Press Release No. 10/361

Press Release: Statement by the IMF Mission to Grenada

September 28, 2010

Ms. Nita Thacker, head of an International Monetary Fund (IMF) staff mission to Grenada, issued the following statement today at the conclusion of the mission:

“An IMF team visited St. George’s during September 20–28 to conduct discussions on the first review of the government’s economic program that is supported by the IMF’s Extended Credit Facility (ECF) approved by the Fund’s Executive Board on April 2, 2010. The focus of the mission was to assess performance under the program at end-June 2010 and review recent economic developments. The mission held discussions with the Minister of Finance Hon. Nazim Burke and other cabinet ministers, senior officials of the Ministry of Finance, heads of statutory bodies, representatives from the political opposition, labor unions, and the financial sector as well as the business community. The mission would like to thank the authorities, the technical staff at ministries and the private sector for their excellent cooperation.

“The authorities have made significant progress in implementing their economic program. Based on the information received to date, all quantitative targets for end-June 2010 appear to have been met, despite a very difficult external and domestic environment. Revenue collections in the first half of 2010 were in line with projections. Spending on goods and services was somewhat higher, but the containment of capital spending kept overall outlays in line with the budget. Higher than expected grants from donors, with the associated adjustments of the IMF targets, also gave the authorities extra fiscal space to undertake some countercyclical policies. As agreed under the program, no new external loans were contracted to ensure that the debt burden does not increase and quarterly budget reviews with line ministries helped to ensure that spending plans matched available resources. Domestic arrears have also declined.

'“Significant progress was also made on meeting the structural benchmarks under the program. Significant progress was made in streamlining the government’s bank accounts and the process towards establishing a Single Treasury Account is well underway. The Grenada Authority for the Regulation of Financial Institutions (GARFIN) is working closely with insurance companies to complete the establishment of statutory funds as required under the Insurance Act of 2009, and is currently conducting on-site inspections of these entities to ensure a healthy financial sector.

“The authorities have updated the draft letter of intent that outlines policy responses to the challenges posed by the difficult economic environment and high debt level. The authorities remain firmly committed to the program’s policies and objectives, which aim at fiscal consolidation to reduce the debt-to-revenue ratio and hence free up resources for priority spending, address the strains in the financial sector to ensure that the sector remains strong, and improve the business and investment climate to achieve broad-based economic growth, increase employment, and reduce poverty. However there are significant downside risks, given the still uncertain economic external environment. Efforts regarding expenditure and debt management, customs reform, and enhanced efficiency of social spending will help Grenada tide over these challenging times. Upon the team’s return to Washington, it will prepare the necessary documentation for Executive Board consideration, expected to take place mid-November. Approval by the Board will result in the disbursement of SDR 1.25million (about US$1.89 million).”