiveness and employment prospects given likely impact on private sector wages. - Recommend Policy Response: Agree on reform strategy as per structural benchmark. Agree on wage contracts prior to budget completion. Carry through with the programmed fiscal adjustment and structural reforms. - Opening of U.S.-Cuba tourism - Relative Likelihood: High - Time Horizon: Short Term - Expected Impact: Low. It is unclear how the ECCU will be affected. Research so far suggests ECCU niche could be preserved and downside risks are expected to be 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. The cost of infrastructure rehabilitation would put pressure on the fiscal position. The disruption to the hotel plant would slow tourism inflows, reduce growth and widen the current account deficit. - Recommend Policy Response: Build buffers by saving receipts from the CBI program as per NTF rules; increase coverage of natural disaster insurance with donor assistance; adhere to the fiscal rules in the FRA. In long-term, work with World Bank/donors to build resilience to climate change. ### Risk Assessment Note - The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff). The relative likelihood categories are staff’s subjective assessments: “low” indicates a probability below 10 percent, “medium” between 10 and 30 percent, and “high” between 30 and 50 percent. “Short term” and “medium term” indicate risks could materialize within 1 year and 3 years, respectively. Non-mutually exclusive risks may interact and materialize jointly. --- ### Fiscal Performance, Targets, and Program Requests (Letter of Intent and MEFP excerpts) ### Key Fiscal Outcomes and Program Requests - Letter date: November 22, 2016. - The Government requests the Executive Board to: - complete the fifth review of the arrangement under the ECF and the financing assurances review, - approve the request for modification of performance criteria and the proposed structural benchmarks, - approve the sixth disbursement under the arrangement of the equivalent of SDR 2 million. ### Fiscal Outturns and 2016 Performance - Primary surplus (first half of 2016): 3 percent of GDP (outperformed the June programme target). - Fiscal adjustment achieved by June 2016: 7.6 percent of GDP since program start. - No additional adjustment measures required to achieve programmed fiscal consolidation for 2016. ### 2017 Budget Targets and Commitments - 2017 primary surplus target: at least 3.5 percent of GDP. - Wage bill ceiling under the Fiscal Responsibility Act (FRA): 9 percent of GDP. - Cabinet-approved wage bill target: at most 8.8 percent of GDP (a prior action). - The agreed payment for deferred increments (salary grade increases) for the period of 2014-2015 and January-June 2016 is included in 8.8 percent. The amount of the accrued increments is estimated at 0.3 percent of GDP based on the salary adjustment for eligible public servants in July 2016. - CBI-related assumptions in the 2017 budget: - Conservative assumption on receipt of EC$32.5 million as capital grants from the NTF based on projected 2016 levels, at EC$22 million. - Adhere to NTF regulations and save 40 percent of the monthly inflows into the NTF for debt reduction and other contingency purposes. - Contingency reserve: allocate 2 percent of revenues in the 2017 budget to a reserve for contingency expenditure needs. --- ### Debt Restructuring, Arrears, and External Debt Developments ### Public Debt and Arrears (end-2015 to end-June 2016) - Public debt: fell from 91.7 percent of GDP at end-2015 to 84.3 percent of GDP at end-June 2016. - External debt arrears: lowered to 4 percent of GDP at end-June 2016 from a peak of 10.3 percent in 2013. - Arrears to domestic creditors: fell from a peak of 5.5 percent of GDP in 2013 to 0.3 percent at end-June 2016. ### Specific Debt Restructuring Notes - Private creditors: - Debt exchange with holders of Grenada’s 2025 international bonds concluded on November 12, 2015; first debt service payment in May 2016. - Some 2005 debt-exchange holdout creditors, valued at US$568,000, subsequently came forward and their claims were restructured on the same terms as the 2025 bonds. - In the 2005 debt restructuring, a small portion of bonds (US$5.6 million, or ¾ percent of GDP) was unclaimed and holders did not participate in the 2005 debt restructuring agreement. - Official creditors: - Following the Agreed Minute on November 18, 2015, engagement with Paris Club creditors for bilateral rescheduling consistent with the Agreed Minute. - Agreements with the United States and France were signed; negotiations with the UK are in the final stages; discussions with Russia are ongoing. - Domestic debt: - Restructuring of T-bills and government-guaranteed debt held by a domestic bank concluded in early 2016. - Negotiations with remaining domestic creditors are ongoing; restructuring of government guaranteed debt owed by the Marketing and National Importing Board is ongoing. - Aim to conclude restructuring of all remaining debts before