A year ago the IMF Chief for Grenada, Aliona Cebotari had described the ailing Grenadian economy as a cancer patient in need of therapy.
However, last week Cebotari told reporters at a press conference in St. George’s that the economy is on the rebound following the implementation of a 3-year Structural Adjustment Programme (SAP) by the 18-month old Keith Mitchell-led New National Party (NNP) administration.
After almost two weeks on the island to undertake the first review of the programme for the period January to June, the IMF official said that the SAP is off to a good start.
She praised the Mitchell administration for the very strong engagement that it has made under the programme and said that one of the conclusions reached by the IMF team is that the economic development and the economic outlook are positive.
Cebotari said for the year 2014, growth is expected to be over 1% following little or no growth in recent years.
“Inflation was more larger than we expected under the programme, in fact during the first two months of the year we saw prices falling, we expect prices to be on average lower than they were last year”, she told reporters.
According to the IMF official, the package of fiscal adjustments measures put in place late last year by government are yielding good results and the expected fiscal consolidation is possible.
“The government met the end June fiscal targets with a significant margin and therefore revenues have been higher than they were expected in the programme and the current expenditures have been low so it’s been a very strong performance rate”, she said.
She believes that the good performance will continue into the rest of the year.
In this regard, Cebotari said the Structural Reform Agenda for the next 12 to 15 months would focus on improving the business environment, strengthening of the fiscal policy framework and modernizing the public service.
Under strengthening of the fiscal policy framework she said, “fiscal responsibility will be personally introduced before the end of the year and new legislative framework for the public debt management will also be introduced as well as the regulatory framework for the national transformation.”
According to Cebotari, the fiscal findings and Structural Reform Agenda have to be approved by the IMF management and IMF executive board.
She said if everything goes well the board is expected to meet in November and thereafter the IMF will be able to disburse more money. The sum could be around US$3 million.
Permanent Secretary in the Ministry of Finance, Timothy Antoine who also addressed the press conference said the government is not surprised by the findings of the IMF.
“We feel we have worked hard, the IMF has recognized those results by verifying them, by being on the ground and looking at it very closely and that our international partners are basically being rewarded in terms of their faith in Grenada by our own performance,” he said.
Antoine stated that the IMF prognosis will serve to further impress upon the government the need to push harder with the programme.
“What that does for us, is it really energises us to press on … so we have to continue to work hard and we have to improve our revenue collection, there’s no doubt about that”, he said.
“We are not satisfied, we are gratified but not satisfied with the results, in other words we met the targets … but we also know that there is room for improvement,” he added.
PS Antoine stressed that the next move by local authorities is to get Grenada’s fiscal house in order and to press on with the business of an already growing economy so as to create jobs and transform the economy.
At the conclusion of the visit, Cebotari issued the following statement on behalf of the IMF:
“Grenada has made a strong start in implementing its program. The fiscal consolidation is on track and all quantitative performance criteria for end-June were met.
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.
The Fund mission reached preliminary understandings with the authorities on economic policies going forward.
The economic recovery is slowly taking hold and the growth outlook remains broadly in line with the program, 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.
Continued strong program implementation will be critical to overcoming the challenges faced by the Grenadian economy.
Looking ahead, the authorities’ program 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 structural reform agenda will focus on:
(i) improving the business environment through amendments to the Investment Promotion Act, the tax incentive regime, and regulatory reforms to the energy sector;
(ii) a continued strengthening of the fiscal policy framework through the introduction of fiscal responsibility legislation,
(iii) 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;
(iv) modernizing the public service; and
(v) strengthening the financial position and oversight of statutory bodies.
These preliminary understandings are subject to approval by the IMF’s Management and Executive Board. Consideration of the first review of Grenada’s IMF-supported program under the ECF could take place by the IMF’s Executive Board in November. Upon approval, SDR 2 million (about US$ 3 million) would be made available to Grenada.
The mission would like to thank the authorities and technical staff for their excellent cooperation and kind hospitality, and reaffirm the IMF’s support for the government’s efforts to implement Grenada’s program.”