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Grenada: Staff Report for the 2008 First Review Under the Poverty Reduction and Growth Facility Arrangement, Request for Waiver of Performance Criterion, Financing Assurances Review, and Request for Rephasing and Extension of the Arrangement and Request for Augmentation Informational Annex

International Monetary Fund
Published Date:
November 2008
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Appendix I. Grenada: Fund Relations

(As of May 31, 2008)

I. Membership Status: Joined: August 27, 1975;

II. General Resources Account:

SDR MillionPercent of

Fund Holdings of Currency13.89118.76
Reserve Position0.000.00

III. SDR Department:

SDR MillionPercent of

Net cumulative allocation0.93100.00

IV. Outstanding Purchases and Loans:

SDR MillionPercent of

Emergency Assistance2.1918.75
PRGF Arrangements1.5613.33

V. Financial Arrangements:

TypeDate of


Amount Approved

(SDR Millio)
Amount Drawn

(SDR Million)
PRGFApr 17, 2006Apr 16, 200910.531.56

VI. Projected Obligations to Fund

(SDR Million; based on existing use of resources and present holdings of SDRs)


VII. Implementation of HIPC and MDRI Initiatives: Not Applicable

VIII. Safeguards Assessment: Under the Fund’s safeguards assessment policy, the Eastern Caribbean Central Bank (ECCB) is subject to a full safeguards assessment under a four-year cycle. The most recent assessment was completed in July 2007, and concluded that the ECCB continues to have appropriate control mechanisms in place, which have strengthened since the first safeguards assessment completed in 2003. ECCB management places emphasis on good governance and sound controls, and has enhanced the bank’s transparency and accountability since the last assessment, including the publications of financial statements that comply with International Financial Reporting Standards. The assessment made some recommendations to sustain the ECCB’s safeguards framework going forward.

IX. Exchange Arrangement: Grenada is a member for the ECCB, which manages monetary policy and the exchange system for its eight members. The common currency, the Eastern Caribbean dollar, has been pegged to the U.S. dollar at the rate of EC$2.70 per U.S. dollar since July 1976. In practice, the ECCB has operated like a quasi-currency board, maintaining foreign exchange backing of its currency and demand liabilities of close to 100 percent. Grenada accepted the obligations of Article VIII, Sections 2, 3, and 4 in January 1994. It maintains an exchange system free of restrictions on the making of payments and transfers for current international transactions.

X. Article IV Consultation: Grenada is on a 24-month consultation cycle. The last Article IV consultation was concluded by the Executive Board on September 26, 2007 (IMF Country Report No. 08/351).

XI. FSAP Participation: Grenada participated in the regional Eastern Caribbean Currency Union FSAP conducted in September and October 2003. The Financial System Stability Assessment is IMF Country Report No. 04/293.

XII. Technical Assistance:

Caribbean Regional Technical Assistance Centre (CARTAC)

CARTAC has provided wide-ranging assistance in developing a Medium-Term Macroeconomic Framework (as part of the Structural Adjustment Technical Assistance Program); preparing to implement a VAT, building upon previous work, including draft VAT/excise laws (prepared by LEG) and a VAT sensitivity study and training/publicity tasks (undertaken with CARTAC/FAD assistance); assisting customs with ASYCUDA/ASYCUDA++ and with the exchange of information with inland revenue; drafting legislation to establish the single supervisory agency, Grenada Authority for the Regulation of the Financial Institutions (GARFIN) and supporting the newly established agency; and training for nonbank supervisors. CARTAC has also provided substantial assistance in improving the production and dissemination of macroeconomic statistics, including national accounts compilation; rebasing of the consumer price index; initiating work to prepare export-import price indices; training in the processing of trade data; and improving external sector statistics as part of a major CARTAC/ECCB project.

Other Technical Assistance (2007–08):

FAD and LEG have provided extensive assistance in tax policy and administration. In particular, FAD and LEG have assisted in the design and drafting of a VAT and related changes to excise taxes. LEG has also assisted with training for tax officials and with the finalization of the VAT and excise laws. A series of FAD missions have provided further assistance on implementing a VAT and on tax and customs administration more broadly.