the end of the ECF-supported program. - Budget expenditure arrears: - Current on domestic budget expenditure obligations, satisfying the end-June performance criterion. - Commit to regularize overdue membership contributions with several international organizations and to conclude restructuring discussions and regularize remaining arrears before the end of the ECF-supported program. --- ### Fiscal Structural Reforms and Public Financial Management Strengthening ### Summary of Commitments and Reforms (paragraph-indexed) - (i) National Transformation Fund (NTF) - Adhere to NTF regulations (put in place August 2015): save 40 percent of monthly inflows into the NTF; integrate NTF-financed capital spending into the Government’s PSIP and Budget; align with GPRS 2016-18 and National Plan 2030 when finalized. - Commit to publish all CBI statistics on the Ministry of Finance website every quarter (TMU, ¶20, structural benchmark). - (ii) Strengthen debt management - Restructured the Debt Management Unit (DMU) within the Ministry of Finance and strengthened capacity for: designing public debt strategies (final authorization by Cabinet), undertaking debt sustainability analysis, monitoring compliance with portfolio and risk management policies, and issuing regular reports on market and credit risk developments. - Plan to issue a quarterly public debt statistics bulletin commencing by end-December 2016 (proposed structural benchmark). - Public Debt Coordinating Committee to monitor DMU work plan and operations. - (iii) Strengthen public finance management (PFM) - 2017 Budget to be prepared according to 2015 PFM Act requirements: assessment of previous fiscal year performance, financial condition of each SOE and SB, and accompanied by a medium-term fiscal framework. - Ministry of Finance to prepare fiscal impact assessments for all proposed policy decisions. - Strengthen the Government’s PSIP with a new PSIP manual; ensure project selection and PSIP reporting are consistent with PFM Act. - Continue work to strengthen accounting and auditing framework for public accounts; receive technical assistance from IMF Fiscal Affairs Department to prepare manuals on budget preparation and budget execution. - (iv) New Chart of Accounts (COA) - Ensure the 2017 budget fully incorporates the new COA. CARTAC technical assistance in June reclassified recurrent spending items in the 2016 capital budget to correct current expenditure categories. Use this to guide 2017 capital budget formulation. - (v) Cash forecasting and commitment controls - Strengthen cash forecasting model for monthly/quarterly expenditure allocations and commitment controls. - Strengthen commitment controls by requiring all merchandise purchase orders to be generated by SmartStream as a centralized clearing house. Goal: have all capital and services spending initiated through a SmartStream generated purchase order. - (vi) Strengthen tax and customs administration - Tax Administration Act passed in February 2016; put in force in May 2016. - Reform Inland Revenue Department (IRD) with technical assistance from CARTAC and IMF (FAD); Large and Medium Taxpayer Service Unit (LMTU) and Small Taxpayers Service Unit now operational. - Priorities for 2017: finalize updated Corporate Strategic Business Plan and put in place a detailed Taxpayer Compliance Strategy. - A new FAD peripatetic advisor installed in June to help develop an action plan for improving capacity and support implementation of reforms. - At customs: with UNCTAD support, expedite roll out of ASYCUDA World System and implement stronger risk management. - Enhance capacities of revenue agencies by establishing a framework for improving collaboration among different agencies on taxpayer information and reprioritizing audit plans to focus on major compliance risks. *Source: _cr16389 - Annex V. Risk Assessment Matrix; Attachment I. Memorandum of Economic and Financial Policies for 2016-17 (excerpts).* ### 8. The government places priority on reforms to improve management of the public ### 8. The government places priority on reforms to improve management of the public sector wage bill ### Public wage bill reform: objectives, timeline, and governance - Reform is essential to safeguard fiscal progress and ensure wage bill management that is "fiscally prudent, fair, and sustainable" (¶11). This is part of the government's commitment under the FRA. - FAD technical assistance (TA) finalized in September informed the position, but comprehensive reform strategy could not be completed by end-September (structural benchmark). - Cabinet approval of a comprehensive plan on November 16, 2016 (prior action). The Plan: - Includes status of existing and in-progress work, preliminary short-term actions (¶9), and an agenda of key elements of the full reform (¶11) with timelines for implementation "by 2019 at the latest". - Provides for early consultation with social partners. - Forms the basis for the full Wage Bill Management Strategy, to be completed by March 31, 2017 (proposed structural benchmark). - The full Strategy (to be completed by March 31, 2017) will specify: - Decisions and specific actions for components in the Plan. - Clear timelines for implementation during 2016-2019, responsibilities, expected outcomes and outputs, and an accountability and governance framework. - Department of Public Administration (DPA) to lead design and implementation in consultation with the Ministry of Finance; other government stakeholders and social partners to be consulted. - Government to hold consultations on a draft of the strategy with social partners before end-February 2017 to allow time for finalization. ### Short-term actions already delivered (prior actions) - Prepared a human resource registry of the full public service based on existing systems data. - Made permanent by Cabinet conclusion the guidance that the DPA retains control of hiring and of the size of the public service (both prior actions). ### Key components committed in the full Public Wage Bill Reform Strategy (March 2017) - Complete and make functional the human resource registry (¶9) by March 31, 2017 (proposed structural benchmark). - Wage-setting processes that are forward-looking and data driven, based on agreed parameters like inflation, market comparators, and common macro assumptions; and a timeline for periodic wage negotiations in line with the budget calendar. - A functional review to identify the appropriate size and balance of the public service, and where possible to identify information technology solutions. - Reform of the pay and grading system to ensure adequacy of pay relativities across grades, and from this to establish a rational system of increments, preferably linked to performance. - Reform and implementation/enforcement of the performance appraisal system. - Development of a communications strategy. ### State-owned enterprises (SOEs) and statutory bodies (SBs) - Ongoing strategic plan to strengthen the financial position of SOEs and SBs; establishing an effective oversight framework to ensure implementation. - Commitment to strengthen the committee mandated to advise on implementation and allocate additional resources to the Policy Unit within the Ministry of Finance to monitor SOE and SB compliance with reporting requirements and assess financial positions. - Reporting remains uneven across institutions; additional outreach planned to strengthen compliance. - Continued monitoring of compliance with guidance on salary negotiations and dividend policy for SOEs and SBs. - Specific SOE reform progress: - Discussions with strategic partners on Grenada Concrete and Emulsion Production Corporation nearing completion to improve financial position and reduce fiscal risks. - Commitment to address capital investment needs and revenue weaknesses of the National Water and Sewerage Authority and the Solid Waste Management Authority over the medium term; consider public private partnerships and review tariff-setting regimes as required. ### Structural reforms to support competitiveness and growth - Institutional alignment with GPRS 2014-18: - GPRS implementation centered on capital budget; Cabinet established consultative committees for operations and planning and approved PSIP preparation and monitoring guidelines. - The 2017 PSIP will accompany the 2017 budget and includes projections of costs of major capital projects over a three-year horizon consistent with the medium term fiscal framework. - Government establishing a management information system to align public sector investment management with FRA and PFMA requirements; will enable integration of capital spending into budgeting and ex ante debt-implication analysis for loan-financed projects. - GPRS monitoring: - Committee established to monitor and evaluate GPRS implementation; plan to report findings to stakeholders and Cabinet by November to fine-tune 2017 policies. - GPRS will underpin the National Sustainable Development Plan 2030; steering committee guides development. Public consultations expected from November; draft expected by July 2017 and finalization by the next budget cycle. ### Business environment and investment readiness: action plan and expected outcomes - Revised GIDC Act in September (June structural benchmark) with Commonwealth Secretariat assistance; further amendments approved by Parliament in November (prior action) to align with FRA, PFM and PDM Acts. - Restructuring of GIDC expected to broaden scope to facilitate investments and reduce time and cost of obtaining investment approval. - Specific actions to address Doing Business survey deficiencies: - Reduce time for receiving construction permits: May 2016 Physical Planning and Development Control Act strengthens controls; online facility operational in 2017 expected to reduce days for a building permit from 90 days to 21 days. - Reduce time to start a business: online business register operational framework in 2017 expected to reduce time from 15 days to 4 days. - Lower cost of electricity: Electricity Supply Act and Regulations passed in May, entered into force in August 2017 to pave way for alternative technologies and lower-cost providers. - Reduce time and cost to register property: online title search facility for deeds and land registry expected operational in first quarter of 2017 and to reduce time to complete registration from 32 days to 27 days and to "reduce costs significantly." - Reduce time and costs for trading across borders: implement Single Window Module (License Module) of ASYCUDA World System to simplify and automate customs procedures. - Resolve insolvency: Bankruptcy and Insolvency Act passed in February 2016 and entered into force in September. ### Labour market reforms and social policies - Labour market focus to improve competitiveness and reduce unemployment: - Revise key components of the Labour Code for improved industrial relations: revised Employment Act and Labour Relations Act approved by parliament in November (prior action). - Strengthen labour market statistics: World Bank assistance to improve annual survey processing times for the 2016 Labour Force Survey (LFS); discussions with Statistics Canada for a quarterly LFS in 2017; OECS consultations with the ILO on a labour market information system (LMIS). - Develop active labour market policies: National Training Agency completed a labour market needs assessment and developed the National Vocational Qualification; established an online job center and strengthened relations with private job agencies; seeking investor support for job training components in investment planning. - Agriculture: - National agriculture strategy approved by Cabinet, consistent with GPRS goals and climate resilience objectives. - Priorities for 2017 budget: investments in infrastructure (road access, irrigation), pest control program, and improvements in air cargo logistics. - Social protection: - SEED programme: new Management Information System (MIS) uploaded; testing tool using the Grenada Living Conditions Index (GLCI) commenced. - Phasing out ineligible SEED beneficiaries and accepting new applicants assessed with new MIS and testing tool from August 2016. - Plan to apply testing tool to target other social protection programmes. ### Energy sector reforms - Regulatory reform accelerated to reduce cost of doing business: - Amendments to PURCA and new Electricity Supply Act (ESA) passed with World Bank-funded ECERA support; both Acts entered into force in August. - PURCA establishes an independent national regulatory authority responsible for tariff-setting, supported by ECERA; ESA expected to introduce competition and guide transition to renewable energy. - Exploration studies supported by Japan and New Zealand; anticipated grant funding from Japan, UK and CDB to advance geothermal efforts. - Government supports emerging interests in wind and solar energy. ### Financial sector reforms and supervision - Banking sector: - Commitment to ECCU regional strategy to strengthen banking sector; work with ECCB on an appropriate strategy within a sustainable fiscal framework. Private sector solutions considered first best option. - Nonbank financial sector and GARFIN: - Implementation of CARTAC recommendations underway; staff training ongoing to strengthen oversight. - Work with CARTAC to develop a national crisis management plan with Fund TA as part of a regional preparedness project. - Credit unions: - GARFIN enhancing supervision, including risk-based supervision; training workshops by CARTAC ongoing and discussions on appropriate capital model. - Plan to start asset quality reviews and stress testing on credit unions in 2017 with continued CARTAC TA. - Draft amendments to the Cooperative Societies Act to standardize capital adequacy requirements are under review by the Attorney General. - Final consultations on a revised uniform ECCU Act and regulations for credit unions expected to conclude in 2017. - Insurance and pensions: - Support for establishment of Eastern Caribbean Financial Services Regulatory Commission for a proposed single insurance market; delays in finalizing third draft of the uniform ECCU Insurance Bill with remaining issues including pensions and associations of underwriters; aim to formally establish single regulatory framework and authority in 2018. - GARFIN to continue on-site examinations and off-site supervision of insurers; reviewing CARTAC’s study on reporting structure for a risk-based framework expected to be adopted formally in 2017. - GARFIN has registered most pension plans; offsite supervision via audited financial statements and actuarial assessments ongoing. - New detailed annual reporting forms for pension plans and ongoing data submissions expected to allow compilation of consolidated pension statistics for GARFIN’s 2016 annual report. - Legislation to regulate pension intermediaries and address restricted investment opportunities expected under the proposed uniform ECCU Insurance Act. - On-site supervision of pension plans (asset/investment