About IEDP

About IEDP

The IEDP was established in 1999 by the IPSA at the Gerald R. Ford School of Public Policy. It is a student initiated, three-credit program that serves as a forum for students to discuss the challenges faced by developing economies. IEDP participants engage in a seven-week course in the winter semester, extensively studying the country of choice, and then take a one-week trip to the country over Spring Break. During the trip, IEDP students conduct extensive interviews and discussions with policymakers, members of civil society, foreign development agencies and university students. So far the IEDP has visited 11 countries, including Ethiopia, Cuba, Morocco, China, Costa Rica, Peru, Jordan, Senegal and the Philippines. The country of study for 2011 is Grenada, the first country from the Caribbean Community (CARICOM) in the IEDP's history.

Wednesday, August 25, 2010

Economy of Grenada




Grenada has a largely tourism-based, small, open economy. Over the past two decades, the economy has shifted from one of agriculture-dominant into that of services-dominant, with tourism serving as the leading foreign currency earning sector. The country's principal export crops are the spices nutmeg and mace (Grenada is the world’s second largest producer of nutmeg after Indonesia). Other crops for export include cocoa, citrus fruits, bananas, cloves, and cinnamon. Manufacturing industries in Grenada operate mostly on a small scale, including production of beverages and other foodstuffs, textiles, and the assembly of electronic components for export.

Economic growth picked up in the late 1990s following slow growth and domestic fiscal adjustment in early years of the decade. Despite an expansionary fiscal policy, the public debt remained moderate at around 50 percent of GDP as deficits were financed partly by privatization receipts. Since 2001, economic growth declined caused by adverse shocks such as a slowdown in the global economy and natural disasters. To deal with the shocks, fiscal policy became more expansionary while privatization receipts declined. As a result, public debt increased sharply to near 110 percent of GDP in 2003. Economic conditions worsened when Hurricane Ivan hit the country in September 2004; progress in fiscal consolidation was impeded as government revenues fell and policy priority was shifted to post-hurricane relief.

Although reconstruction has proceeded quickly with significant aid from the international community, tourism and agricultural activities remain weak and nearly offset the stimulus from the reconstruction boom. The country is still facing the difficult task of reconstruction and recovery, while public debt is unsustainable and the government faces large financing gaps. In the years ahead, reinvigorating growth will be a high priority, and continued efforts are needed to address vulnerabilities.

After experiencing GDP growth averaging nearly six percent a year in the late 1990s, economic growth declined considerably after 2001 as a result of a decline in the tourism industry following the September 11, 2001, terrorist attacks, and damages caused by several hurricanes.
The economy of Grenada was brought to a near standstill in September 2004 by Hurricane Ivan, which damaged or destroyed 90 percent of the country's buildings, including some tourist facilities. In July 2005 Hurricane Emily struck Grenada again as the country was still recovering from the impact of Hurricane Ivan. Besides the negative impacts to the tourism industry, the two devastating hurricanes destroyed or significantly damaged a large percentage of Grenada’s tree crops, which may take years to recover.

As the damage of Hurricane Ivan to the economy exceeded 200 percent of GDP, economic growth registered a negative growth of three percent in 2004, compared with a positive growth rate of 5.8 percent in 2003. Although signs of recovery have been seen in Grenada after the damage inflicted by Hurricanes Ivan and Emily, economic conditions remain difficult; GDP is projected at a growth rate of only one percent for 2005.

With the absence of sustained growth, the fiscal situation started to deteriorate after 2001 reflecting a continued expansionary policy with sharp increase in spending on social sectors, the wage bill, and goods and services. As a result, the fiscal deficit rose to 8.5 percent of GDP in 2001 from 3.2 percent in 2000. The fiscal situation remained shaky in 2002 with the deficit widening to 19.2 percent of GDP due to dampened output from Tropical Storm Lili. As the economic began to recover in 2003, the government began to take steps for fiscal consolidation, and the fiscal deficit fell to 4.8 percent of GDP. But progress in fiscal consolidation was impeded in 2004 as the government policy changed abruptly to post-hurricane relief. Meanwhile, government revenues decreased as a result of the impact of the hurricanes on the economy.
While economic growth has declined since 2001 due to adverse shocks, including slowdown in the global economy and natural disasters, fiscal policy became more expansionary when privatization receipts declined. As a result, public debt has increased sharply to over 100 percent of GDP since 2002; it remained as high as near 130 percent of GDP in 2004.

Grenada is a member of the Eastern Caribbean Central Bank (ECCB), which manages monetary policy and issues a common currency for all the member countries. Inflation has remained low and stable within the framework of the currency board arrangement, with inflation averaging at two percent over the past 15 years.

Grenada's current account balance has remained in large deficit due to its heavy dependence on import of most consumer goods and domestic investment. Following an average deficit of around 20 percent of GDP from 1997 to 2000, the current account deficit has increased to over 30 percent of GDP since 2001 due to higher import demand combined with lower receipts from tourism and nutmeg exports. The current account deficits are financed by inflows of foreign direct investment, official grants and loans, and commercial borrowing by the private sector.


Grenada’s economy is vulnerable to external shocks considering its high dependence on tourism, exports, and imports of most of the goods that are consumed or invested domestically. It is also prone to other adverse shocks such as natural disasters.

