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Grenada: Second Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, Requests for Waivers and Modification of Quantitative Performance Criteria, and Financing Assurances Review

International Monetary Fund
Published Date:
March 2009
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Appendix I. Grenada: Fund Relations

(As of October 31, 2008)

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

II. General Resources Account:

SDR MillionPercent of Quota
Fund Holdings of Currency13.53115.64
Reserve Position0.000.00

III. SDR Department:

SDR MillionPercent of Allocation
Net cumulative allocation0.93100.00

IV. Outstanding Purchases and Loans:

SDR MillionPercent of Quota
Emergency Assistance1.8315.63
PRGF Arrangements4.5438.80

V. Financial Arrangements:

TypeDate of


Amount Approved

(SDR Million)
Amount Drawn

(SDR Million)
PRGFApr. 17, 2006Apr. 16, 201011.994.54

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 November 14, 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 was 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$47.56 million.

The OECS E-Government for Regional Integration Program was approved by the Board on May 27, 2008. This project consists of a US$2.4 million IDA Credit 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 Credit is expected to be effective end 2008.

The Grenada Technical Assistance Project was approved on March 13, 2008 as a US$2.78 million IDA Credit. The Project’s developmental objectives are to: (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 improved 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 US$4.5 million IDA Credit will finance Grenada’s contribution to the insurance pool over three years. The CCRIF 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 was approved in December 2005 to support the modernization of Grenada’s public sector. The US$3.5 million IDA Credit will finance a project that has the following components: Component 1- (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 - support for 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- support for Grenada to take the lead to jointly procure select goods and services with other OECS countries; and Component 4 - 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 in the amount of 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- strengthen the national and regional regulatory frameworks and promote additional competition in the telecommunications sector; Component 2 - review current universal access policy, create related guidelines, and provide financial support to establish a Universal Service Fund (USF); Component 3 - improve growth and competitiveness in ICT-enabled services through utilization of broadband infrastructure; and Component 4 - 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 Grenada’s recovery efforts through the financing of critical imports and rehabilitation activities in key social sectors.

The Grenada OECS Education Development Project, approved in June 2003 for US$8.0 million as part of a multi-country Adaptable Program Loan (APL), 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 improve governance of schools. The Bank is currently preparing additional financing in the amount of US$1.9 million which is scheduled to go to the Board in December 2008. The proposed additional resources would finance the costs associated with scaling up those components curtailed when the original project was restructured after Hurricane Ivan in November 2004, namely improving education quality and strengthening management.

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.

OECS (Grenada) Skills for Inclusive Growth, is scheduled to be approved by the Board in December 2008. The US$3.5 million IDA Credit will fund the second phase of the multi-country APL and will support Grenada’s efforts to increase the employability of youth through public/private sector partnerships for technical and life skills training that is demand driven. This objective has three intermediate outcomes with associated lines of action: (a) to increase job-related competencies among unemployed youth through the establishment of a competitive training mechanism that supports the financing and delivery of demand driven training; (b) to improve the quality and value of training in Grenada and enhance OECS collaboration in training through the adoption of an occupational standards framework that is validated locally and recognized regionally; and (c) to strengthen institutional capacity to plan, implement, and monitor training.

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 and the OECS Tourism Backward Linkages Study were completed in 2008. The publication “Caribbean—Accelerating Trade Integration: Policy Options for Sustained Growth, Job Creation and Poverty Reduction” was released in the Fall of 2008. Grenada will also benefit from ongoing and planned analytical and advisory activities including the following: an Eastern Caribbean Skills Study, a CARICOM study on Managing Nurse Migration and a preparatory study aimed at developing a Caribbean-wide Regional Energy Strategy.

C. Financial Relations

(In millions of U.S. dollars)

OperationOriginal PrincipalAvailable1Disbursed1
E-Government for Regional Integration Program2.402.240.00
Grenada Technical Assistance Project1.861.790.00
The Caribbean Catastrophe Risk Insurance4.500.853.63
The Public Sector Modernization Technical Assistance Project3.502.970.77
Telecommunications & ICT Development Project0.540.300.26
Hurricane Ivan Emergency Recovery Project19.774.599.87
Grenada Education Reform Project8.001.415.77
HIV/AIDS Prevention And Control Program6.043.1312.08

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 disbursements1.992.462.786.302.775.934.275.837.48
Net disbursements1.922.402.716.232.555.303.174.355.85
Interest and fees0.

