Durrant Pate/Contributor

The Executive Board of the International Monetary Fund (IMF) concluded its latest Article IV consultation with Grenada, confirming Wednesday, the Caribbean territory’s economic recovery from Hurricane Beryl last July.

On July 1, Hurricane Beryl caused damage exceeding 16% of Gross Domestic Product (GDP) on the islands of Carriacou and Petite Martinique, as well as the northern parishes of the main island but the recovery has been swift with the IMF reporting that Grenada’s near-term economic growth is projected to remain resilient at 3.9% in 2025.

This is buoyed by limited hurricane damage to tourism infrastructure and substantial recovery and reconstruction spending by the authorities. Also, the sizable government savings and the activation of disaster-contingent instruments create fiscal space for these spending needs. 

Medium-term growth prospects

Assuming a timely return to fiscal rules, the IMF Article IV consultation has assessed that public debt is projected to continue falling, reaching the debt target of 60% of GDP by 2030. Over the medium term, GDP growth is projected to slow as the tourism sector operates near its peak-season capacity. 

The key downside risks cited by the Article IV consultations, include the threat of further natural disasters, potential shocks to tourism demand, and the uncertain scale of future Citizenship-by-Investment (CBI) inflows, supported a strong improvement in the fiscal position and reduction in public debt. In addition, prospective hotel developments and public investment projects represent upside risks to the medium-term growth outlook.

The IMF acknowledged that the domestic non-bank financial system faces rising vulnerabilities from the continued rapid expansion of credit unions and the increasing costs of property insurance.  However, the IMF welcomed the banking system’s resilience despite repeated shocks. 

The Directors emphasized the need for vigilance and strengthened oversight in the rapidly expanding credit union sector while encouraging strengthening data collection and regional collaboration in the property insurance sector, given rising premiums. They also agreed that further enhancements in the AML/CFT frameworks are essential including safeguarding correspondent banking relationships.

Grenada’s Disaster Resilience Strategy 

The IMF Directors also commended the authorities’ implementation of Grenada’s Disaster Resilience Strategy including investments in a risk-layering framework of disaster-contingency insurance and financing instruments. Moving forward and noting the risk of future natural disasters, they emphasized the importance of further advancing the energy transition and investment in disaster-resilient infrastructure with support from private financing.

The Grenadian government was praised for the swift and prudently tailored response to Hurricane Beryl, which supported disaster relief and helped mitigate the impact on economic growth. Noting that the medium-term outlook remains subject to risks from natural disasters, uncertain CBI flows, and other external shocks, the IMF Directors encouraged the administration to exercise continued fiscal prudence and to pursue structural reforms to boost long-term growth and enhance resilience, while leveraging Fund technical assistance.

They welcomed Grenada’s commitment to fiscal prudence and debt sustainability and emphasized the importance of a timely return to the suspended fiscal rules. In that context, the IMF team noted the need for continued expenditure prioritization and revenue mobilization to create fiscal space for future investment needs, including for climate resilience. 

Further strengthening public investment management and budget planning processes would also be important, the IMD Directors cited the merit in developing a more uniform framework for managing all CBI resources and encouraged continued progress in resolving outstanding official arrears.