Reducing public debt in Grenada is urgent, says IMF
by Kishawn Thomas
Caribbean Net News Grenada Correspondent
Email: kishawnthomas@hotmail.com
Monday, May 16, 2005
ST. GEORGE’S Grenada: Reducing public debt
to a safer level is a matter of economic urgency and social responsibility,
according to IMF official Mr. Prakash Loungani. An IMF team visited Grenada
last week and presented the 2005 Article IV consultation discussion on
Grenada’s economy. The total stock of
outstanding public and publicly-guaranteed debt in Grenada at end 2004 was
EC$1.5 billion, or about EC$15,000 per person.
Mr. Loungani said the fiscal situation in Grenada is challenging.
Extraordinary reconstruction expenditures need to be undertaken nut, at the
same time, the revenue base has eroded and the high public debt level limits
additional government borrowing. Mr. Loungani
continued that, despite generous assistance from the international community
and sustained efforts to reduce non-essential expenditures, the government was
not able to close financing gaps for 2004 and could not fully service its debt
obligations. The report added that the 2005
financing gap is 4.6 percent of GDP, including almost 2 percent of GDP in
overdue payments to creditors from last year. Beyond 2005, financing gaps are
expected to widen to between 12-15 percent of GDP despite an anticipated
recovery in revenues, in large part because reconstruction expenditures remain
high and grant commitments are expected to fall off sharply.
The IMF team official said that despite the downturn the economy is expected
to rebound next year after sluggish growth in 2005. The IMF projects growth of
only about 1 percent this year, as conditions in the agricultural sector
remain depressed and the recovery in tourism is not yet enough to supplement
the stimulus from the reconstruction boom.
“Further fiscal measures will be needed to fill financing gaps in 2006-10. The
mission recommends that the authorities devise a medium-term macroeconomic
framework, with fiscal targets for the next 3-5 years that would be based on a
broad consensus and approved by parliament. Such a plan could be built around
a menu of growth and fiscal measures, many of which are already on the agenda
of the authorities,” Mr. Loungani said.
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