quality and corporate governance) expected to start in 2017 after Jamaica FSC training in September 2016. ### AML/CFT enhancements - Importance placed on strengthening AML/CFT framework and due diligence for the Citizenship by Investment (CBI) programme. - FIU working closely with banks and GARFIN to strengthen oversight. - Completion of a national money laundering and terrorist financing risk assessment identified as critical; government seeking TA from international partners due to limited capacity. ### Programme monitoring and conditionality - Programme subject to review of remaining performance criteria, indicative targets and structural benchmarks at the Sixth Review, as well as continuous performance criteria (set out in Tables 1-2 and TMU). - Anticipate Sixth Review after March 31, 2017; observance of continuous performance criteria and conditionality for end-December 2016, and remaining proposed structural benchmarks for January and March 2017 required. - Commitment to provide detailed statistical information as specified in the TMU; programme progress may be monitored quarterly through staff visits. ### Key quantitative programme targets and monitoring indicators (selected items from Table 1) - Performance criteria: - A. Cumulative floor on central govt. primary balance (EC$ mn) 2/: -28 (Act. Status Met), 37 (Act. Status Met), 58 (Act. Status Met), Prog. 39, Adj. Prog. 48, Prog. 86 (Met), Act. 94. - B. Cumulative ceiling on central govt. primary spending (EC$ mn) 2/: 630 (Met), 281 (Met), 601 (Met), Prog. 268, Adj. Prog. 289, Prog. 284 (Met), Act. 526. - C. Ceiling on stock of central govt. budget expenditure arrears (EC$ mn) 4/: 79 (Met), 53 (Not met), 0 (Met), Prog. 0, Adj. Prog. 0, Prog. 0 (Met), Act. 0. - D. Ceiling on accumulation of external debt arrears (continuous): 0 (Met) across listed periods. - E. Ceiling on contracting of non-concessional external debt by the central govt. (continuous, US$ mn) 5/: 10 (Not met), 0 (Met), 0 (Met), Prog. 0, Adj. Prog. 15, Prog. 15 (Met), Act. 0. - Indicative targets: - F. Cumulative ceiling on net change in central govt. and central govt. guaranteed debt (EC$ mn) 2/: 48 (Met), -30 (Met), -67 (Met), Prog. 13, Adj. Prog. -7, Prog. -85 (Met), Act. 15. - G. Floor on social spending by central govt. (EC$ mn): 11.4 (Not met), 5.4 (Not met), 11.8 (Not met), Prog. 7.0, Adj. Prog. 7.0, Prog. 7.0 (Met), Act. 14.0. - Monitoring: - H. Wage bill target: 219 (Met), 109 (Met), 215 (Met), Prog. 110, Adj. Prog. 110, Prog. 105 (Met), Act. 219. - I. Public employment target: 7515 (Met), 7096 (Met), 7003 (Met), Prog. 7000, Adj. Prog. 7000, Prog. 6810 (Met), Act. 7000. - Memorandum item: - Projected new concessional external debt (US$ mn): 0, 0, 8, 10 across listed columns. *Italicized source attribution: IMF staff report excerpt (content unit: _cr16389 - 8. The government places priority on reforms to improve management of the public)* ### 1. Parliamentary approval of the revised GIDC Act ### 1. Parliamentary approval of the revised GIDC Act ### Structural benchmarks and status (selected items) - Immediate measures reported at top of source: - Parliamentary approval of the revised GIDC Act - Parliamentary approval of the revised Grenada Labor Code - Cabinet approval of a wage bill for 2017 at or below 8.8 percent of GDP. - Cabinet approval to make permanent DPA control of hiring and the size of the public service. - Preparation of a human resource registry based on exising HR systems information. - Cabinet approval of a wage bill management reform Plan. - Structural Benchmarks (selected chronological items and status): - Parliamentary approval of the revised Investment Promotion Act — November 30, 2014 — Met - Parliamentary approval of 2015 budget consistent with program commitments — December 31, 2014 — Not met, corrective action taken - Parliamentary approval of 2016 Budget consistent with program commitments and Fiscal Responsibility Legislation — December 31, 2015 — Not met, corrective action taken - Parliamentary approval of fiscal adjustment measures for 2016 — December 31, 2015 — Met - Parliamentary approval of 2017 Budget consistent with parameters of the FRA and realistic CBI program-related revenue projections — December 31, 2016 — Proposed - Parliamentary approval of the revised PFM legislation — August 31, 2014 — Met - Cabinet approval of a strategic plan for the statutory bodies — October 31, 2014 — Met in February 2015 - Parliamentary approval of the revised legislation on tax incentive regime — November 30, 2014 — Met in June 2015 - Parliamentary approval of the legislation for the fiscal policy framework — December 31, 2014 — Met in June 2015 - Minister of Finance approval of regulations for the National Transformation Fund — February 28, 2015 — Met in August 2015 - Parliamentary approval of a public debt management law — March 31, 2015 — Met in June 2015 - Minister of Finance approval of regulations for the revised PFM legislation — June 30, 2015 — Met in September 2015 - Publication of all