Grenada Borrows More As Economy Shows No Sign Of Improvement

by Amanda Banks, Tax-News.com, London

04 September 2001

In July this year the leader of the opposition in Grenada, Michael Baptiste, urged the ruling New National Party (NNP) to declare the country to be in a state of economic crisis. Never before, according to Mr Baptiste, has Grenada's economic situation appeared so grim.

Although Prime Minister Dr Keith Mitchell is not about to comply with Mr Baptiste's request, his Finance Minister, Anthony Boatswain, called for a 'special sitting' of the House of Representatives where a motion to extend the government's overdraft facility from $25 million to $40 million was agreed upon.

According to reports from the Grenada Today online news service, the extra money will meet government expenses for the period September 18, 2001 to March 17, 2002. Anthony Boatswain was keen to point out that the government is 'not borrowing any money but is just increasing its overdraft facility', a distinction that may be lost on some readers. He added that Grenada has the lowest overdraft in all of the OECS countries (Organisation of Eastern Caribbean States) - with some countries having overdrafts up to $70-$80 million.

Mr Baptiste supported the motion but expressed his fears that Grenada's wilting economy is now becoming evident to the general public. He explained that he supported the motion only because it was imperative that the government is allowed to continue its operations efficiently.

A recent Article IV Consultation, conducted by the International Monetary Fund (IMF), examining Grenada's economic performance concluded that although the country's economy had improved in recent years, it was necessary for the government to introduce a package of tax reforms in order to maintain financial stability. The IMF recommended a reappraisal and harmonization of tax incentives, possibly as part of an initiative to reform the tax system based on the introduction of a value-added tax.

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