IMF Staff concludes 2023 Staff Visit to Grenada
IMF News, November 20, 2023
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- Published: November 20, 2023
Mission overview
- IMF team led by Mr. Janne Hukka met with Grenadian authorities during November 15–17 to discuss recent economic developments and follow up on policy priorities from the 2023 Article IV Consultation.
- End-of-mission statement issued by Mr. Hukka summarizes preliminary findings; staff will prepare a report for the IMF's Executive Board subject to management approval.
- Press Release No. 23/404 — November 20, 2023.
Growth performance and drivers
- The Grenadian economy continues to grow robustly and is expected to surpass its pre-pandemic level in 2023.
- Growth drivers:
- Continued strength in construction.
- Sustained increase in tourist arrivals, in part due to successful efforts to improve airlift.
- Record revenues from the Citizenship-by-Investment (CBI) program have supported both public and private investment.
Inflation and risks to the outlook
- Inflation:
- Headline inflation remains low: 2.3 percent y/y in September.
- Food price inflation is still elevated but gradually easing: 6.8 percent y/y.
- Key risks:
- External shocks disrupting tourism or CBI inflows.
- Potential commodity price volatility amid heightened geopolitical uncertainty.
- Ever-present risk of natural disasters.
Fiscal outlook and reform agenda
- Near-term fiscal outlook:
- Improved by recent strong revenue performance reflecting buoyant economic activity and a surge in government CBI revenue.
- CBI revenue is anticipated to normalize after the current backlog of CBI applications is cleared.
- The 2023 supplementary budget used some additional fiscal space to scale up public investment; execution delays are anticipated to result in a higher-than-budgeted central government surplus.
- Central government debt remains on a downward path.
- Fiscal reforms and policy recommendations:
- The new Fiscal Resilience Act:
- Simplifies the existing rules-based framework and strengthens longer-term fiscal discipline.
- Broadens the coverage of the framework’s public debt anchor.
- Strengthens the role of the medium-term fiscal framework in guiding revenue and expenditure policies.
- Enhances the role of the Fiscal Resilience Oversight Committee (FROC).
- Recommend an appropriately phased regularization of public sector workers, guided by the ongoing review of job functions, to improve efficient delivery of public services alongside broader public sector service reforms.
- Modernize the tax administration to facilitate online payments.
- Parametric pension reforms, including the recently approved phased increase in the retirement age to 65, will materially help shore up the National Insurance Scheme’s longer-term sustainability.
- An actuarially sound and carefully coordinated reform of the public sector pension scheme remains a high priority to contain the fiscal burden on government finances.
Financial sector stability and vulnerabilities
- Overall assessment:
- The Grenadian financial sector remains stable and liquid.
- Bank credit growth has increased with greater demand for construction and durable consumer goods loans.
- Vulnerabilities and supervisory actions:
- Persistently elevated non-performing loans in credit unions, prompting intensifying supervisory measures to tighten lending standards and enforce corrective actions for institutions that do not meet prudential requirements.
- Encouragement for all financial institutions to leverage the ECCU regional credit bureau once it becomes operational to mitigate credit quality risks and support local lending.
Closing
- The mission team expressed gratitude to the Grenadian authorities for candid and productive discussions and warm hospitality.
IMF Staff concludes 2023 Staff Visit to Grenada, Press Release No. 23/404, November 20, 2023.