From Caribbean360

IMF-740ST. GEORGE’S, Grenada, Thursday August 28, 2014, CMC – An International Monetary Fund (IMF) delegation Wednesday ended a 10-day visit to Grenada warning that the local economy continues to face significant challenges from high unemployment, a large debt overhang, and balance sheets weakened by impaired loans.

The IMF team headed by Aliona Cebotari, the Fund’s mission chief for Grenada, was conducting the first review of Grenada’s IMF-sponsored US$21.7 million programme under the Extended Credit Facility (ECF) that was approved in June this year.

During their visit here, the IMF delegation, which was accompanied by representatives from the Barbados-based Caribbean Development Bank (CDB), the World Bank and the Eastern Caribbean Central Bank (ECCB), met with Prime Minister Dr. Keith Mitchell, senior government ministers as well as representatives from the private sector and civil society.

They also held talks with the Monitoring Committee for the Home-grown Programme.

“Grenada has made a strong start in implementing its programme. The fiscal consolidation is on track and all quantitative performance criteria for end-June were met,” said Cebotari, noting that the main structural benchmark for the first review―the introduction of a new Public Finance Management Act to strengthen budget preparation and execution in line with best international practices―was also met.

She said the Fund mission reached preliminary understandings with the authorities on economic policies going forward.

But she noted the “economic recovery is slowly taking hold and the growth outlook remains broadly in line with the programme, while inflation has been lower than expected.

“However, the economy continues to face significant challenges from high unemployment, a large debt overhang, and balance sheets weakened by impaired loans.”

She said continued strong programme implementation will be critical to overcoming the challenges faced by the Grenadian economy.

“Looking ahead, the authorities’ programme will continue to focus on restoring fiscal sustainability, strengthening competitiveness and growth prospects, and securing financial stability. In addition to the programmed fiscal adjustment, progress on the comprehensive debt restructuring underway will be needed to secure fiscal sustainability.”

The IMF official said the structural reform agenda will focus on a number of areas including improving the business environment through amendments to the Investment Promotion Act, the tax incentive regime, and regulatory reforms to the energy sector.

It will also provide a continued strengthening of the fiscal policy framework through the introduction of fiscal responsibility legislation, new legislative frameworks for public debt management and tax administration, and a regulatory framework for the National Transformation Fund to ensure sustainable management of the citizenship-by-investment receipts.

The IMF said the programme also provides for the modernisation of the public service and strengthening the financial position and oversight of statutory bodies.

Cebotari said the preliminary understandings are subject to approval by the IMF’s Management and Executive Board.

She said consideration of the first review of Grenada’s IMF-supported programme under the ECF could take place in November and that upon approval, about three million US dollars would be made available to Grenada.

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