The country outline for Grenada aims to offer a general overview of Grenada's social and economic situation. It was prepared using inputs from the Caribbean Development Bank Annual Economic Report for the year 2003-2004, the CIA fact-book and World Bank Discussion Papers available online. The complete list of references is available in the sections named Bibliography and Sources on-line.
I. Social Analysis
Unemployment and poverty remain high even with recent increase of the minimum wage. At 5% of the population, Grenada has the highest incidence of extreme poverty in the Eastern Caribbean and unemployment is estimated to have risen to 12.2% in 2002.[1] In addition, 64% of the population does not have formal education certification and more than 25% of students leaving primary school have no access to secondary school education. While the government increased spending on education from 5.3% of GDP in 2000 to 6.3% in 2002, low teacher qualification remains endemic.[2] Urban migration, urban squatting and increased demand for a safety net for the poor has made a streamlined poverty reduction crucial for Grenada.
Grenada has a 1% prevalence rate of HIV. Providing cost-effective primary healthcare continues to be one of the main challenges for government. The MDG report accounts for an increase in the number of HIV/AIDS orphans in Grenada.
II. Economic Situation Analysis
a. Overview of the recent economic performance
Grenada relies on tourism as its main source of foreign exchange, especially since the construction of an international airport in 1985. The Grenadian economy experienced growth of 5.7% in 2003 following two years of decline since 9/11.[3] This growth reflects a 28.5% increase in the real value-added of the construction sector, which benefited from the tourism industry with the construction of a new cruise ship terminal and a major hotel construction. While the tourism industry expanded by 13.8% in 2003, the overall fiscal deficit widened to 19.4% of GDP.[4] Strong performances in construction and manufacturing, together with the development of an offshore financial industry, have also contributed to growth in national output. Grenada has been removed from the list as an uncooperative tax haven (OECD) 2002 as well as the list for deficiency in management of offshore sector activities (FATF) 2003.[5] Offshore financial services still contracted in 2003 with many banks closing or liquidating.
Tourism, construction, communications, transportation, and manufacturing have mitigated declines in agricultural production. Agricultural output declined by 2.4% in 2003.[6] Sector performance in agriculture has been uneven because approximately 90% of the total farms are small farms of less than 2 hectares. Agriculture remains important to economic activity in Grenada with potential in modernization of farms. In response to cocoa and banana production being down, the Cocoa Revitalization Programme has been implemented to facilitate the commercialization of cocoa production. The goal of the program is to revitalize over 1,000 acres of neglected or unproductive cocoa farms. As part of Grenada's overall economic diversification plan, the banana industry has developed an organic banana project that will export to a promising market in the UK.
The large increase in the island's debt service payments has absorbed government resources at the expense of economic and social development. Grenada's debt payment obligations rose to $112.4 million in 2003 accounting for 34.7% of recurrent revenues.[7]
b. Development Cooperation
The Government received Balance of Payment support of $10.8 million from the IMF under its Emergency Assistance Programme. Grenada commenced implementation of two capital development projects began in 2003: a Bridges and Roads Investment Project and a World Bank-financed Emergency Recovery Project and Disaster Management Project.
In July 2002, The World Bank approved a loan and credit for US$6.04 million to Grenada HIV/AIDS programming.[8] The HIV/AIDS Prevention and Control Project will provide financial assistance to the Government of Grenada to support the implementation of its new national HIV/AIDS strategy with a focus on improvements in the national health system and monitoring the HIV/AIDS epidemic. The project will be implemented over five years.
The Caribbean Development Bank and the International Fund for Agricultural Development have co-financed the Grenada Rural Enterprise Project which aims to reduce rural poverty through rural development.[9]
The Grenada/OECS Education Development Project became effective on January 28, 2004. The project is financed through a US$11.3 million loan from the World Bank, a US$.8 million grant from DFI and a US$2.5 million counterpart from the Government of Grenada. The project will aid the Ministry with the development of Curriculum Policy, the provision of and Education Management and Information System, and training of principals and teachers.
The EU also provides the following significant support to the Government of Grenada. This support is as follows:
- EU - A-allocation ' 3.5 million
This allocation is destined to cover the long-term development activities identified in the context of the response strategy, namely in the tourism sector while 10% of the allocation is to be used to for studies, audits and technical support in the area of regional integration, disaster prevention and monitoring. An indicative allocation for a project in the Information Communication Technology is also foreseen outside the focal area of concentration.
- B-allocation ' 3.9 million
This allocation is to be used for unforeseen needs such as emergency assistance and support to mitigate adverse affects of instability in export earnings.
- STABEX
STABEX transfers to Grenada for loss of export earnings from bananas, cocoa, nutmeg and mace are being used to support a major reform of the banana industry in parallel with efforts to diversify both agriculture and the economy as a whole. In particular efforts are underway to strengthen the national economy, improve the balance of payments, enhance the quality of life of the population in rural areas and reduce the rate of rural-urban drift.
- Special Facility of Assistance (SFA)
Funds available to Grenada under this facility are being used to develop a more competitive agricultural sector, including the maintenance of the banana industry whilst also emphasising the need to diversify rural income generation and the provision of social recovery for displaced farmers and their families.
III. Key Challenges
a. Overview
The major policy issues for the Government at this juncture are:
- Delivery of Education
- Financial Management and Public Indebtedness
- Poverty reduction
The Government's Budget Address titled 'Promoting Economic and Social Development through People's participation' details the government's focus on agricultural development, education and training, youth development and health care. Grenada will need to support private investment through expanded public investment spending in areas such as infrastructure, water/sanitation, as well as in education and health. The IMF suggests that the government maintain efforts to create an enabling environment for the private sector, rather than simply provide concessions.[10] Because Grenada's tourism product and infrastructure remain less developed than its competitors, it will need active private sector participation to sustain growth and reduce poverty.
According to the Caribbean Development Bank, Grenada faces a trade-off between balancing fiscal spending in order to enhance growth and the need to manage fiscal sustainability.
b. The Environment
The government of Grenada has established a National Environmental Action Plan and instituted a legislative and policy framework for the regulation of the management of environmental hazards. Grenada's current environmental issues include:[11]
- Soil erosion; beach and coastline erosion
- Waste management, supply, and pollution
- Sedimentation of coastal and river waters
- Forestry and land protection
- Potential loss of habitat and associated bio-diversity
