Compiled by: Sandra CA Ferguson
World Bank Development Policy Loan to Grenada – Count Down to Debt for Nature Swap?
- Announcement of Fiscal Resilience and Blue Growth Development Policy Credit:
- World Bank Press Release of 25 June:
Around the end of June, the media was abuzz with news that Grenada had received a US$30 million policy development credit from the World Bank. A 25 June press release by the World Bank advised:
- International Development Association (IDA) Development Policy Credit: The World Bank’s Board of Executive Directors approved a US$30 million Development Policy Credit. This loan was the first in a series of two and would be complemented by technical and capacity support.
- Strengthening Climate and Fiscal Resilience/Blue Economy: The purpose of the loan was to support Grenada in strengthening its climate and fiscal resilience and helping the country transition to a blue economy.
- Building on Home-grown Structural Adjustment Programme: “The program builds on the success of the government’s reform efforts and policy measures that strengthen fiscal discipline, and help the small Caribbean island to build buffers to better cope with natural disasters or other economic shock”
- Environmental Measures for Health of Marine Ecosystems: Among the key reforms to be supported by the development policy credit would be a ban on single use plastic bags, Styrofoam containers and utensils and the establishment of a marine protected area that places under protection 15% of its coastal and marine ecosystems.”
- Announcement in Parliament:
- Almost Free Money: And, most recently in Parliament, the Prime Minister explained that it was a 40-year loan with a 10-year grace period and repayable at at less than 1% interest rate. He almost suggested that given the low rate of interest it was almost free money. He also commented that he would not have to worry about paying it back since he would definitely would be out of Parliament by the time the grace period was up.
- Moh-neeeey: Does anyone who remember t the “moh-neeey” which the Prime Mnister alluded to when he invited his supporters to repeat the word after him at the Tanteen rally. We hardly knew then that (prior) measures were being implemented to effect draw-down of the funds.
- Use of Funds/Transformative Projects: The Hon. Prime Minister advised that the part of the funds will target “transformative” projects. He named one of the rookie ministers as being in charge of these projects, which included the St Patrick’s Breakwater and Port.
- Grenada’s Debt to GDP Ratio: The Hon. Prime Minister also dismissed concerns about the size of the debt, noting that it was the debt to GDP ratio that was important and Grenada’s economy “was growing”.
- World Bank Programme Document:
A perusal of the World Bank document, available on the World Bank’s website, advises as follows
- Development Policy Credit:
This $30 million loan is the first in a series of two loans which supports the implementation of policy and institutional reforms set out in the government’s long-term development strategy, the New Economy Plan (NEP), the Growth and Poverty Reduction Strategy (GPRS) for 2014-18, and Grenada’s Blue Growth and Coastal Master Plan.
- New Economy Plan: According to the document the New Economy Plan is a long-term development agenda targeting accelerated economic growth, fiscal sustainability, social development, and debt management.
- Does anyone know where this plan is articulated? Is it a manifesto? By whom was it developed? Did the friendly Chinese have a hand in its development?
- Growth and Poverty Reduction Strategy 2014-18: The Growth and Poverty Reduction Strategy is described as “the country’s first comprehensive economic growth and poverty reduction strategy and focuses on establishing the institutional framework and policy conditions necessary for achieving sustainable growth and poverty reduction by improving the investment climate, restoring fiscal sustainability, accelerating social development, and building resilience against natural disasters.”
- What has been the impact of the successful Structural Adjustment Programme on the rate of poverty and the social sector?
- Blue Growth and Coastal Master Plan: According to the policy credit document, Grenada’s Blue Growth Coastal Master Plan identifies opportunities for blue growth development in areas, such as fisheries and aquaculture, blue biotechnology, renewable energy, research, and innovation.
- Artist Impression/Conversation Piece: This plan continues to be one of the best kept secrets of the Grenada government. Exactly WHOSE plan is this? Sometime back in August 2017, I recall Sen. Stiell describing it as “a conversation piece”, “an artist’s impression”. Notwithstanding the “apparent international acclaim” of this document, the “authorities” seem rather reluctant to boast about it at home.
- Public Service Management Reform Strategy (PMSR) 2017-2019:
- Fiscal Sustainability Threatened Beyond 2017: In April 2017, the Cabinet approved the overarching PMSR strategy that provides a “road map of reforms” to address “several aspects of the pay and management structures” which “threaten fiscal sustainability beyond 2017”.
