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Grenada - Joint World Bank-IMF Debt Sustainability Analysis (English)

Grenada’s external public debt is classified as ‘in debt distress’ due to remaining unresolved arrears to official bilateral creditors of some 1.8 percent of GDP, but its debt remains sustainable, a conclusion that is unchanged from the previous DSA of 2019. The risk rating for external debt was ‘moderate’ in the May 2019 DSA and is now ‘high’ due to threshold breaches of the debt-services-to-exports ratio for 2020-2023, essentially due to the COVID19 shock. The large COVID-19 related contraction in output, decline in tax revenues, and increase in health and social expenditures would cause an uptick in the debt ratio to 68¾ percent of GDP in 2020, but the subsequent economic recovery should help reverse this rise. The underlying medium-term dynamics, being anchored by the Fiscal Responsibility Law (FRL), follow a downward path. The primary fiscal surplus is projected to increase above the FRL’s 3.5 percent of GDP floor after 2020 as the economy normalizes, anchoring debt sustainability. Medium-term financing needs are moderate and are expected to be covered by external borrowing with a substantial concessional component. Risks to these debt dynamics include the possibility of a more prolonged impact of COVID-19, possible delays in the return to the FRL’s core parameters, natural disasters, and a one-off increase in debt if Grenlec-related payment obligations are met by debt issuance.

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Grenada - Joint World Bank-IMF Debt Sustainability Analysis (English). Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/536691593446824404/Grenada-Joint-World-Bank-IMF-Debt-Sustainability-Analysis