Transcript of an IMF Economic Forum -- Tracking Grenada's Recovery: Six Months after Hurricane Ivan
IMF News, February 25, 2005
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Bibliographic details
- Published: February 25, 2005
Event summary
- Date and location: Washington, DC., February 25, 2005.
- Participants: His Excellency Denis G. Antoine (Grenada's Ambassador to the United States), Caroline Anstey (Country Director for the Caribbean Region, The World Bank), Prakash Loungani (IMF Mission Chief for Grenada). Moderated by Paul Nehru Tennassee.
- Sponsors: NCOCA and Caribbean Association of the World Bank Group and IMF (CAWI).
- Format: Opening remarks, prepared presentations (Ambassador Antoine, Caroline Anstey, Prakash Loungani), followed by a Q&A session with audience members.
Damage assessment and reconstruction strategy
- Scale of damage:
- Damage estimated at the equivalent of 200 percent of GDP—around 2.4 billion EC dollars.
- Ninety percent of the entire housing stock was damaged or destroyed.
- Over ninety percent of the forest area, the watershed and the mangroves were destroyed.
- Over ninety percent of the schools and the physical infrastructure were damaged.
- Institutional response:
- Government established an Agency for Reconstruction and Development (ARD) to coordinate recovery; ARD is operational and nearly all reconstruction projects and programs channel through it.
- A three-year reconstruction program has been designed, costing approximately $1.2 billion.
- Sectoral reconstruction highlights:
- Housing: community housing allocation committees set up; special assistance to address land tenure; skills-training programs for construction underway.
- Education: four school buildings under repair, with 15 in planning stage.
- Agriculture: 2,000 acres cleared for replanting nutmeg and cocoa; seeds and fertilizer supplied to over 3,000 farmers and households.
- Forestry: experts developing strategies for watershed protection refurbishment.
- Tourism: a brand-new cruise ship terminal is operational; tourist attraction sites being rehabilitated.
- Health and social services: psychological briefing and counseling planned for approximately 4,000 persons; eleven medical clinics and two community centers being repaired.
Economic impact, labor market, and near-term projections
- Pre-Ivan context: the economy was beginning to recover from post-9/11 shocks; tourism had shown improvement.
- Magnitude of shock: estimated at 200 percent of GDP; comparison examples cited (average disaster damage ~2 percent of GDP over 30 years; tsunami damage to Sri Lanka ~8 percent of GDP).
- IMF emergency assistance: US$4.4 million disbursed immediately at concessional rates.
- Labor market:
- Pre-hurricane unemployment estimated at 13 percent.
- National Insurance Scheme survey found 8 percent of the labor force displaced as a result of the hurricane.
- Unemployment likely rose to over 20 percent, with some reabsorption into construction.
- Gender impact: construction-led recovery tends to absorb men more readily than women; donor training programs (e.g., USAID) aim to train women in construction skills.
- Growth outlook:
- Expected growth for the year: under 1 percent, driven mostly by construction but offset by depressed agriculture, hotels, and restaurants.
- Financing gap:
- Financing gap for 2004 was closed due to donor conferences and contributions.
- Remaining financing gaps: a gap for the current year and a larger gap for 2006—over 10 percent of GDP in 2006 (per the February mission estimates).
- Filling the gap will require a combination of further donor and creditor support and government measures.
Donor coordination and administrative bottlenecks
- Donor mobilization:
- Coordinated donor response resulted in raising over US$100 million through donor conferences in October and a follow-up in Grenada in November.
- The World Bank provided US$20 million of the US$100 million, focused primarily on education (rebuilding about 26 schools) and involvement in health sector rebuilding.
- Simplification recommendations:
- Need to harmonize reporting and procurement to avoid multiple, conflicting donor procedures.
- Specific World Bank recommendation: raise procurement thresholds during emergencies (Grenada's Tender Board threshold cited as about 10,000 EC dollars) to allow projects up to a million EC dollars to be authorized by the Permanent Secretary or Minister to speed implementation.
- Supply chain and procurement bottlenecks noted as constraining reconstruction speed; risks include price gouging and substandard materials (example: inferior hurricane straps observed).
Disaster mitigation, insurance, and building codes (long-term prevention)
- Catastrophic risk insurance proposal:
- Proposal for a pooled catastrophic risk insurance mechanism covering public buildings; countries pay annual premiums; donors could help cover premiums or deductibles.
- Pooling expected to lower premiums; nine CARICOM heads of government expressed interest in participating.
- Building codes and resilient construction:
- Example cited: hurricane straps cost about $75 and, if broadly used, could have vastly reduced roof losses.
- World Bank-funded schools built to high hurricane resistance codes remained standing—evidence supporting stronger building codes and enforcement.