- Securing Gains of HGSAP: Thus, to secure the realized gains of the Home-grown Structural Adjustment Programme (HGSAP) and further strengthen economic performance, the Public Service Management Reform Strategy (PSMR) 2017-19 was developed.
- Pillars of the PSMR Strategy 2017-2019: The PMSR Strategy is built on following the four pillars:
- Re-engineering: re-engineering the public service;
- Human Resource Management: strategic human resource management;
- Compensation: strategic compensation management; and
- ICT: integrated information and communication technology
- Government Priorities:
According to the document, the Government’s programmrs prioritise fiscal sustainability, strengthening resilience against natural disasters, and harnessing the “blue economy” as a way to fuel sustainable growth. The key pillars of the development policy credit are:-
- Compliance with Fiscal Responsibility Legislation: to support fiscal measures and compliance with the Fiscal Responsibility Legislation
- Blue Economy: to support Grenada’s transition to a Blue Economy by strengthening marine and coastal management marine ecosystem health and climate resilience.
In order to draw down on the loan, the government was required to undertake nine prior actions. Associated with those priority actions were certain actions which triggered disbursement of the loan. The attached table, First Fiscal Resilience and Blue Growth Development Policy Credit Summary of Prior Actions, Triggers and Expected Results. Among the prior actions were the following:
- Compensation Management Policy Framework: Approval by the Cabinet of Ministers of the Compensation Management Policy Framework for the public sector in line with the parameters of the Fiscal Responsibility Act by Advance Cabinet Conclusion dated 3 April 2018.
- Establishment of the Grand Anse Marine Protected Area – evidenced by Advanced Cabinet Conclusion dated 5 March 2018; and the Blue Innovation Institute (approved by Cabinet on 7 September 2017).
- Cabinet Approval re: Total Ban on Styrofoam food containers via a Cabinet Conclusion expected to come into force on 1 August 2018 and a total ban on plastic shopping bags (single use bags), disposable plastic plates, spoons and forks via Cabinet Conclusion expected to come into force on 1 February 2019
- May 2016 MoU, GoG -Parley for the Oceans: It is useful to note in May 2016, at the Blue Growth Investment Conference in Grenada, that there was a Memorandum of Understanding signed between the Government of Grenada and Parley re the initiation of a strategy by Parley “to focus on reducing and eliminating the amount of plastic that ends up at the Grenada’s landfills.”
- Observations and Queries:
- World Bank Missions: Post-election, around the end of May-June, several World Bank missions were “crawling” all over the government service and there were “stakeholder consultations” on almost 24-hour notice. One now appreciates, very much like the IMF Assessment Missions during the period of the Structural Adjustment Programme, these “missions” were scoping out whether the apparently agreed “prior” actions had been delivered in order to approve disbursement of funds.
- Public Service Management Reform Strategy (PMSR) 2017-2019: What exactly is “re-engineering” the public service? Are the public sector unions privy to the PMSR?
- Post-election Transfers in the Public Service: Post-election, there have been a number of transfers within the service which have “raised eyebrows”. Are these transfers “strategic human resource management” measures which form part of the “road map” and the “prior actions” delivered by the Government of Grenada?
- Ministry of Climate Resilience et al: Post-elections, eyebrows were lifted when the apparently, another “super ministry” was created, headed by Sen. Simon Stiell – Climate Resilience, Environment, Forest, Fisheries and Disaster Reduction. Among the World Bank missions crawling around was one which came to look at “re-structuring” this ministry. At one of those “stakeholder consultations”, the technocrats who were present seemed nonplussed, even confused and seemed to have no idea what was the intent.
- Compensatory Management Framework: The document advised that this framework endorsed by the Cabinet and supported by the Development Policy Credit builds on the assessment and interventions identified in the PMSR.
- Was this the Compensatory Management Framework the CONFIDENTIAL agreement/understanding arrived at between the public sector unions and the Government of Grenada on the eve of the 2018 elections? It was rather puzzling to most people that, with so much pre-election bru-ha-ha, the union-government understanding should be confidential.
- Advance Cabinet Conclusion dated 3 April 2018: Exactly what is Advance Cabinet Conclusion? If this compensatory mechanism was indeed the “understanding” between the two parties, was the reason for the “confidentiality the advance Cabinet Conclusion?