citizenship-by-investment statistics on a quarterly basis — Quarterly, beginning July 31, 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 - Signing into force of the new tax incentive regime and Investment Act 2014 — December 31, 2015 — Met - Cabinet approval of a strategic plan to modernize the public sector — March 31, 2016 — Not met, rephased and revised - Parliamentary approval of the revised GIDC Act, with amendments — June 30, 2016 — Met in November 2016 - Parliamentary approval of a new Grenada Labor Code — August 31, 2016 — Met in November 2016 - Cabinet approval of a focused reform plan to manage the public sector wage bill — September 30, 2016 — Not met - Publication of the debt statistics bulletin on a quarterly basis — Quarterly, beginning December 31, 2016 — Proposed - Cabinet approval of a comprehensive public sector wage bill management reform strategy — March 31, 2017 — Proposed - Complete and make functional the human resource registry for the public service — March 31, 2017 — Proposed - Note on CBI-related budget projection guidance: - "Budget projections of CBI-related inflows should be based on 2016 inflows and realistic assumption for growth based on market indicators." ### Definitions and scope (TMU) - Central government coverage: - "Central government will cover all items included in the government budget." - External vs. domestic debt: - External debt: central government contracted or guaranteed debt owed to creditors residing outside of Grenada. - Domestic debt: central government contracted or guaranteed debt owed to residents of Grenada. - Debt considered contracted when signed by the Executive and authorized or ratified by Parliament. - All securities issued at the Regional Government Securities Market (RGSM) and debt owed to the ECCB will be considered domestic debt. - Reporting responsibility: - Ministry of Finance (MOF), Accountant General’s office, Debt Management Unit (DMU), and GARFIN are referenced as reporting sources for various items. ### Performance criteria — central government primary balance (measurement and adjustments) - Measurement from above the line: - Primary balance = total revenue and grants of the central government less total non-interest expenditure. - Total revenues and grants treatment: - Project grants recorded only 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 the CBI receipts. - Expenditures recorded on an accrual basis, using: - (a) budget execution data reported by MOF; supplemented by - (b) data on unprocessed claims collected and reported by MOF. - Measurement from below the line (primary balance = negative sum of financing items): - i. Net domestic bank financing = change in domestic banking system credit to central government minus government deposits, as reported in the monetary survey; domestic banking system credit = sum of ECCB and commercial banks’ financing. - ii. Net nonbank financing = net changes in holdings of government securities by nonbanks and net borrowing from nonbank institutions; reported by MOF and GARFIN. - iii. Net government issuance of securities in RGSM excluding holdings by domestic banking and nonbanking system. - iv. Net external financing = net disbursements of project and non-project loans (including securitization) + net proceeds from issuance of external debt + reduction in cash deposits held outside the domestic financial system; reported monthly by MOF. - v. Change in stock of arrears = net change in unpaid checks issued, unprocessed claims, pending invoices, interest payments past due, and other expenditures recorded above the line but not paid (e.g., contributions to NIS); reported monthly by MOF. - vi. Gross receipts from divestment = proceeds received from privatization/divestment and sale of assets. - 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 trigger: - If difference between above-the-line and below-the-line measures > EC$6 million in 2015 and EC$3 million in 2016, MOF will consult with IMF staff. - Adjustments to the floor on the primary balance: - i. Upward by non-tax revenues in the budget from the citizenship-by-investment (CBI) programme and transfers from the NTF for settlement of arrears. - ii. If revenues (excluding CBI and NTF transfers) exceed projections, end-June 2016 primary balance target adjusted upward by one half of the January–June excess; government will increase capital budget allocations for last two quarters up to 2/3 of the over-performance. - iii. Upward by half of budgetary grants received in excess of projections. - iv. Upward for any shortfall in targeted cash transfers (SEED) from their indicative target. - v. Downward for cost of severance payments associated with restructuring of Grenada Concrete Emulsion and Production Corporation and Grenada Postal Corporation (up to cumulative maximum of US$4 million). - vi. Downward by amount paid by government to reimburse policy holders of the failed regional insurance companies BAICO and CLICO, less grant-financed share. - Programmed revenues and capital