by Linda Straker
- Parliament approved supplementary budget of EC$269 million on 27 and August
- Grenada activated Fiscal Resilience Act suspension law of on 6 September
- SRO 25 signed 1 July, published in Government Gazette on 9 September
As of 6 September, Grenada activated the suspension law of the Fiscal Resilience Act (FRA) which provides for the finance minister to suspend the requirements for public debt target and primary balance rule during a fiscal year when the condition for suspension is applicable.
These conditions include but is not limited to a major economic shock resulting from:
- a global economic recession or crisis as declared by the International Monetary Fund; or
- 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; or
- a public health epidemic, as declared by an authorised national, regional or intentional agency; or
- war, or any other event whether national, regional or international resulting in the declaration of a state of emergency by the Governor-General pursuant to section 17 (1) of the Constitution and
- a cumulative decline in real GDP equal to or greater than 3% over the 2 consecutive preceding fiscal years
According to the Fiscal Resilience (Suspension of the Public Debt Target and Primary Balance Rule) Order or SRO 25 signed by Finance Minister Dennis Cornwall on 1 July — dated 6 September and published in an extraordinary publication of the Government Gazette on 9 September 2024 — Hurricane Beryl devastated parts of the State of Grenada and this constitutes a major economic shock and the suspension will be applicable for the fiscal year January to December 2024.
The FRA provides for the ministry of finance to take certain responsibilities if the suspension Order is published in the first half or second half of any given year. The legislation states that when the suspension Order is published within the second half of the year, “the medium term economic and fiscal strategy report accompanying the national Budget for the new fiscal year shall include the measures proposed to facilitate compliance with the public debt target and primary balance rule in the new fiscal year, including the size and nature of the revenue and expenditure measures for the national Budget for the new fiscal year.”
On 11 July 2024, ten days after the passage of the Category 4 hurricane which the northern part of Grenada hardest, the Fiscal Resilience Oversight Committee (FROC) issued a statement saying that the fiscal impact of the supplementary budget will determine whether there is a need to activate the Suspension Clause.
Both the Lower and Upper Houses of Parliament approved a supplementary budget of EC$269 million on 27 August and 30 respectively. Government’s total expenditure for 2024 is now estimated to increase by 17% because of Hurricane Beryl devastation according to the 2024 mid year review which was tabled in the Lower House on 27 August.
The FROC also promised that no later than 2 weeks after the approval of any supplementary budget, it will prepare and lay before the House of Representatives for consideration, a statement on the impact of the supplementary budget on the compliance with the fiscal rules and targets.
“Where an Order under Section 9 has been made, prepare and lay before the House of Representatives a written assessment on the compliance with this Act and the adequacy of the measures proposed to facilitate compliance with the public debt target and primary balance rule at the end of the suspension; and advise on measures that ensure compliance in accordance with the provisions of this Act,” said the FROC statement.
Besides triggering the suspension clause in the Fiscal Resilience Act, Grenada also triggered its hurricane clause with international agreement because of the devastation caused by the hurricane.
Grenada’s 7.0% Bonds due 2030 with the code ISIN: USP48863AE77 will experience a deferral payment because of the hurricane Beryl. “Grenada has elected to make a Deferral Claim as a result of the Event. As the Modelled Loss is greater than US$30 million, the Deferral Dates as a result of the Event include each of the next two consecutive Payment Dates following the submission of the Deferral Claim (i.e., the payment dates falling on November 12, 2024 and May 12, 2025),” said a statement on the Ministry of Finance website.
“The portion of a Deferred Payment Amount that is comprised of interest will be converted into principal on and with effect from the relevant Deferral Date. Where such interest is converted into principal, the principal amount of the Debt Securities shall be increased in the amount of such deferred interest,” the statement further instructs.
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