- Enforcement of Climate Screening of Public Sector Investment Projects Proposals (approval targeted for FY18) for Climate Resilience: It is welcomed news that climate resilience will be mainstreamed in public sector investments projects. It is easy to talk. Does this suggest that Grenada would be avoiding disasters like the first phase of the Sauteurs breakwater , undertaken without a comprehensive and proper Environmental Impact Assessment?
- Climate Screening and Private Investments: And what about those projects that seem to be approved by Ministers and by the Citizenship by Investment Committee, who continue to appropriate the role of/defy the advice of well trained technocrats? Are we going to continue have examples like the CONCRETE SPRAWL of the Silver Sands Resort Development, CONSTRUCTED ON A WETLAND with no/ineffective environmental safeguards while the Grand Anse beach deteriorates?
- World Bank’s Debt for Nature and Resilience Financing Facility:
- Retiring Expensive Debt: On an Inside Finance programme the current head of the Debt Management Unit in the Ministry of Finance advised that the staff of the Unit was being “trained up” by the IMF and the World Bank. The staff of the unit had recently advised the Minister to consider use of a portion of the US$30 million to retire a portion of the more expensive restructured debt.
- Re-financing/Debt Buy Back: The staffer also advised that $25 million of government debt in the form of 365-day Treasury Bills (or more properly named, Treasury bonds) had been refinanced by trading on the securities market and had been re-issued at a lower interest rate of 2.75%. He advised that the bond issue had been oversubscribed. It was unclear whether this reference was to the Eastern Caribbean Regional Securities market.
- World Bank’s Debt for Nature and Resilience Financing Facility: Incidentally, a CDB document makes reference to a debt for nature and resilient financing facility for small states that was proposed by the World Bank. This facility proposes to retire the high cost commercial debt or bilateral debt so that savings from the debt reduction created additional fiscal space can be used to finance current or capital expenditure
- Qualifying Criteria: The qualifying criteria for access to this resilience facility facility were as follows:
- Policy and Institution Reforms: Willingness to implement policy and institutional reforms for environmental management and climate resilience.
- Debt Buy-Back: Identification of debt that could be bought back, preferably at a discount and/or replaced by cheaper and longer-maturity debt
- Available Donors: Identification of a donor/or donors who can provide additional funds for the debt buyback operation in exchange for policy reforms.
- Potential for debt-for-nature and resilience swaps in the Caribbean: The document goes on to identify Grenada as having advanced the most “in the pursuit of using this instrument to restructure some of its sovereign debt in exchange for debt that will have a longer tenor and a more favourable interest rate.” It goes on, “the new debt will be subject to conservation covenants and to capitalise the endowments that will serve as a long-term funding source for continued conservation work”.
- Comprehensive Disaster Management Strategy: As part of this process of access to resilience facility, Grenada would also complete a comprehensive disaster risk reduction strategy.
- One may recall that within the last two or three weeks, there was an engagement of stakeholders who were updating Grenada’s disaster management strategy and plan.
- Blue Innovation Institute:
In what context was the establishment of the Blue Innovation Institute required as PRIOR action re Grenada’s access to this loan? It is useful to recap the following in respect of the Blue Innovation Institute:-
- Centre of Excellence: The 2017 Budget Statement announced that the Government of Grenada was exploring the establishment of The Blue Innovation Institute as a “centre of excellence” to deepen “Grenada’s leading role at the centre of the development of the blue economy in the Caribbean” it further advised that the interest shown by potential partners was “very high”.
- Special Vehicle to Facilitate Debt Swap: Grenada would also consider the Blue Innovation Institute as a “potential vehicle to facilitate a debt for nature swap that Grenada was exploring with potential partners. This initiative will guarantee sustainable financing for environmental protection.”
- Location at Quarantine Point: A major concern was the location of the Blue Innovation Institute at Quarantine Point, one of the few remaining green spaces in the south of the island.
- Count Down to Debt for Nature Swap:
- Blue Growth Master Plan: Among other things, one can conclude that the Blue Growth Master Plan is being rolled out. What ever happened to the National Sustainable Development Plan 2030 Process?
- Count Down to Debt Swap: Is it also reasonable to conclude that the debt-for nature swap appears imminent.
