Gre­nada restor­ing fis­cal and ex­ter­nal sus­tain­abil­ity: IMF

The Pak Banker - - COMPANIES/BOSS -

In re­sponse to a re­quest from the Gre­nada's au­thor­i­ties, an IMF mis­sion vis­ited Gre­nada's to hold dis­cus­sions on a four-year ar­range­ment un­der the IMF's Ex­tended Fund Fa­cil­ity (EFF).

Con­clud­ing state­ment of the 2016 Ar­ti­cle IV Con­sul­ta­tion Visit and Fourth Re­view un­der the Ex­tended Credit Fa­cil­ity (ECF), IMF Mis­sion de­scribes that since the last Ar­ti­cle IV con­sul­ta­tion in June 2014, Gre­nada has made ma­jor strides to­ward restor­ing fis­cal and ex­ter­nal sus­tain­abil­ity. Eco­nomic ac­tiv­ity has picked up, debt has been re­duced, and the bal­ance of pay­ments po­si­tion has strength­ened. The govern­ment has also pushed through im­por­tant leg­isla­tive re­forms to build a fis­cal frame­work that will lock-in fis­cal dis­ci­pline over the long term. As the coun­try heads into the last year of its ECF­sup­ported pro­gram, re­newed pol­icy re­solve will be es­sen­tial to se­cure last­ing suc­cess of the home-grown pro­gram and broaden the reach of its ben­e­fits. The key pri­or­i­ties in 2016 in­clude ex­e­cu­tion of the bud­get in line with pro­gram com­mit­ments and the new Fis­cal Re­spon­si­bil­ity Act (FRA); fo­cused re­forms to en­sure pru­dent and sus­tain­able man­age­ment of the pub­lic sec­tor wage bill; ap­pli­ca­tion of the new sys­tem to reg­is­ter ben­e­fi­cia­ries for so­cial as­sis­tance; and fol­low through on growthen­hanc­ing re­forms in the ar­eas of busi­ness fa­cil­i­ta­tion and la­bor leg­is­la­tion.

Ac­tiv­ity in 2015 re­mained ro­bust. Fu­eled by growth in agri­cul­ture, tourism and con­struc­tion, the econ­omy is es­ti­mated to have ex­panded by 4.6 per­cent. Gre­nada ex­pe­ri­enced de­fla­tion of 1.3 per­cent (an­nual av­er­age) in 2015 due mostly to lower en­ergy prices. The ex­ter­nal cur­rent ac­count deficit fell to an es­ti­mated 15.1 per­cent of GDP in 2015 from a peak of 23.2 per­cent in 2013 on the back of stronger tourism re­ceipts and lower in­ter­na­tional oil prices. The cur­rent ac­count deficit was ad­e­quately fi­nanced by tourism-re­lated FDI and pri­vate cap­i­tal in­flows, and for­eign re­serves rose to 6 months of im­ports at end-2015. The real ef­fec­tive ex­change rate has ap­pre­ci­ated by 3.6 per­cent since mid 2014 due to the rise in the U.S. dol­lar, but this was partly off­set by rel­a­tively lower do­mes­tic price in­fla­tion in Gre­nada.

Fis­cal per­for­mance un­der the ECF­sup­ported pro­gram was strong in 2015. The govern­ment met all quan­ti­ta­tive per­for­mance cri­te­ria at end De­cem­ber. Stronger ac­tiv­ity, re­cent rev­enue mea­sures, and im­prove­ments in tax ad­min­is­tra­tion con­trib­uted to higher rev­enue col­lec­tions, and cur­rent ex­pen­di­ture was con­tained. The pri­mary sur­plus (fis­cal bal­ance ex­clud­ing in­ter­est pay­ments) is es­ti­mated at 2.2 per­cent of GDP (in­clud­ing Cit­i­zen­ship-by-In­vest­ment rev­enues). The govern­ment cleared all bud­get ex­pen­di­ture ar­rears in 2015, com­plet­ing a key step to re­store liq­uid­ity and con­fi­dence in the do­mes­tic econ­omy. Af­ter in­tense ef­forts, Gre­nada con­cluded sev­eral im­por­tant debt re­struc­tur­ing agree­ments in 2015. Pub­lic debt as a per­cent­age of GDP was re­duced from a peak of 107 per­cent in 2013 to 92.7 per­cent at end 2015.

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