spending (table for 2016; cumulative from end of previous year): - Non grant revenue — Jun.: 298.0 (EC$ millions); Dec.: 580.1 (EC$ millions) - Budgetary grants — Jun.: 0; Dec.: 0 - Capital spending — Jun.: 88.8; Dec.: 178.8 - o.w. financed by capital grants — Jun.: 42.9; Dec.: 85.7 - Note: "The quarterly allocation of non-grant financed capital spending is less than the projection to provide a buffer to achieve program QPCs." - Consultation clause: - "The authorities will consult with IMF staff on corrective measures in the event of shortfalls in government revenue and financing." ### Other performance criteria and ceilings - Cumulative ceiling on central government primary spending: - Primary spending = sum of revenues and grants utilized minus primary balance. - Adjustments to primary spending target include: - i. Upward by one half of revenue over-performance for end-June 2016; end-December 2016 adjusted upward for full annual over-performance. - ii. Upward by full amount of additional capital grants received in excess of programmed levels; downward by half of any shortfall in capital grants. - iii. Upward by half of budgetary grants received and spent on capital outlays in excess of programmed levels. - iv. Downward for any shortfall in targeted cash transfers (SEED). - v. Upward by cost of severance payments for specified restructurings (up to cumulative maximum of US$4 million). - vi. Upward by amount paid to reimburse BAICO and CLICO policy holders. - Ceiling on stock of central government budget expenditure arrears (definition and reporting): - Arrears include: (i) invoices received and verified but unpaid within contractual grace period or within 60 days after due date; (ii) wages, pensions, or transfers pending > 60 days; (iii) interest and amortization payments on domestic debt unpaid within contractual period. - Exclusions: arrears from nonpayment of debt service where clearance/rescheduling agreed. - Data reported by Accountant General’s office. - Non-accumulation of external debt arrears (continuous): - Central government will not incur new arrears on external obligations during the arrangement. - Exclusions: overdue membership fees to regional and international organizations and arrears covered by clearance frameworks or debt restructuring. - Ceiling on contracting of non-concessional external debt (continuous): - Applied to contracting/guaranteeing of medium and long-term external debt (maturity > one year). - Adjustors include borrowing from Caribbean Development Bank and World Bank and debt instruments issued as part of debt restructuring. - Total amount from World Bank under adjustor strictly limited to US$30 million (cumulative from beginning of 2016). - Total amount from Caribbean Development Bank under adjustor strictly limited to US$30 million (cumulative from beginning of 2016). - Debt is non-concessional if grant element in NPV terms relative to face value < 35 percent; discount rate = 5 percent. - For variable-rate debts linked to benchmarks, PV calculated using programme reference rate plus fixed spread: - Programme reference rate for six-month USD LIBOR = 3.34 percent (fixed for duration of programme). - Spread of six-month Euro LIBOR over six-month USD LIBOR = -250 basis points. - Spread of six-month JPY LIBOR over six-month USD LIBOR = -300 basis points. - Spread of six-month GBP LIBOR over six-month USD LIBOR = -100 basis points. - For other currencies, spread over six-month USD LIBOR = -200 basis points. - Where variable rate linked to other benchmark, add spread reflecting difference to six-month USD LIBOR (rounded to nearest 50 bps). ### Indicative targets and monitoring - Indicative ceiling on net change in central government and central government guaranteed debt: - Defined as difference in stock of such debt between two periods; measured on disbursement basis. - Adjustors: - Upward by amount paid to reimburse BAICO and CLICO policy holders, less grant-financed share. - Upward to a maximum of 5 percent of GDP to accommodate PPP related expenditures. - Downward by nominal debt forgiveness in debt restructuring. - Upward for severance payments associated with specific restructurings (up to cumulative maximum of US$4 million). - Data provided by DMU after reconciliation with Accountant General’s office, monthly. - Indicative floor on social spending: - Applies only to SEED programme expenditures; reported quarterly by MOF. - Memorandum items (monitoring targets): - Wage Bill Target: wage bill includes expenditures for wages, salaries and personnel allowances; reported quarterly by MOF. - Public Employment: includes established (permanent), unestablished (temporary), and project workers; reported quarterly by MOF. - Quarterly capital budget allocation (Non-grant Capital Spending Allocation for 2016): - 2016Q1: 23.4 - 2016Q2: 17.5 - 2016Q3: 23.6 - 2016Q4: 23.6 *Source: Technical Memorandum of Understanding and Structural Benchmarks as provided in the IMF program documentation for Grenada.