Mitchell’s economic legacy in jeopardy

by Rawle Titus

Grenada’s long serving Prime Minister, Dr Keith Mitchell, is facing his biggest threat to his economic legacy, the ravaging opportunity cost of the dreaded global pandemic, Covid-19.

As Prime Minister for nearly 2 decades, Mitchell has spearheaded several economic comebacks of varying degree of success. These include policies powered by the removal of personal income tax in the late 90s that triggered a construction boom and an impressive growth rate. Back then, a cover story in the now defunct but widely respected Caribbean News Agency (CANA) business magazine, CANABusiness, branded Grenada as the OECS economic tiger, a comparison to the economic gains of Singapore labelled as the Asian economic tiger. Mitchell returned in 2013 to meet a shattered economy in negative growth, unemployment high as 40% and debt to GDP ratio surpassing the 100 mark.

In the last 7 years, fiscal measures approved by the Washington based IMF, have been pivotal in resurrecting Grenada’s economy to front runner status in the sub-grouping. Economic growth rate has been averaging 5% each year, debt to GDP ratio has been reduced to 55%, well ahead of the ECCU target before the 2024 deadline and unemployment trending downwards towards 15%, figures from the Ministry of Finance indicate.

Now a belated lockdown to protect the country from the virus has severely reversed economic gains to the point where the economy has plunged to a depth of 10% negative growth and unemployment has skyrocketed to more than 50%. Revenues, which once routinely surpassed quarterly targets, are at their lowest. There have been massive layoffs as the Grenadian leader finds himself attempting to craft yet another economic comeback formula. Involved in the planning is a cabinet appointed broad-based committee representing many of the sectors crucial towards rekindling the economy.

The current administration has been facing calls to prioritise a comprehensive reboot of the island’s agriculture sector in any new formula for economic comeback, post Covid-19. Over the years and especially in the grips of this virus-induced meltdown, Mitchell’s administration is being accused of not giving enough attention to this sector. Tourism, private education and construction, including its link to the CBI programme that pumped $80 million into the economy in 2018, have been the key drivers. Nonetheless, agriculture’s role in the local economy has been a perennial point of concern for many Grenadians and the International Monetary Fund (IMF). In fact, the IMF has made this known on several occasions within the last 7 years, in its review of the local economy.

In 2017, the IMF raised the red flag on the need for agriculture to create jobs and grow the economy after completing the 6th review of the 3-year structural adjustment programme. Team leader, Nicole La Framboise, noted then that “Based on the natural endowments and market brand, the agriculture sector could be a more important source of growth and employment in Grenada.”

In 2019, Bogdan Lissovolik, Head of the International Monetary Fund Article IV Consultation to Grenada, informed the Keith Mitchell administration that his economic policy was lopsided and that job prospects were being compromised. As the construction sector appeared to be slowing, Lissovolik, in a statement called for a ‘rebalancing’ of the economy, saying “it is important to rebalance and find other sustainable job opportunities.” The head of the IMF visiting delegation also recommended that government embark on a strategy that will strengthen the agriculture sector.

In 2017, Prime Minister Mitchell announced measures to turn around the agriculture sector, which, according to figures from the Ministry of Finance and the IMF, contracted in 2016. They included commercialisation of government estates before the end of 2017, the liberalisation of the commodity boards and use of a small business initiative to target government lands for young farmers. The commercialisation of 4 government estates identified in Mt Rueil, Grand Bras, Belle Vue and Limlair are yet to take place. The liberalisation of commodity boards is also yet to occur despite its announcement followed by consultation more than 10 years ago.

Admittedly, under Mitchell’s rule, agriculture has not exactly been treated as a pariah sector. Agriculture, which enjoyed its heyday even in post-revolutionary times as the biggest revenue earner, has been playing lower fiddle to other sectors under Mitchell’s reign. Both private education, which contributes about 14% to GDP, and tourism, which has surpassed agriculture in revenue, have been stealing the spotlight. Still, many of Grenada’s farmers, estimated to be about 10,000, may have benefitted from a number of initiatives – feeder road construction through the Kuwaiti fund, increased purchases by MNIB, small business programmes of the Grenada Development Bank (GDB), compensation after crop damage from flooding, and support for sub-sectors including soursop, fishing and poultry.

Nevertheless, what Mitchell’s government has not done is to rollout adequate policies that will significantly boost production and bolster employment in the sector, to the extent that unprecedented value is added to the local economy. As a matter of fact, under Mitchell’s watch, the share of value-added by agriculture to Grenada’s GDP has been on a steady decline. In 2015, agriculture contributed 7.43% to GDP and plummeted further; 6.21% in 2016, 5.32% in 2016 and 4.92% in 2018. This simply means that agriculture is on the decline in Grenada and policies are needed to reverse this trend.

The figures give legitimacy to growing calls for a somewhat neglected sector to be given a higher priority in Grenada’s economy. But despite an outlandish prognosis by the IMF of more than 6% economic growth next year, dark clouds will continue to hover over Grenada’s economic recovery for some time. A monthly $22 million wage bill, the fear of defaulting on loans and the challenge of servicing a national debt of more than $1 billion are among factors in the equation. The main drivers – private education, tourism and major construction projects have effectively been shut down.

Contradiction over strategy in curbing the virus, by leaders in major source markets such as the United States, is creating uncertainty in St George’s regarding timelines for reopening borders. Large protests in cities across America over the murder of a black man by a police officer could lead to increases in the spread of the virus, a scenario that could have implications for socio-economic life on the Caribbean island.

The longer Covid-19 remains a threat, the longer the Grenada economy will take to even begin to rebound. Mitchell’s best chance of salvaging his economic legacy does not lie with sectors which have become fragile due to Covid-19. As he approaches the twilight of his political career the advice of the IMF and growing calls for a revival in agriculture must be heeded. The Grenadian leader needs to urgently introduce more robust policies to augment agriculture as a key productive sector, massively boosting production and creating jobs as the IMF had suggested. Given the current climate, he has little choice.

Neighbouring St Vincent and the Grenadines has been seeing a steady climb in agriculture output with the sector’s contribution to GDP rising from about 5% in 2008 to a high of nearly 8% in 2018. Perhaps Mitchell’s provocative Vincentian counterpart could offer an advice or two.