IMF second review in the positives

The Washington-based International Monetary Fund (IMF) has once again given Grenada the “thumbs up” with progress being made with its 3-year self styled Home Grown Structural Adjustment Programme.

IMF representative  Aliona Cebotari and PS Finance Timothy Antoine at head table reporting growth in Grenada’s economy

IMF representative Aliona Cebotari and PS Finance Timothy Antoine at head table reporting growth in Grenada’s economy

A team from the fund led by Aliona Cebotari has just concluded a visit to the island to conduct its second review of the programme that the Keith Mitchell-led New National Party (NNP) was forced to institute to deal with a fiscal crisis.

Cebotari told reporters at a press briefing last week Thursday that the mission was very encouraged by the progress made by the two-year old administration in St. George’s to stabilise the economy and to return Grenada to a path of sustainable growth.

“The Grenadian economy seems to be recovering at a stronger paste than we anticipated earlier under the programme. In fact the average growth that we expected for 2014 and 2015 was about 1 percent during our earlier review, currently we estimate that growth has average about 2 percent, slightly higher,” she said.

According to Cebotori, the tourism sector continues to fuel the recovery in Grenada which has a burdensome national debt of EC$2.5 billion.

She said the outlook for 2015 has also improved and it is expected that growth for this year would be between 1.5 and 1.8 percent.

“While these trends are indeed encouraging, the challenges remain significant as unemployment remain fairly high, the leveraging in the private and public sector continues,” she added.

The IMF official stressed that the government is now collecting more in revenue from the new taxes now on stream.

“…Taxes have picked up because of the fiscal efforts the Government is doing, that has supported an increase in taxes. The Government has continued to control spending very well. We are on track in terms of where we expect it to be. In fact as I said we are significantly above our targets,” she remarked.

Cebotori told reporters that one of the negatives cited in the programme were delays in the introduction in some of the agreed upon and badly needed structural reforms.

This, she said is due to no fault of the administration since government might have “underestimated perhaps the time they would need for public consultations on some of the reforms and we also found that in many cases we had to put more efforts in estimating the revenue impact to some of the reforms”.

“…For example on the tax incentive side … that took a little bit longer than anticipated but all of the reforms that had to be done during 2014 and towards March 2015 they are all coming through…”, she said.

To date the IMF has disbursed about US$5.9 million to the Mitchell government under the SAP programme that was approved by the fund on June 26, 2014.

In a prepared statement at the conclusion of the mission visit to Grenada, Cebotari made the following official statement:

“The IMF is encouraged by the progress made to stabilize the Grenadian economy and return Grenada’s public finances to a sustainable path.

“The Grenadian economy is recovering at a stronger pace than anticipated, with growth in 2014-15 expected to average above 2 percent, compared to earlier estimates of 1.1 percent. While strong external demand for tourism services has continued to fuel the recovery, growth in other sectors, especially agriculture, is gradually strengthening.

“The outlook for 2015 has also improved, with the decline in world energy prices and a robust recovery in the United States. We now expect growth of 1.8 percent, compared to 1.1 percent at the first review. While these trends are encouraging, significant challenges remain, as elevated unemployment, contracting credit, and large debt continue to weigh down the prospects for a faster and sustained recovery.

“The fiscal performance in 2014 has also been stronger than anticipated. The government reduced its primary deficit from 4 percent of GDP in 2013 to 1 percent in 2014, outperforming the program targets. Tax revenues recovered to pre-crisis levels, reflecting the adjustment measures and stronger tax collection efforts, and expenditures were kept under strict control.

“The government has continued to repay its debt to domestic suppliers, reducing the stock of arrears by about 20 percent during 2014 and staying on track to fully repay them by the end of this year.

“To secure fiscal sustainability, this adjustment effort will need to be complemented by the completion of the debt restructuring currently under way. In addition, ambitious reforms to strengthen the fiscal policy framework are ongoing and continued progress is expected in the coming months. These include the introduction of the planned fiscal responsibility and public debt management legislation, the reform of the tax incentive regime, the enhancement of the strategy to strengthen statutory bodies and state-owned enterprises, and the approval of regulations for the sustainable management of the resources in the National Transformation Fund.

“The government has also initiated institutional reforms of its Inland Revenue Division to strengthen its capacity and effectiveness and to facilitate tax compliance by the largest taxpayers.

“The mission also made progress toward agreement on key policy issues going forward. Discussions will continue in the coming days via video-conference from Washington, D.C., with the aim of securing a timely completion of the second review”.

“The mission met with the Prime Minister and Minister of Finance and Energy, Dr. The Rt. Hon. Keith C. Mitchell; the Minister of Communication, Works, Physical Development, Public Utilities and ICT, Hon. Gregory Bowen; the Minister of Economic Development, Trade, Planning, Cooperatives and International Business, Hon. Oliver Joseph; the Permanent Secretary of the Ministry of Finance, Timothy Antoine; the Deputy Permanent Secretary of the Ministry of Finance, Mike Sylvester; the Executive Director of the Grenada Authority for the Regulation of Financial Institutions (GARFIN), Angus Smith; other senior officials, representatives of the private sector and civil society, and the Monitoring Committee for the Home-grown Program.
“The mission would like to thank the authorities and technical staff for their cooperation and hospitality, and reaffirm the IMF’s support for the government’s efforts to implement Grenada’s program. We encourage Grenada to press on with this collective effort and these vital reforms.”

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