ST. GEORGE’S, Grenada, CMC—The Grenada government said Wednesday that while it has not yet written to multilateral partners seeking to suspend debt payments in the aftermath of Hurricane Beryl’s damage, it would “if needs be” seek to trigger debt suspension clauses on outstanding loan agreements.
Finance Minister Dennis Cornwall told reporters that the government has held discussions aimed at deferring payments on loans that contain the debt suspension clause if the country is affected by a natural disaster, such as a major hurricane.
“We have not sought a suspension of the loan agreements; what we have done is to rap with them and utilize measures that we are allowed under the loan agreement to defer payments if needs be,” Cornwall told reporters.
He said that the process for payment deferrals began immediately after the meteorological office announced that Grenada was in the path of category four hurricanes that left a trail of death and destruction when they hit Grenada and the Grenadine islands of Carriacou and Petite Martinique on July 1, this year.
“We began the process even before Beryl hit us in Grenada because we were aware, based on the information from the meteorological office, that Grenada was likely to be impacted by Hurricane Beryl, and therefore, days before Beryl hit us, we had already put things in motion to ensure that we can interact with our partners at the World Bank, IMF and other entities that we borrow from,” Cornwall said.
Earlier this month, Prime Minister Dickon Mitchell announced that his administration would be moving to trigger the Escape Clause of the Fiscal Resilience Act, which went into effect on January 1 this year and mandates that the government maintain a primary balance of at least 1.5 percent of gross domestic product (GDP).
This law replaced the Fiscal Responsibility Act, which had been in effect from 2015 to 2023. It mandated the government maintain a primary balance of at least 3.5 percent of GDP.
“We have decided on the rules and suspension of targets of the Fiscal Resilience Act,” Cornwall said, adding that Cabinet had decided that this would be the correct thing to do in the aftermath of Hurricane Beryl.
“It gives us the flexibility to incur debt for recovery efforts if needed,” said Cornwall, explaining the main benefits of triggering the FRA Escape clause.
According to the legislation, 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 authorized national, regional or international agency, or any other catastrophe proclaimed under section 55 of the Disaster Management Act, 2023.
During the news conference, Prime Minister Mitchell said that the government is still awaiting a full assessment of the storm’s damage.
Cornwall said that the government’s priority is to prioritize grants and concession debt financing. “In other words, we have committed ourselves to borrowing money if need be, on concessional terms, for the most part, at this point,” said Cornwall.
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