Appendix II. Grenada: Relations with the World Bank Group

(As of April 30, 2008)

In September 2005, the Eastern Caribbean Sub-Region Country Assistance Strategy (CAS) for FY06–09 was presented to the Board of the World Bank. The strategy supports the sub-region’s development agenda through two main pillars: (1) stimulating growth and improving competitiveness; and (2) reducing vulnerability, by promoting greater social inclusion and strengthening disaster risk management. Recognizing the OECS countries’ weakened creditworthiness due to high debt ratios, Bank activities will focus on leveraging available donor grant financing. Following the recommendations of the recently completed growth and competitiveness study for the OECS, IBRD and IDA support would focus on providing technical and financial assistance for interventions to support the two main pillars. An indicative Base Case lending scenario consisted of about US$51.3 million in IDA resources for the four OECS IDA eligible countries. An OECS CAS progress report will be presented to the Board in June 2008.

A. Projects

There are eight active World Bank projects in Grenada for a net commitment of approximately US$46.61 million.

The OECS E-Government for Regional Integration Program is scheduled for Board consideration on May 27, 2008. This project consists of a US$2.4 million loan to Grenada and is designed to promote the efficiency, quality, and transparency of public services through the delivery of regionally integrated e-government applications that take advantage of economies of scale. The program is structured in phases. Phase 1 focuses on cross-sectoral e-government issues, as well as on specific applications in the public finance area (including Public Financial Management or PFM, tax, customs and procurement), and also includes an e-government in health pilot project (possibly together with preparatory and complementary activities in other social and productive sectors). Subsequent phases of the program are expected to deepen the assistance provided under Phase 1, while expanding the program to cover other sectors, in particular, health, education, agriculture, tourism, postal, among others that may emerge during the early stages of implementation of Phase 1.

The Grenada Technical Assistance Project, approved on March 13, 2008 for US$2.78 million, has the following development objectives: (i) improve the efficiency and effectiveness of Customs, (ii) improve the efficiency of tax administration and decrease transaction costs of paying taxes and consequently increase tax compliance, (iii) modernize investment promotion, and, (iv) enhance the Government’s support to the export sector through improve access to trade information and the strengthening the capacity of the Bureau of standards to provide conformity assessment and quality assurance. The medium-to-long-term direct impact of the project is likely to be substantial, including: better quality service and reduced clearance time at customs; reduced time and lower transaction cost for paying taxes and hence improved compliance; greater access to trade data and quality assurance support for exporters; and increased investments as a result of a more streamlined and faster system for investment approval in Grenada.

The Caribbean Catastrophe Risk Insurance Facility (CCRIF) was approved in March 2007 as the world’s first ever multi-country catastrophe insurance pool. The bank has approved a US$4.5 million IDA credit for Grenada to finance their contribution to the fund over three years. The Facility will enable governments to purchase catastrophe insurance coverage against adverse natural events, such as a major earthquake or hurricane. The CCRIF allows participating countries to pool their country-specific risks into one, better-diversified portfolio, resulting in a substantial reduction in the premium cost of 45–50 percent.

The Public Sector Modernization Technical Assistance Project, approved in December 2005 for US$3.5 million, assists the Government of Grenada to begin the process of modernizing its public sector. The project has the following components: Component 1) will finance: (i) the strategic review of the proposed organizations and functions for conversion to Executive Agencies status; (ii) the preparation of detailed, modernization and financing plans for each conversion; (iii) the preparation of a Policy Framework for Executive Agencies; and (iv) the preparation of enabling legislation-including the preparation of a draft Executive Agencies bill to be presented to Cabinet and Parliament under Grenada’s legal framework. Component 2) will support the strengthening of the Small Business Development Centre (SBDC) of the Grenada Industrial Development Corporation (GIDC) that will provide technical assistance and training to the micro/small segment of the business community. Component 3) will support Grenada in taking the lead to jointly procure select goods and services with other OECS countries. Component 4) will strengthen the Public Sector Reform Unit by providing financial and technical resources and training on key policy areas.

The Telecommunications and ICT Development Project, approved in May 2005 for US$540,000, aims at improving the access, quality, and use of telecommunications and ICT services to achieve socio-economic development in the Organization of Eastern Caribbean States (OECS). The project has the following four components: Component 1) will strengthen the national and regional regulatory frameworks and promote additional competition in the telecommunications sector. Component 2) will review current universal access policy, create related guidelines, and provide financial support to establish a Universal Service Fund (USF). Component 3) will improve growth and competitiveness in ICT-enabled services through utilization of broadband infrastructure. Component 4) will ensure management and administration of the overall project.