* ### 22. The Ministry of Finance on a quarterly basis beginning July 31, 2015 will supply to the IMF ### The Ministry of Finance on a quarterly basis beginning July 31, 2015 will supply to the IMF ### Programme reporting requirements - Performance under the programme will be monitored from data supplied to the IMF by the Ministry of Finance and the Central Statistics Office as outlined in Table 1. - The authorities will transmit promptly to IMF staff any data revisions as well as other information necessary to monitor the arrangement with the IMF. - 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. ### Citizenship-by-Investment Program (reporting details) - Reporting frequency: Quarterly. - Reporting deadline: 30 days after the end of quarter. - Responsible: MOF. - Required reported items: - 1. Number of CBI-program applications received by type of application (NTF donation and investment options) - 2. Number of CBI-program applications approved (NTF donation and investment options) - 3. Number of new citizens under the CBI program - 4. Number of CBI-program applications rejected - 5. Total amount of revenues received into the NTF - 6. Total amount of CBI program application fees received by the central - 7. Total transfers of NTF funds from the NTF to the central government - 8. Total central government spending financed by CBI-program related revenue (by direct central government financing and NTF-financed projects) ### Fiscal Sector (reporting details) - Responsible entities: AG1/ /Budget Office (Accountant General's Office and Budget Office). - Key reporting frequencies and deadlines: - 1. Central Government budget and outturn — Monthly — 30 days after the end of month — AG/Budget Office - 2. Grants — Monthly — Same as above — AG - Budgetary grants — Monthly — Same as above — AG - Project grants — Monthly — Same as above — AG - 3. Spending on SEED program — Monthly — Same as above — AG - 4. Employment data for established and un-established workers — Quarterly — 30 days after the end of quarter — AG - 5. Financial statements of all statutory bodies — Annually — Within 12 months after year end — AG - 6. Change in the stock of domestic arrears by creditor — Monthly — 30 days after the end of month — AG - Unpaid claims — Monthly — Same as above — AG - Interest arrears — Monthly — Same as above — AG ### Financial Sector (reporting details) - Responsible: GARFIN2/ (Grenada Authority for the Regulation of Financial Institutions). - Required reports: - 1. Consolidated balance sheet for all credit unions — Quarterly — 30 days after the end of quarter — GARFIN - 2. Consolidated balance sheet for all insurance companies — Quarterly — By the end of subsequent quarter — GARFIN ### Real and External Sector (reporting details) - Responsible: CSO/MOF3/ and Customs Dept. - Required reports, frequencies, and deadlines: - 1. Updates on annual National Accounts: by sector — Annually — Within 6 weeks after availability — CSO/MOF - 2. Tier 1 high frequency indicators4/ — Monthly — 60 days after the end of month — CSO/MOF - The following are defined as Tier 1 high frequency indicators: retail sales; imports of construction materials; agricultural production; manufactured production; production of water and electricity. - 3. Tier 2 high frequency indicators5/ — Monthly — 6 weeks after the end of quarter — CSO/MOF - The following are defined as Tier 2 high frequency indicators: building permits; registration of vehicles; cargo and aircraft statistics. - 4. Balance of Payments data — Annually — Within 3 months after year end — CSO/MOF - 5. Details of exports breakdown — Quarterly — By the end of subsequent quarter — Customs Dept. - 6. Details of imports breakdown — Quarterly — Same as above — Customs Dept. - 7. Details of tourism data — Quarterly — Same as above — CSO - 8. Customs revenue foregone — Monthly — 30 days after the end of month — Customs Dept. - 9. CPI — Monthly — Same as above — CSO ### Debt (reporting details) - Responsible: DMU7/ (Debt Management Unit) and related offices. - Required reports, frequencies, and deadlines: - 1. External and domestic debt and guaranteed debt (by creditor)6/ — Monthly — 30 days after the end of month — DMU - Disbursements — Monthly — Same as above — DMU - Amortization — Monthly — Same as above — DMU - Interest payments — Monthly — Same as above — DMU - Stock of external debt — Monthly — Same as above — DMU - Stock of domestic debt — Monthly — Same as above — DMU - Arrears on interest and principal — Monthly — Same as above — DMU - 2. Financial statement of Petrocaribe Grenada — Monthly — Same as above — DMU/AG - 3. Gross receipts from divestment — Monthly — Same as above — Budget Office - 4. Exceptional domestic financing — Monthly — Same as above — DMU - 5. Proceeds from bonds issued abroad — Monthly — Same as above — DMU - 6. Copies of any new loan agreements — As occurring — DMU *International Monetary Fund — Grenada, Table 1: Summary of Data to be Reported to the IMF* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr16389.pdf_