Appendix III. Grenada—Relations with the Caribbean Development Bank

(As of August 30, 2008)

A. New Projects and Technical Assistance

Grenada, since Hurricane Ivan in 2004, continues to benefit from special financing from the Caribbean Development Bank (CDB), designed to yield a concessionary grant element of 35%. These loans offer longer maturities and grace periods, as well as lower interest rates than those applied in the Bank’s ordinary operations.

Rockfall and Landslip (Additional Loan and Variation in Scope)

In May 2008, a loan of US$3.7 million was approved to finance cost overruns (on the original Rockfall and Landslip project that was approved in 2005), as well as additional works to mitigate rockfall hazards at selected sites and to restore damaged retaining structures at selected locations along the main road network. The original loan of US$5.7 million was approved for similar mitigation works.

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. Ongoing Activities

Loan disbursements continued for projects under implementation. These included capital works to: (i) upgrade and rehabilitate physical infrastructure including the road and bridge network as well as school infrastructure; (ii) reduce the risk of rock fall and landslip events in the aftermath of natural hazards; (iii) improve the shelter conditions of low-income households through the provision of 116 serviced lots; and (iv) facilitate urban redevelopment.

C. Financial Relations

(As of August 2008)

(In millions of U.S. dollars)

Cumulative total credit approved1112.4119.0127.6152.6163.6171.1174.8
Cumulative disbursements288.697.099.7112.8130.0143.3148.7
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)55.761.267.177.691.6101.8105.2
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

Data provision has some shortcomings, but is broadly adequate for surveillance. Identified deficiencies need to be addressed in the context of a thorough implementation of the System of National Accounts 1993 and a revision of the national accounts’ base year (currently dating from 1990)). The IMF, through the Caribbean Regional Technical Assistance Center, has been providing specialized technical advice to Grenada on the critical area of export-import price indices compilation and dissemination.

While Grenada has participated in the Fund’s General Data Dissemination System since March 2001, most of the metadata have not been updated since late 2002.

A. Real Sector Statistics

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 fixed capital formation and sectoral price deflators needs to be improved. There are also discrepancies in the foreign trade estimates prepared by the customs department and those from the Central Statistical Office (CSO); furthermore, coverage, consistency, and timeliness of tourism data are limited.

Consumer prices are the only real sector data provided in between IMF 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 unprocessed. 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. Government Finance Statistics

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 and Financial Statistics

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 Statistics

The ECCB compiles the balance of payments statistics on an annual basis, using information collected by the CSO. The data are reported to the IMF for publication in the IFS and Balance of Payments Yearbook.

The statistics are based primarily on information collected from surveys of establishments; however, these surveys are not comprehensive and the response rates are usually poor. Merchandise trade statistics have traditionally been more reliable and are available by SITC classification on a quarterly basis. However, the reliability and comprehensiveness of the merchandise 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 the balance of payments statistics. Moreover, efforts should be undertaken to compile quarterly balance of payments statistics and the annual international investment position statement.

E. External and Domestic Debt Statistics

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 November 26, 2008

Date of latest observationDate receivedFrequency of Data1Frequency of Reporting1Frequency of publication1
Exchange Rates2NANANANANA
International Reserve Assets and Reserve Liabilities of the Monetary Authorities3Sep 2008Nov 2008MM, with 2- to 3-month lagA/Q
Reserve/Base MoneySep 2008Nov 2008MM, with 2- to 3-month lagA/Q
Broad MoneySep 2008Nov 2008MM, with 1- to 2-month lagA/Q
Central Bank Balance SheetSep 2008Nov 2008MM, with 1- to 2-month lagA/Q
Consolidated Balance Sheet of the Banking SystemSep 2008Nov 2008MM, with 2- to 3-month lagA/Q
Interest Rates4Sep 2008Nov 2008MM, with 1- to 2-month lagA/Q
Consumer Price IndexSep 2008Nov 2008MM, with 1- to 2-month lagA/M
Revenue, Expenditure, Balance and Composition of Financing5–Central GovernmentOct 2008Nov 2008MQ, with 1- to 2-month lagA
Stocks of Central Government and Central Government-Guaranteed Debt6Sep 2008Nov 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 2007Sep 2008AStaff MissionA
Gross External Debt7Jul 2008Sep 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.

1/Loans to Government of Grenada.
2/Including valuation adjustments.
3/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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