The Hurricane Ivan Emergency Project was approved in November 2004 for US$10 million, with an additional US$9.8 million being added in September 2005. This emergency assistance for Grenada was implemented to respond to the effects of a devastating hurricane that hit the island in September 2004. The project supports the recovery efforts of the government of Grenada through the financing of critical imports and rehabilitation activities in key social sectors.

The Grenada Education Reform Project, approved in June 2003 for US$8.0 million, is a follow-up to an earlier education project. Its objective is to build human capital, with a view to contributing to economic diversification and more sustainable growth. Key objectives are to: (i) increase equitable access to secondary education; (ii) improve the quality of the teaching and learning processes, with more direct interventions at the school level and an increased focus on student-centered learning, and (iii) strengthen management of the education sector and to improve governance of schools.

The HIV/AIDS Prevention and Control Program, approved in July 2002 for US$6.04 million, is funded under the Multi-Country APL for the Caribbean Region. Its objectives are to: (i) curb the spread of the HIV/AIDS pandemic; (ii) reduce the morbidity and mortality attributed to HIV/AIDS; (iii) improve the quality of life for persons living with HIV/AIDS; and (iv) develop a sustainable organizational and institutional framework for managing the HIV/AIDS epidemic. The Bank’s support to Grenada under this project amounts to US$6.0 million

B. Economic and Sector Work

The Bank has completed a series of analytical work relating to public sector capacity in the OECS including a number of Public Expenditure Reviews, an Institutional and Organizational Capacity Review and, in late 2007, a Country Fiduciary Assessment. The Bank also prepared an OECS study on Growth and Competitiveness (2005), a Caribbean Air Transport Report (2006), and a regional study on Crime, Violence, and Development: Trends, Costs, and Policy Options in the Caribbean (2007). In addition, an OECS Private Sector Financing Study was completed in early 2008.

Grenada will also benefit from ongoing and planned analytical and advisory activities including the following: A Caribbean Skills and Curriculum Study, a Caribbean Financial Sector and Regulation report, a Caribbean Social Protection Strategy Review, a Trade Integration in the Caribbean: Policy Options for Sustained Growth, Job Creation, and Poverty Reduction report, a CARICOM study on Managing Nurse Migration, and an OECS Tourism Backward Linkages Study. In addition, a Regional Energy Security report is planned.

C. Financial Relations

(In millions of U.S. dollars)

OperationOriginal PrincipalAvailable1Disbursed1
E-Government for Regional Integration Program2.402.400.00
Grenada Technical Assistance Project1.861.970.00
The Caribbean Catastrophe Risk Insurance4.502.492.44
The Public Sector Modernization Technical Assistance Project3.503.440.67
Telecommunications & ICT Development Project0.540.380.22
Hurricane Ivan Emergency Recovery Project19.776.6613.87
Grenada Education Reform Project8.001.795.89
HIV/AIDS Prevention And Control Program6.043.651.85

Amounts may not add up to Original Principal due to changes in the SDR/US exchange rate since signing.

Amounts may not add up to Original Principal due to changes in the SDR/US exchange rate since signing.

Disbursements and Debt Service(Fiscal Year ending June 30)
Total disbursements1.992.462.786.302.775.934.275.837.57
Net disbursements1.922.402.716.232.555.303.174.355.99
Interest and fees0.

Figures as of April 30, 2008

Figures as of April 30, 2008

Appendix III. Grenada: Relations with the Caribbean Development Bank

(As of April 30, 2008)

A. New Projects and Technical Assistance

Since Hurricane Ivan in 2004, Grenada has benefited from special financing from the Caribbean Development Bank (CDB). The financing apportioned to Grenada incorporates a blend of the Bank’s Special Development Funds (SDF) and ordinary capital resources, designed to yield a concessionary grant element of 35%. The SDF, administered exclusively for high-priority development loans, offer loans with longer maturities and grace periods, as well as lower interest rates than those applied in the Bank’s ordinary operations.

