IMF to Support Grenada in Strengthening its Fiscal Responsibility Framework

The content originally appeared on: The Barnacle News

January 17, 2023 – The International Monetary Fund (IMF) has kicked off its technical assistance (TA) programme, which will support Grenada in amending and improving its Fiscal Rules Framework, with a planning meeting held on Wednesday, January 11, 2023.

A stronger Framework will support fiscal robustness and improve resilience to climate change and other economic shocks. The strengthening of the Fiscal Rules Framework also underscores the Government’s commitment to economic and social transformation in a fiscally responsible way.

The TA will address several salient areas in need of improvement, which were identified by various stakeholders, including the Fiscal Responsibility Oversight Committee (FROC). These include, inter alia

Excessive fiscal rules in the Fiscal Responsibility Act, resulting in overlap and inferior fiscal outcomes (such as large primary surpluses but below-budgeted capital expenditure).Rigidity of the Primary Expenditure Rule, which does not support adequate spending and investment in resilience-building infrastructure and other capital expenditure.Ambiguity with the medium-term debt anchor and the transition period towards the mediumterm debt target, as well as inconsistency in the definition of public debt vis-à-vis the definition in the Public Debt Management Act.Ambiguity with the frequency of activation of the Escape Clause and the contents and timing of the Recovery Plan.Definitional issues and inconsistencies with other Legislations.

The scope of the IMF’s technical support will focus, in broad terms, on undertaking analytical work and making recommendations to the Government for improving the Framework. 

The IMF Technical Assistance Mission is tentatively carded for 10-14 April (virtual) and 17-25 April (in-person), which will include broad-based consultations with government and nongovernment stakeholders.