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Commentary: Grenada-IMF agreement: Reading between the lines
Published on March 22, 2014 Email To Friend    Print Version

By Arthur Kallick

On March 14, 2014, Ms Aliona Cebotari, IMF Mission Chief for Grenada issued a statement to the effect that an agreement was concluded with the Fund subject to a final approval of the agreement by its executive board.

arthur_kallick.jpg
Arthur Kallick was born in Trinidad and lived in Grenada until he moved to Canada in the late 1980s after completing secondary school. He has a Master’s in family counselling and child physiology from the University of Toronto. He is now a freelance writer and has been living in Grenada for the past six years, and at present works with Caribbean Family Planning unit as a counsellor
Since the electoral victory of the NNP In 2013, the new administration has been in engagement with the IMF so as to mobilise support for its Home Grown Structural Adjustment Program. The release describes as ‘ambitious’ the program to correct the country’s imbalance and lift sustainable growth and the public financial management reforms. My curiosity was aroused with the use of that description, as the track record of the NNP administration with the IMF suggests that what she really meant is that the task cannot ‘be easily done or achieved’.

Grenada has been in continuous IMF supported programs since 2006. However, due to non compliance and weak implementation of agreed reforms, the country’s economic reality have in fact worsened over the period.

The statement also indicated that US$21.9 million has been approved to support the Structural Adjustment Program for three years. On the heels of this announcement, the country’s prime minister and minister of finance announced that a further US$100 million can be mobilised through the World Bank, the Caribbean Development Bank and the European Union (EU). In fact, he said that, in regards to the EU, grant funding will be provided and that “the sky is the limit’. Dr Mitchell did indicate that certain conditionalities have to be met in order to benefit from this ‘windfall’.

This sales pitch approach cannot suffice at this stage. The much talked about Letter of Intent is yet to be finalised. That will only be the first step, as it will provide the policy framework. Thereafter, the government will have to negotiate the detail arrangements to include performance benchmarks, timelines and implementation schedules.

Therein lays the problem. The government has a credibility problem with the Fund, as in the previous programs, implementation was weak or in some cases not achieved at all. Back in 2006/07, a review of structural benchmarks indicates that 40 % was never achieved.

The country faces some significant disadvantages:

• Weak management capacity in the Ministry of Finance

• Expenditure controls needs strengthening

• Debt management capacity is almost non existent

• There has been slippage in the Doing Business Indicators according to the World Bank

• There is limited political will to curb tax incentives as a means to attract investment

• Grenada’s status as a middle income country limits access to concessionary financing provided by the World Bank and its affiliates.

• Political considerations supersede sound economic policy implementation

The country waits with bated breath, the agreed benchmark indicators and implementation timelines. It is only then the citizenry will be in a position to internalise Dr Mitchell’s assertion that over US$100 million will be available to Grenada to assist in its efforts to achieve sustainable economic development.

It is interesting that the projection set out to bring our debt to GDP ratio to 60% is the year 2020, six years from now. Is the IMF indicating that the three-year program is simply ambitious or that a sensible and achievable Structural Adjustment Program will take longer?

You just have to read between the IMF lines.
 
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