The Washington-based International Monetary Fund (IMF) has reported on the performance of the re-introduced passport selling scheme of the 3-year old New National Party (NNP) government of Prime Minister, Dr. Keith Mitchell.
In a 84-page report obtained by THE NEW TODAY newspaper, the IMF noted that the revenue obtained by government from selling passports “have the potential to provide meaningful support to public investment, public finance, and growth, provided the proceeds are managed in a transparent and sustainable manner”.
The cash-strapped Mitchell-led government returned to selling passports under a Citizenship By Investment (CBI) programme to help raise badly needed funds for the Treasury.
The first programme was halted in the face of concerns expressed by the United States and Canada over fears that Grenadian passports could end up in the hands of questionable figures.
The Canadian government retaliated by imposing visa restrictions on nationals from the Spice Isle seeking to enter their borders.
Following are extracts from the IMF report on Grenada’s CBI programme:
Strengthening the Transparency and Governance of Grenada’s Citizenship-By-Investment (CBI) programme.
Grenada has taken steps to strengthen its Citizenship-By-Investment (CBI) program.
Launched in 2014, government revenue from the program remains relatively small (about 0.4 percent of GDP during the first half of 2015), but, as the program matures, its revenues have the potential to provide meaningful support to public investment, public finance, and growth, provided the proceeds are managed in a transparent and sustainable manner.
To strengthen the governance of their CBI program, the authorities have recently:
Published CBI Program Statistics: The authorities, in July 2015, began publishing quarterly statistics on their CBI program (a structural benchmark under their IMF-supported program), strengthening transparency of the program. Grenada is the only ECCU country with a CBI program publishing statistics on its program.
National Transformation Fund (NTF) Regulations: The authorities, in August 2015, finalized regulations for the NTF, a special public fund into which foreign nationals can make a donation to obtain Grenadian citizenship. The regulations put in place a governance framework for the fund and its investment decisions. As the bulk of government CBI revenues are expected to be received by the NTF, the regulations are a critical component of the government’s overall effort to manage fiscal risks from a sudden stop of CBI flows while maximizing their impact on potential growth.
*Enhance the transparency of the CBI program by mandating the publication of information on all NTF-financed projects and spending, its financial statements, and annual expenditure plan.
*Clarify the governance framework for the NTF by establishing a Board of Directors and outlining reporting requirements to central government.
*Guard against an unsustainable scaling up of public investment by mandating the use of NTF resources be balanced between debt reduction and transformational investment spending. Consistent with the Fiscal Responsibility (FR) Act (2015), the first 40 percent of total NTF resources must be saved for arrears repayment, debt reduction and contingency financing for natural disaster relief. Moreover, consistent with the authorities’ program commitment to clear all budget expenditure arrears by end-2015, the regulations require that the first EC$24 million of NTF revenues in 2015 be devoted to arrears clearance.
*Mitigate potential fiscal risks by fully integrating NTF investment into the central government budget and setting a cap on annual NTF spending.
*Maximize the impact of CBI revenue on potential growth by:
(i) requiring rigorous project evaluation and selection aligned with Grenada’s development priorities identified in its GPRS 2014-18 and National Sustainable Development Plan 2030; and
(ii) and full integration of NTF projects with Grenada’s Public Sector Investment Program (PSIP).
These reforms complement the authorities’ existing efforts to ensure the sustainable management of Grenada’s CBI program.
The FR Act (2015) also includes important safeguards to mitigate potential fiscal risks from CBI revenues by capping the total sum of CBI program receipts to be used for meeting the primary balance targets at 1.5 percent of GDP.
The authorities have also focused on putting in place a strong due diligence framework, with safeguards to prevent financial integrity and security risks, to ensure the program’s sustainability.
In particular, the authorities have engaged reputable international groups to strengthen the screening of applicants and are holding bilateral discussions with important stakeholders from the international community on collaborative information sharing.
Continuation of these efforts, including through effective implementation of the anti-money laundering and combating the financing of terrorism (AML/CFT) framework targeted to applicants and new citizens, will also be critical to ensuring the sustainability of the CBI program.