Press Release: IMF Executive Board Approves US$4.4 million in Emergency Assistance for Grenada
IMF News, November 16, 2004
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- Published: November 16, 2004
Approval and emergency assistance
- The Executive Board of the International Monetary Fund (IMF) approved SDR 2.93 million about (US$4.4 million) in emergency assistance for Grenada.
- The amount approved is available immediately to help the government deal with the devastating effects of Hurricane Ivan, which passed directly over Grenada in September.
Damage assessment and economic projections
- The damage caused by Hurricane Ivan is estimated at over 200 percent of GDP.
- Tourism and agriculture, the two major sources of foreign exchange earnings, have been hit hard.
- The economy is projected to contract by over 3 percent in 2004, compared to a pre-hurricane projection of 4 percent growth.
Financing gaps and international response
- With its tax base and sources of foreign exchange earnings impaired, Grenada faces large financing gaps for 2004-05.
- These gaps will need to be filled, in part, through support from the international community.
- A donors' conference was held in Washington, D.C., on October 4, 2004, and a follow-up pledging session is scheduled for November 19 in Grenada.
Terms of the IMF emergency loan and prior assistance
- The emergency loan currently carries a charge of 3.4 percent.
- Repayment terms: repaid in eight equal quarterly installments over 3.25 to 5 years from the disbursement date.
- Prior instance: In January 2003, emergency assistance had been approved to help Grenada deal with the effects of tropical storm Lili (see Press Release No. 03/10).
IMF assessment and recommended medium-term policy framework (AgustÃn Carstens, Deputy Managing Director and Acting Chair)
- Expressions of sympathy and acknowledgement:
- "The IMF extends its deepest sympathy to the people of Grenada at this difficult time following the devastation of Hurricane Ivan."
- The government, with international support, "is responding swiftly to the situation."
- Authorities have "redirected budget allocations to the pressing needs of rehabilitation and reconstruction."
- An independent agency to coordinate the reconstruction effort and a reconstruction fund "would be subject to independent audits."
- Fiscal and growth challenges:
- "The hurricane has set back the government's efforts to address fiscal imbalances."
- Prior to the hurricane, Grenada had been making progress through "a comprehensive review of tax policies and a medium-term fiscal strategy to bring debt down to more manageable levels."
- With the tax base and foreign exchange earnings impaired, Grenada "now faces larger fiscal and balance of payments financing gaps."
- Need for comprehensive strategy and international support:
- External support, including IMF emergency assistance, "will help with the near-term situation."
- A comprehensive strategy is needed "to ensure the success of the reconstruction efforts and spur economic growth."
- Authorities intend to develop a medium-term policy framework aimed at "restoring fiscal and debt sustainability and promoting structural reforms to enhance growth prospects in Grenada."
- Specific policy measures outlined by the authorities:
- Re-introduction of a value added tax.
- Strengthening of the customs department.
- Reduction of government guarantees.
- Rationalization of the tax incentive regime.
- Reform of the public service to improve efficiency.
- Rationalise and re-prioritise public expenditure.
- Concluding assessment:
- "The authorities' firm resolve to implement a comprehensive medium-term economic strategy, together with the continued support from the international community, should help Grenada's economy to rebound," Mr. Carstens said.
Press Release No. 04/240, November 16, 2004. International Monetary Fund.