- Recommendations: implement and enforce better building codes, retrain local builders/contractors given prevalence of self-building, and address land-titling constraints that complicate enforcement.
Sector-specific notes and medium/long-term considerations
- Nutmeg and agriculture:
- Nutmeg trees take 7 to 10 years to mature; alternative varieties may grow faster (5 to 7 years cited for certain types), but long lag remains—implications for diversification and short-term income generation.
- Tourism:
- Cruise ship terminal undamaged and aiding vendor and restaurant activity; need for more stay-over visitors who generate higher revenues.
- Education and specialized sectors:
- St. George's University (medical school) identified as a significant contributor to the economy through international students (fee example cited around $35,000 a year) and a potential growth area along with other off-shore education institutions.
- ICT and other diversification strategies noted as potential growth areas the World Bank and Grenada were exploring.
Fiscal policy options and domestic measures discussed
- Fuel pricing:
- Retail fuel prices had been frozen for four years despite nearly 50-percent increase in world crude oil prices over that period; discussion of phasing in retail price increases and moving toward a flexible pricing mechanism.
- Tax concessions:
- Concerns raised about the proliferation of tax concessions during recovery; donors and IMF counsel limiting concessions as they undermine revenue mobilization.
- Debt strategy:
- Government appointed financial advisers (Bear Stearns cited) and legal advisers (Cleary, Gottlieb, Steen & Hamilton cited) to work on creditor agreements.
- IMF has no formal program engagement at the time beyond technical visits; debt strategy is being devised by the government with advisers.
- World Bank/IMF speakers emphasized linking debt discussions to new sources of growth and considered debt a long-term regional concern (OECS countries among the 18 most highly indebted emerging economies cited).
Social and psychological impacts
- Psychological trauma:
- Large-scale psychosocial impact noted; government planning psychological briefing and counseling for approximately 4,000 persons.
- Concern that psychological effects are becoming more apparent as immediate relief tasks recede and the next hurricane season approaches.
- Community involvement:
- Importance of involving civil society, community groups, and bottom-up planning in reconstruction; examples of community design participation and workshops cited.
- Diaspora and private contributions:
- Anecdotal evidence of strong diaspora involvement: remittances, return visits (particularly around Christmas), in-kind support via flights, and NGO/church-led contributions.
- No systematic quantified evidence of diaspora contributions provided in the transcript.
- Examples of private sector corporate social responsibility: Digicel contributed to rebuilding schools; private hotel sector engaged in rebuilding its properties.
Q&A highlights and practical concerns from attendees
- Debt-service spikes: IMF explained spikes in 2012 and 2014 result from two international bonds with bullet payments maturing in those years.
- Diaspora engagement mechanisms: participants discussed potential institutional linkages (e.g., ministries of diasporan affairs used in other countries) and practical routes for donors/diaspora to channel help (U.N. flash appeal, Red Cross, local NGOs).
- Enforcement of improved building codes linked to land-titling clarity and community education efforts; UNDP workshops and radio campaigns were active.
- Private-sector investment: examples of private and corporate actors participating in reconstruction; private real estate investment interest noted but no quantified private-investment totals provided.
Key figures and numeric details (preserved exactly as spoken)
- Damage/cost: equivalent of 200 percent of GDP—around 2.4 billion EC dollars.
- Reconstruction program cost: approximately $1.2 billion.
- Donor funds raised via coordinated conferences: over US$100 million.
- World Bank contribution: US$20 million of the US$100 million.
- IMF emergency assistance: US$4.4 million.
- Housing damage: Ninety percent of the entire housing stock was damaged or destroyed.
- Forests/schools/infrastructure damage: Over ninety percent (forest area/watershed/mangroves) and Over ninety percent (schools and physical infrastructure).
- Labor statistics: pre-hurricane unemployment 13 percent; National Insurance Scheme found 8 percent of the labor force displaced; unemployment likely rose to over 20 percent.
- Growth projection: some growth expected this year, under 1 percent.
- Procurement threshold example: current Tender Board threshold about 10,000 EC dollars; World Bank recommended raising it to a million EC dollars in emergencies.
- Hurricane strap cost example: about $75.
- Nutmeg maturation: 7 to 10 years (typical); alternative varieties possibly 5 to 7 years.
- Number of schools World Bank to be involved in rebuilding: about 26 schools.
- Psychological counseling target: approximately 4,000 persons.
- Medical clinics/community centers being repaired: eleven medical clinics and two community centers.
- Number of acres cleared for replanting: 2,000 acres.
- Number of farmers/households receiving seeds/fertilizer: over 3,000.
- Number of CARICOM heads expressing interest in insurance pool participation: nine.
Transcript of an IMF Economic Forum — Tracking Grenada's Recovery: Six Months after Hurricane Ivan; February 25, 2005.