Grenada - First Programmatic Resilience Building Development Policy Credit Program

 PROGRAM INFORMATION DOCUMENT (PID) APPRASIAL STAGE <May 17, 2014> Report No.:AB7571 Operation Name First Programmatic Resilience Building Development Policy Credit Region Latin America and Caribbean Country Grenada Sector Central Government Administration (100%) Operation ID P147152 Lending Instrument Development Policy Lending Borrower(s) Government of Grenada Implementing Agency Ministry of Finance, Planning, Economy, Energy and Cooperatives Government of Grenada St. George’s, Grenada Tel: (473) 440-2928 Date PID Prepared May 17, 2014 Date of Appraisal May 8, 2014 Estimated Date of Board June 30, 2014 Approval Key development issues and rationale for Bank involvement As a small, open and highly indebted middle-income island state, Grenada faces significant systemic vulnerabilities and structural challenges. Between 2009 and 2012, the country suffered a deep recession as tourism revenues and foreign direct investment flows collapsed subsequent to the global financial crisis. GDP contracted by a cumulative 8.2 percent during this period. Economic activity finally started to recover in 2013, with a GDP growth rate of 1.5 percent, the best performance since 2007. Following the global crisis and deteriorating macroeconomic situation, Grenada’s public debt increased sharply in 2012 and continued to worsen, culminating in the announcement of a restructuring of the public debt in March 2013. The public debt-to-GDP ratio increased from 100.9 percent of GDP in 2010 to 113.4 percent of GDP by end-2013. External debt service has significantly picked up, especially to commercial creditors, putting upward pressure on interest rates. The unsustainability of the public debt and a solvency crisis led Grenada’s government to announce a “comprehensive and collaborative restructuring of its public debt