Schools Rehabilitation and Reconstruction Project

In May 2007, an investment loan of US$7.47 million was approved to assist the Government of Grenada to improve the quality and effectiveness of basic education in Grenada. Its specific objective is the enhancement of the learning and teaching environment through reconstruction and expansion of facilities at one primary and three secondary schools. It also allows for the expansion of technical/vocational and science laboratories in some of the project schools. An institutional strengthening component provides for consultancies services to assist Government enhance the capacity of school principals to plan and manage their resource; and to assess the current programme for training of technical/vocational teachers. The project is expected to benefit the student and staff population of the project schools, some of whom are currently accommodated in inadequate temporary facilities.

Project Management Training

Six public officials from Grenada benefited from a CDB-financed, regional training programme in project management training emphasizing the quality of project design and the efficiency of execution. The training programme awards a postgraduate certification in Project Planning, Appraisal and Management, and is slated to run for three years.

Institutional Strengthening - The Ministry of Communications, Works and Transport

In March 2008, a technical assistance grant of US$466,200 was approved to assist with the establishment of a Project Implementation and Management Unit within the Ministry, and with the conduct of an organizational assessment of the Ministry by consultants with a view to improving project implementation and management capacity.

B. On-going Activities

Loan disbursements continued for projects under implementation. These included capital works to upgrade and rehabilitate physical infrastructure including the road and bridge network; reduce the risk of rock fall and landslip events in the aftermath of natural hazards; improve the shelter conditions of low-income households through the provision of 116 serviced lots; and facilitate urban re-development.

C. Financial Relations

(As of December 31, 2007)

(In millions of U.S. dollars)

Cumulative total credit approved1112.8120.7143.8169.0180.1199.1
Cumulative disbursements288.697.099.7112.8130.0143.3
Ordinary Capital Resources1.
Special Development Fund2.
Other Special Fund Resources1.
Ordinary Capital Resources0.
Special Development Fund1.
Other Special Fund Resources0.
Outstanding debt (end of period)55.761.267.177.691.6101.8
Interest and Commitment Fees
Ordinary Capital Resources1.
Special Development Fund0.
Other Special Fund Resources0.
Source: Caribbean Development Bank.
Source: Caribbean Development Bank.

Appendix IV. Grenada: Statistical Issues

Since March 2001, Grenada has participated in the Fund’s General Data Dissemination System (GDDS). Its metadata are posted on the Dissemination Standards Bulletin Board, although these have not been certified and updated recently. The metadata include short-and medium-term plans for statistical development. While the dataset provided by the authorities is generally adequate for program purposes, identified discrepancies would need to be increasingly addressed. Some of the outstanding issues are detailed below.

A. Real Sector

There are a number of deficiencies in the real sector statistics. National accounts are provided annually but are subsequent to frequent revisions—major revisions were undertaken in 2007 to extend coverage of national accounts to the offshore university as well as to improve construction activity estimates. GDP by expenditure is available only with long lags, and real GDP estimates for the tourism sector are not computed. The estimation of gross capital formation and sectoral price deflators needs to be improved. There are discrepancies in the foreign trade estimates prepared by the customs department and the Central Statistical Office (CSO), and coverage, consistency, and timeliness of tourism data are limited.

Consumer prices are the only real sector data provided between missions; however these data are subject to frequent revisions. The basket used to compute the consumer price index was last updated in 2000. A producer price index is not available.

Labor statistics are limited and outdated, with 1998 being the most recent year for which data are available. There are no regular wage and unemployment data. Data collected during the 2001 population census are still being processed. The CSO is working with the International Labor Organization (ILO) to improve the coverage of labor market statistics and is also conducting a Country Poverty Assessment, with assistance of the Caribbean Development Bank.

B. Public Finances

The reporting of central government data has improved in recent years, with quarterly data being provided to the ECCB, WHD, and other users in Fund economic classification format with lags of about two months. However, there appear to be inaccuracies in the composition of public expenditure. Moreover, capital expenditures could include current expenditure items, and the nature of expenditures in the Public Sector Improvement Program needs to be scrutinized carefully. In addition, spending on outsourced activities is not broken down into the appropriate categories, but rather grouped into a single category.

The coverage of the rest of the public sector is very limited, and there are no consolidated public sector accounts. There is no systematic reporting of information to the ministry of finance. Annual statements for some public enterprises are provided during Fund missions. It would be useful to institute a mechanism for the regular reporting of financial data pertaining to the rest of the public sector.

The authorities do not report fiscal data for publication in IFS. Grenada has not provided any fiscal data, either on a GFSM 2001 basis, or a cash basis, for presentation in the GFS Yearbook. The ECCB disseminates Grenada’s quarterly GFS data in its Economic and Financial Review.

