by Linda Straker
- Government to prioritise grants and concession debt financing
- Preliminary findings of rapid damage assessment of Hurricane Beryl yet to be released
- Government hopes to take onboard all expenses to replace all assets damaged
Grenada will be triggering the Escape Clause of the Fiscal Resilience Act (FRA) which went into effect on 1 January 2024. The Act mandates that the government maintains a primary balance of at least 1.5% of GDP.
This law replaced the Fiscal Responsibility Act, which was effective from 2015 to 2023 and mandated the government maintain a primary balance of at least 3.5% of GDP.
“We have decided on the rules and suspension of targets of the Fiscal Resilience Act,” announced Finance Minister Dennis Cornwall during a news conference on Wednesday, 17 July 2024. He said the Cabinet of Ministers decided this would be the correct thing to do in the aftermath of Hurricane Beryl, which devastated the northern part of the country on 1 July.
“It gives us the flexibility to incur debt for recovery efforts if needed,” said Cornwall, explaining the main benefits of triggering the escape clause. That clause states that the Minister may, by Order subject to negative resolution, suspend the public debt target and primary balance rule under Section 8 at any time during a fiscal year where a disaster arising from a natural hazard as declared by an authorised national, regional or international agency, or any other disaster declared pursuant to Section 55 of the Disaster Management Act, 2023.
Government is yet to release the preliminary findings of the rapid damage assessment of Hurricane Beryl. This is required in the Disaster Management Act and the findings must be submitted to the Caribbean Disaster Management Agency (CDEMA).
Government has declared the northern part of Grenada disaster zones as mandated in the Disaster Management Act. That declaration, Prime Minister Dickon Mitchell said in a recent news conference will unlock financing for the country.
This is the third time since 2020 that the escape clause of the Fiscal Resilience Act, formerly called the Fiscal Responsibility Act, has been suspended. This legislation seeks to reform the rules-based fiscal responsibility framework and strengthen fiscal resilience in Grenada, to guide and anchor fiscal policy during the budget process to ensure that government finances are sustainable over the short, medium, and long term, consistent with a sustainable level of public debt, and for related matters.
Cornwall said that Government’s priority is to prioritise grants and concession debt financing. “In other words, we have committed ourselves to borrow money if needs be, at concessional terms for the most part at this pointing time.” Cornwall disclosed that Government hopes to take onboard all the expenses to replace all the assets damaged by Hurricane Beryl, the first Category 4 storm for the 2024 Atlantic Tropical Cyclone season. The annual season runs from 1 June to 30 November.