In the aftermath of Hurricanes Ivan and Emily, the priority now for Grenada is to continue the recovery process necessary to restore the infrastructure that was devastated by the hurricanes. The international community has disbursed significant amounts of aid, including financial help under the International Monetary Fund's emergency assistance policy for natural disasters and assistance from the World Bank and the Caribbean Development Bank.


In the context of regional economic development, further integration into the Eastern Caribbean regional economy will help enhance Grenada’s competitiveness and increase its scale of economy in production, marketing and distribution.

History of Grenada


Before the arrival of Europeans, Grenada was inhabited by Carib Indians who had driven the more peaceful Arawaks from the island. Columbus landed on Grenada in 1498 during his third voyage to the new world. He named the island "Concepcion." The origin of the name "Grenada" is obscure, but it is likely that Spanish sailors renamed the island for the city of Granada. By the beginning of the 18th century, the name "Grenada," or "la Grenade" in French, was in common use. 

Partly because of the Caribs, Grenada remained uncolonized for more than 100 years after its discovery; early English efforts to settle the island were unsuccessful. In 1650, a French company founded by Cardinal Richelieu purchased Grenada from the English and established a small settlement. After several skirmishes with the Caribs, the French brought in reinforcements from Martinique and defeated the Caribs the last of whom leaped into the sea rather than surrender. 

The island remained under French control until its capture by the British in 1762, during the Seven Years' War. Grenada was formally ceded to Great Britain in 1763 by the Treaty of Paris. Although the French regained control in 1779, the island was restored to Britain in 1783 by the Treaty of Versailles. Although Britain was hard pressed to overcome a pro-French revolt in 1795 Grenada remained British for the remainder of the colonial period. 

During the 18th century, Grenada's economy underwent an important transition. Like much of the rest of the West Indies it was originally settled to cultivate sugar which was grown on estates using slave labor. But natural disasters paved the way for the introduction of other crops. In 1782, Sir Joseph Banks, the botanical adviser to King George III, introduced nutmeg to Grenada. The island's soil was ideal for growing the spice and because Grenada was a closer source of spices for Europe than the Dutch East Indies the island assumed a new importance to European traders. 

The collapse of the sugar estates and the introduction of nutmeg and cocoa encouraged the development of smaller land holdings, and the island developed a land-owning yeoman farmer class. Slavery was outlawed in 1834. In 1833, Grenada became part of the British Windward Islands Administration. The governor of the Windward Islands administered the island for the rest of the colonial period. In 1958, the Windward Islands Administration was dissolved, and Grenada joined the Federation of the West Indies. After that federation collapsed in 1962, the British Government tried to form a small federation out of its remaining dependencies in the Eastern Caribbean. 

Following the failure of this second effort, the British and the islands developed the concept of associated statehood. Under the Associated Statehood Act of 1967 Grenada was granted full autonomy over its internal affairs in March 1967. Full independence was granted on February 7, 1974. 

After obtaining independence, Grenada adopted a modified Westminster parliamentary system based on the British model with a governor general appointed by and representing the British monarch (head of state) and a prime minister who is both leader of the majority party and the head of government. Sir Eric Gairy was Grenada's first prime minister. 

On March 13, 1979, the new joint endeavor for welfare, education, and liberation (New Jewel) movement ousted Gairy in a nearly bloodless coup and established a people's revolutionary government (PRG), headed by Maurice Bishop who became prime minister. His Marxist-Leninist government established close ties with Cuba, the Soviet Union, and other communist bloc countries. 

In October 1983, a power struggle within the government resulted in the arrest and subsequent murder of Bishop and several members of his cabinet by elements of the people's revolutionary army. Following a breakdown in civil order, a U.S.-Caribbean force landed on Grenada on October 25 in response to an appeal from the governor general and to a request for assistance from the Organization of Eastern Caribbean States. U.S. citizens were evacuated, and order was restored. 

An advisory council named by the governor general administered the country until general elections were held in December 1984. The New National Party (NNP) led by Herbert Blaize won 14 out of 15 seats in free and fair elections and formed a democratic government. Grenada's constitution had been suspended in 1979 by the PRG but it was restored after the 1984 elections. 

The NNP continued in power until 1989 but with a reduced majority. Five NNP parliamentary members, including two cabinet ministers, left the party in 1986-87 and formed the National Democratic Congress (NDC) which became the official opposition.

In August 1989, Prime Minister Blaize broke with the NNP to form another new party, The National Party (TNP), from the ranks of the NNP. This split in the NNP resulted in the formation of a minority government until constitutionally scheduled elections in March 1990. Prime Minister Blaize died in December 1989 and was succeeded as prime minister by Ben Jones until after the elections. 

The NDC emerged from the 1990 elections as the strongest party, winning seven of the 15 available seats. Nicholas Brathwaite added two TNP members and one member of the Grenada United Labor Party (GULP) to create a 10-seat majority coalition. The governor general appointed him to be prime minister. 

Learn About Grenada


Grenada is an island country and sovereign state consisting of the island of Grenada and six smaller islands at the southern end of the Grenadines in the southeastern Caribbean Sea. Grenada is located northwest of Trinidad and Tobago, northeast of Venezuela, and southwest of Saint Vincent and the Grenadines.Grenada is also known as the "Island of Spice" due to the production of nutmeg and mace crops of which Grenada is one of the world's largest exporters.Its size is 344 square kilometers (133 sq mi), with an estimated population of 110,000. Its capital is St. George's. The national bird of Grenada is the critically endangered Grenada Dove.