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IMF Commends Grenada On Fiscal Policy

by Phillip Morton, Investors

03 December 2009

Grenada has been commended for decisions taken under the Poverty Reduction and Growth Facility (PRGF) arrangement with the International Monetary Fund (IMF). The Fund has lauded recent efforts towards establishing a financial centre and introducing a value-added tax (VAT).

The three-year PRGF with Grenada was approved on April 17, 2006, and in July 2008 Grenada received USD19.2m to help mitigate the impact of food and fuel price shocks. This has since been increased to USD23.6m.

Following the Executive Board review, Takatoshi Kato, Deputy Managing Director and Acting Chair, delivered the following statement:

“The impact of the global crisis on Grenada’s economy has been more pronounced than initially envisaged. Falling tourism receipts, foreign direct investment, and remittances have led to a marked decline in output, a rise in unemployment, and revenue shortfalls in 2009."

"The authorities have continued to implement steadfastly their PRGF-supported program, focusing macroeconomic policies on coping with the short-term impact of the external shocks, while laying the foundation for sustainable and broad-based economic growth. Implementation of the structural reform agenda and a cautious debt management policy will be essential.”

He continued: “The government is pursuing medium-term fiscal consolidation to place public debt on a sustainable trajectory. Steps have been taken to prioritize capital spending, restrain wage growth, and increase the efficiency of spending on goods and services, while protecting social spending to mitigate the impact of the crisis on the most vulnerable groups.”

And observed that: “The banking sector has remained resilient, and important progress has been made in strengthening the capacity for nonbank financial supervision and regulation. The authorities have cooperated closely with regional governments to contain the fallout from the financial difficulties associated with the Trinidad and Tobago-based CL Financial Group.”

Finally turning to discuss changes in fiscal policy, Kato added:

“The authorities have made important progress on structural reforms. Preparations to introduce a value-added tax in early 2010, which is expected to enhance the coverage and buoyancy of the tax system, are firmly on track."

"To preserve external competitiveness, the government is pressing ahead with measures to improve the business and investment climate and implementing reforms to expand and diversify external receipts.”

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