The debt crisis in Grenada

Fr. Sean Doggett – gives the Church’s  perspective of the economic crisis

Fr. Sean Doggett – gives the Church’s
perspective of the economic crisis

The Grenada government, which is contemplating entering into an agreement with the International Monetary Fund (IMF), says it is encouraged by the support given by non-governmental organisations to restructure the country’s national debt.

According to a release from the Government Information Service (GIS), the Grenada Conference of Churches, the Grenada Private Sector Organisation, the Grenada Trade Union Council and the Inter-agency Group of Development Organisations have all voiced their support for government’s plan to restructure the national debt.

Representatives of these organisations outlined their positions last week Tuesday night during the first in a series of “Social Partner’s Forum” held at the Trade Center at Grand Anse to debate issues of national concern.

“Do we support a comprehensive work out of the debt and the answer is yes, and that was the first point we made to the Government in May,” said Father Sean Doggett, using biblical references to strengthen his argument.

“Our concern is that what happens … that the poor and marginalised must benefit from any program… their interest should be to the front”, he added.

The debt restructuring is a key component of a home-grown programme Grenada is discussing with the IMF and the Keith Mitchell administration has already warned nationals they should be prepared to make sacrifices.

Dr. Mitchell is due to visit Washington later this month for talks with the IMF and has promised to continue the national dialogue.

The Grenadian leader has been meeting with various groups to solicit feedback and has been outlining the various issues being discussed with the IMF whose board members meet in December for decision on Grenada’s home-grown programme.

Timothy Antoine – confident of growth in the economy

Timothy Antoine – confident of growth in the economy

The labour movement representative, Kenny James, said, while labour supports debt restructuring it was opposed to any move to retrench workers.

James said the unions would instead favour a redeployment of workers, measures to enhance government’s revenue collection, a cell phone levy, a financial transaction tax as well as a review of the current income tax threshold.

No retrenchment of workers. In an economy where the unemployment rate is forty percent, any further loss of jobs can have catastrophic socio-economic consequences on our society”, James told the workshop debate.

Social worker, Judy Williams, who represented development groups at the forum, said the country’s debt management strategy has been poor and Grenada must first examine the process that would have led to its current economic problems.

”We also want to say that the poor management is also a reflection of the broader issue of governance and accountability,” she said.

“We feel compel to ask for an examination of the process which led us to the current reality”, she added.

Permanent Secretary in the Ministry of Finance, Timothy Antoine, who represented the government, stressed that the size of the public debt is a matter for all Grenada.

He pointed out that the benefits of an emerging programme would result in significant reductions in the national debt, about US$300 million in debt relief, substantial grant aid and technical support in tax collection and other areas..

“Grenada has the potential to be the strongest economy in the Eastern Caribbean Currency Union (ECCU). But we must take some important decisions…some tough decisions, starting with the simple proposition of spending no more than we earn,” said Antoine.

“To convince our creditors that we not only need help but that we have learnt our lesson, we must make important sacrifices”.

The second national Social Partner’s Forum, to be held on October 15, will focus on jobs.

The Conference of Churches in Grenada submitted the following recommendations to the Government of Grenada:

 

(1). We urge the government to push for a reduction in Grenada’s debt stock to a maximum level of 50% of GDP due to the harmful effects of debt above this level on economic growth. This will require, in practice, an upfront debt stock reduction of approximately two-thirds. It is essential that debt restructuring in Grenada restore long-term debt sustainability and support a return to economic growth.

 

(2). The debt restructuring process should involve all external creditors, namely commercial, multilateral and bilateral. This will ensure fairness between creditors and mean that each creditor is subject to a lower ‘haircut’ on its claims. This will also be an incentive for all creditors to take part. We encourage the government to explore options for a comprehensive solution. These include an independent debt sustainability assessment, external mediation and a creditors’ conference.

 

(3). We appreciate that the government wishes to resolve the current debt situation in a timely manner and secure access to new sources of external finance to meet the country’s needs.

This is likely to involve an IMF-supported economic adjustment programme. Before the government signs any programme, it must seek consensus with the people on the package of reform measures the country will undertake. This will ensure that the programme respects the priorities of the local people. We therefore insist that the government share all documents with the Committee of Social Partners and the public with ample time for review and debate before any agreements are signed.

 

(4). Looking forward, it will be essential for Grenada to reduce the risk of future debt crises. We insist that the government strengthen legal and administrative structures to ensure greater transparency, accountability and participation. Specifically, we insist that the government commits to a mechanism which monitors and evaluates new debt commitments. This mechanism must involve the social partners. There is also a need to improve debt management capacities. These reforms will help put in place the tools to reduce the risk of future debt crises.

 

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