The Washington-based International Monetary Fund (IMF) is reporting a growth of 3.1% for the Grenadian economy for the first half of 2015 under the so-called home grown Structural Adjustment Programme (SAP) introduced by the Keith Mitchell-led New National Party (NNP) administration.
The growth was announced, following a visit to the island, by a delegation from Washington to conduct the Third review of the programme for the period January to June. The delegation, together with Ministry of Finance officials, held a joint press conference at the Ministry of Finance conference room to provide information on the findings.
According to head of the IMF delegation, Nicole Laframboise, Grenada is making solid progress in implementing the programme aimed at restoring fiscal sustainability and “laying the ground work for sustained stronger growth.”
Laframboise said the quantitative performance criteria in June were met but with the exception of the flow on social standing. This, she said is “an indicative target and that was due to technical problems related to information systems and other technical issues for the Flagship Social Assistance programme … we understand that this has been resolved and those are expected to resume shortly,” she told reporters.
“We found that real GDP expanded strongly in 2014 by over 5% at market prices and driven in particular by a short rebound in Agriculture output and also strong demands for tourism service. For similar reasons we project growth of 3.1% in 2015 compared to 1.7% projections which we had six months ago so there is a significantly stronger outlook,” she said.
According to the senior IMF official, Grenada’s fiscal performance is looking very strong as the Fund is seeing very positive results.
She said: “…With the government on track this year to deliver the first primary surplus in over a decade and as you recall primary surplus is the budget balance excluding interest payments…
“Tax revenues have recovered to pre-crisis level and expenditures are being kept under control. The government has continued to pay its budget expenditure and is expected to clear them in full by the end of the year as agreed under the programme.
The female IMF official noted that the NNP administration has been able to push through substantive legislative reforms in Parliament in 2014 and 2015. Laframboise believes that these are designed, among other things, to strengthen the fiscal policy framework, tax incentive regime and the taxation regime and public finance management.
“These reforms, particularly the fiscal responsibility legislation, has built a solid institutional foundation for fiscal prudence and discipline that would help secure and maintain a sustainable physical position over many years to come,” she said.
In spite of the positive reviews, the IMF continues to express concerns with the island’s high unemployment especially among the youth and the fact that credit growth is still contracting.
She said the Fund, together with the government, have agreed that the reform efforts in the next phase of the programme should focus on measures to boost employment and foster broad-based growth that will raise the real incomes of all segments of society but, in particular, the middle and low income earners.
“In this respect during our review, we made progress toward agreement on the structural reforms measures directed at improving the supply response of the economy including strengthening incentives for employment creation”, she remarked.
“The government is also following through on its strategy to reform the state-owned enterprises and this should, in time, boost the quality and efficiency of the delivery of public goods and services and help with the overall growth average,” she said.
The Mitchell government was forced to enter into the programme after it defaulted on debt payments to a group of international creditors shortly after taking office in February 2013.