IMF Executive Board Completes Final Review Under the Extended Credit Facility Arrangement for Grenada
IMF News, May 18, 2017
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- IMF Executive Board Completes Final Review Under the Extended Credit Facility Arrangement for Grenada
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- Published: May 18, 2017
Program completion and disbursement
- The Executive Board completed the sixth and final review of Grenada’s performance under a three-year arrangement under the Extended Credit Facility (ECF).
- Completion of the review enables disbursement of the equivalent of SDR 2 million (about US$2.8 million), bringing total resources made available to Grenada to the equivalent of SDR 14.04 million (about US$19.4 million).
- The ECF arrangement was approved by the Executive Board on June 26, 2014.
Program outcomes and macroeconomic performance
- The government met all continuous and end-December 2016 performance criteria and structural benchmarks.
- The economy grew by about 3.9 percent in 2016, reflecting continued strong construction activity and steady external demand for Grenada’s tourism services.
- The pace of restructuring of public debt accelerated in recent months.
- Grenada’s debt-to-GDP ratio declined to 83.4 percent at end-2016 from 108 percent in 2013.
- The program’s core objectives achieved: restoring fiscal sustainability, strengthening the financial sector, and setting the stage for sustainable growth.
Structural and institutional reforms
- Authorities passed: the Fiscal Responsibility Act, the Public Debt Management Act, and the Public Finance Management Act.
- The government raised total social spending under the program and improved targeting of social transfers.
- Grenada’s banking sector has strengthened and financial stability has improved.
Risks and remaining challenges
- Grenada remains a small open economy susceptible to external shocks, including natural disasters and swings in tourism demand and commodity prices.
- Public debt is still relatively high; authorities need to continue efforts to reach medium-term debt targets, lower unemployment, raise productivity, and broaden the base of growth.
- Important remaining tasks include regularizing all outstanding arrears and concluding discussions with remaining creditors as soon as possible.
- Continued efforts are needed to strengthen regulation and supervision of the non-bank financial sector.
Policy recommendations (from Mr. David Lipton)
- Adhere to the strengthened, rules-based fiscal policy framework to meet medium-term debt targets and build up reserve buffers.
- Advance structural reforms that promote broad-based growth and lower unemployment.
- Implement legislation passed during the program and follow through on accountability systems accompanying the fiscal framework.
- Remove impediments to private sector activity, advance institution-specific reforms to state-owned enterprises, and revitalize the agriculture sector.
- Strengthen labor market skills and mobility and implement public service management reform.
- Strengthen regulation and supervision of the non-bank financial sector so the financial system contributes more effectively to private sector growth.
Selected economic and financial indicators (as reported)
- GDP at constant prices: 2014: 7.3; 2015: 6.2; 2016: 3.9; 2017: 2.5; 2018: 2.3; 2019: 2.2; 2020: (projection not listed)
- Consumer prices, average: 2014: -1.0; 2015: -0.6; 2016: 1.7; 2017: 2.6; 2018: 2.0; 2019: 1.8; 2020: 1.9
- Consumer prices, end of period: 2014: 1.1; 2015: 0.9; 2016: 3.0
- Credit to private sector (end of period): 2014: -5.1; 2015: -3.8; 2016: 4.1; 2017: 2.7; 2018: 4.5; 2019: 4.4; 2020: 4.6
- Broad money (M2): 2014: 5.2; 2015: 5.5
- Central government balances (accrual), revenue (in percent of GDP): 2014: 24.5; 2015: 24.8; 2016: 26.8; 2017: 26.5; 2018: 26.1; 2019: 25.9; 2020: 25.7
- Expenditure (in percent of GDP): 2014: 29.2; 2015: 26.0; 2016: 24.3; 2017: 23.7; 2018: 23.3; 2019: 22.8
- Capital expenditure (in percent of GDP): 2014: 9.2; 2015: 8.4; 2016: 4.3; 2017: 3.8
- Primary balance 1/: 2014: -1.1; 2015: 5.3
- Primary balance (excl. CBI revenues): 2014: 1.6
- Overall balance (in percent of GDP): 2014: -4.7; 2015: -1.2; 2016: 2.4; 2017: 2.9
- Public debt (including guaranteed) 2/ (in percent of GDP): 2014: 101.8; 2015: 91.7; 2016: 83.4; 2017: 71.8; 2018: 65.8; 2019: 60.4; 2020: 54.9
- Domestic: 2014: 34.1; 2015: 29.1; 2016: 25.6; 2017: 23.5; 2018: 21.0; 2019: 18.3; 2020: 16.0
- External: 2014: 67.7; 2015: 62.6; 2016: 57.9; 2017: 48.3; 2018: 44.8; 2019: 42.2; 2020: 38.9
- Imputed net international reserves (US$ mn): 2014: 158.3; 2015: 188.5; 2016: 192.3; 2017: 194.8; 2018: 203.5; 2019: 213.4; 2020: 224.0
- Imputed net international reserves (in months of imports): 2014: 5.0; 2015: 4.8
- Current account balance (in percent of GDP): 2014: -17.5; 2015: -14.6; 2016: -15.4; 2017: -15.0; 2018: -14.4
- Exports of goods and services (in percent of GDP): 2014: 27.9; 2015: 27.2; 2016: 29.0; 2017: 28.2; 2018: 28.4; 2019: 28.7
- Imports of goods and services (in percent of GDP): 2014: 45.5; 2015: 44.7; 2016: 43.6; 2017: 43.4; 2018: 43.7
- External debt (gross, in percent of GDP): 2014: 143.0; 2015: 135.3; 2016: 129.0; 2017: 117.5; 2018: 113.0; 2019: 109.4; 2020: 105.2
Sources: Ministry of Finance; Eastern Caribbean Central Bank; and Fund staff estimates and projections.
Press Release No. 17/182 — IMF Communications Department