C. Monetary Accounts

The ECCB compiles monthly data on depository corporations (central bank and other depository corporations) and reports the accounts attributable to Grenada to STA using the standardized report forms with a lag of about two months for publication in the IFS and the IFS Supplement. The ministry of finance does not collect data regularly on finance companies, building societies, and credit unions, which also accept deposits, and on other financial corporations; this may improve with the formation of the Grenada Authority for the Regulation of Financial Institutions. While the dataset provided by the authorities is generally adequate for program purposes, identified discrepancies would need to be increasingly addressed. These include appropriate classification of government indebtedness (in particular, a specific 2005 loan). However, these data inadequacies do not pose problems to program reviews.

Expanding institutional coverage to include all depository corporations and the other financial corporations, such as credit unions and insurance companies, would enhance understanding of savings and credit as well as improve compilation of monetary aggregates. In addition, improved classification of financial instruments and loan categorization would enhance identification of credit flows to different sectors of the economy.

D. Balance of Payments

The ECCB compiles and reports balance of payments statistics on an annual basis, using information collected by the CSO. The 2006 data were finalized in 2008 and are published in the IFS and Balance of Payments Yearbook.

Many of these statistics are based on information collected from surveys, and are not comprehensive. Trade statistics have traditionally been more reliable and available by SITC classification on a quarterly basis. However, reliability and detail of trade statistics have suffered considerably in the aftermath of Hurricane Ivan (September 2004) and reporting is not yet fully back on track.

Enhanced data sources and better compilation procedures are needed to improve the accuracy of balance of payments statistics. Moreover, quarterly balance of payments statistics and international investment position data are not compiled.

E. External and Domestic Debt

The database for government external debt is quite comprehensive, and can be used to provide detailed and reasonably up-to-date breakdowns of disbursements and debt service. However, data availability on domestic debt, government-guaranteed debt, and debt of public enterprises is limited, and there is no data on private external debt.

Grenada: Table of Common Indicators Required for Surveillance

As of June 12, 2008

Date of latest observationDate receivedFrequency of Data1Frequency of Reporting1Frequency of publication1
Exchange Rates2NANANANANA
International Reserve Assets and Reserve Liabilities of the Monetary Authorities3Apr 2008Jun 2008MM, with 2- to 3-month lagA/Q
Reserve/Base MoneyApr 2008Jun 2008MM, with 2- to 3-month lagA/Q
Broad MoneyApr 2008Jun 2008MM, with 1- to 2-month lagA/Q
Central Bank Balance SheetApr 2008Jun 2008MM, with 1- to 2-month lagA/Q
Consolidated Balance Sheet of the Banking SystemApr 2008Jun 2008MM, with 2- to 3-month lagA/Q
Interest Rates4Apr 2008Jun 2008MM, with 1- to 2-month lagA/Q
Consumer Price IndexApr 2008Jun 2008MM, with 1- to 2-month lagA/M
Revenue, Expenditure, Balance and Composition of Financing5 – Central GovernmentApr 2008Jun 2008MQ, with 1- to 2-month lagA
Stocks of Central Government and Central Government-Guaranteed Debt6Apr 2007Jun 2008M/AQ, with 1- to 2-month lagA
External Current Account BalanceDec 2007Feb 2008AA, with long lagA
Exports and Imports of Goods and ServicesDec 2007Feb 2008AA, with long lagA
GDP/GNPDec 2007Apr 2008AStaff MissionA
Gross External Debt7Apr 2008Jun 2008QQ, with 1-month lagA/Semi-annual
International Investment PositionNANANANANA

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I); Not Available (NA).

Grenada is a member of the Eastern Caribbean Currency Union, in which the common currency of all member states (EC dollar) is pegged to the U.S. dollar

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

Including currency and maturity composition.

Public external debt only.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I); Not Available (NA).

Grenada is a member of the Eastern Caribbean Currency Union, in which the common currency of all member states (EC dollar) is pegged to the U.S. dollar

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

Including currency and maturity composition.

Public external debt only.


Loans and grants to Government of Grenada.


Including valuation adjustments.


Ordinary capital resources (OCR) are loans on non-concessional terms. Special development funds (SDF) and other special fund (OSF) resources are soft loans. Commitment fees apply only to OCR.

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