- Role of Blue Innovation Institute: What will be the role of the Blue Innovation Institute?
Maybe, all will be revealed in the fullness of time?
World bank loan: first fiscal resilience and blue growth development policy credit
Summary of Prior Actions, Triggers and Expected Results
|Pillar 1: Support fiscal measures and compliance with the Fiscal Responsibility Law
|1. Fiscal Responsibility Oversight Committee:
Operationalise the Fiscal Responsibility Oversight Committee (FROC): Establishment of FROC:-
to monitor compliance with the fiscal rule and targets under Sections 7 and 8 of the FRA; and
lay before the House of Representatives for consideration, an annual report on the status of implementation of the FRA.
|1. Contingency fund:
Operationalising a contingency fund to respond to emergencies and natural disasters, by:
defining the criteria for the use of the contingency fund; and
establishing overall governance framework, including the reporting and public accountability mechanisms of the fund, in alignment with the PFM Act and the Fiscal Responsibility Act.
|Adherence to Fiscal Rules: Institutional and Structural Reforms to ensure continued adherence to the fiscal rules established in line with identified targets.
Indicator:- Wage Bill as a Ratio of GDP-
o Wage Bill as ratio of GDP in adherence to the FRA;
o Wage bill (9.0% of GDP). Target (2020):
o Wage bill ratio will remain aligned with fiscal rule (eg below 9% of GDP).
|2. Compensation Management Policy Framework: Approval by the Cabinet of Ministers of the Compensation Management Policy Framework for the public sector in line with the parameters of the Fiscal Responsibility Act.
||2. Operationalisation of the Compensation Management Policy Framework by:
adopting guidelines and standards for payroll management and wage negotiation for public sector workers in line with the parameters of the wage bill rule; and
conducting an audit of the payroll.
|3. Appeals Commission:
Establishment of an Appeals Commission for the Customs and Excise Division to adjudicate and settle disputes that occurred between importers/brokers and customs officers.
|3. Operational Reforms of the Customs and Excise Division by:
restructuring the Division, to include among other functions, a new Marine Unit to increase border security and compliance, as well as to reduce health risks;
decreasing clearance time and strengthening post clearance audits and enforcement capabilities; and
improving and coordinating risk management.
|Improved effectiveness in compliance and increased transparency in customs:-
Improved service delivery and transparency: The decisions of the Appeals Commission will be publicly available.
to improved efficiency of the clearance process and reduced waiting times at the border: Automated process will contribute to this.
More robust enforcement: through inter-agency co-ordination and communication
|4. Amendment of the Customs Act No. 9 of 2015:
Amendment with a view to strengthen customs administration and improve the adoption of electronic declarations and other automatic processes.
|5. Establishment of a report card system (by Ministry of Finance) to track key performance indicators (KPIs) of the commercial SOEs.
||4. Review of the tariff structures of selected SOEs conducted:-
to identify cost inefficiencies and future capital investment needs.
||5. Assessment of Contingency Risk presented by the FROC in the Annual Fiscal Risk Report
||Enhance the transparency of SOE financial accounts through their compliance with mandatory monitoring and reporting requirements:-
The MoF is expected to produce several reports a year on SOE performance and
all SOEs are expected to be in compliance with the requirement to submit information on KPIs by 2020.
|Pillar 2: Support Grenada’s transition to a Blue Economy by strengthening marine and coastal management, marine ecosystem health, and climate resilience
|Marine and coastal management
|6. Establishment of:
the Grand Anse Marine Protected Area; and
the Blue Innovation Institute (approved by Cabinet on 7 September, 2017).
|6. CBF-SDTF Agreement: Partnership Agreement between Sustainable Development Trust Fund (SDTF) and the Caribbean Biodiversity Fund (CBF) has been signed.
||Caribbean Challenge initiative: Achievement of commitment under the Caribbean Challenge Initiative 2020 to place 20% of its marine and coastal area under protection;
help restore the health and management of the marine and coastal areas, including valuable natural capital, avoid further degradation, and offer sites for income generation through tourism, biotechnology, and sustainable fisheries.
Indicator: Percentage of Marine Protected Area. Target (2020): 20%.
||7. Strengthen management of its coastal and marine assets enabled by Cabinet:
enactment of the Integrated Coastal Zone Management (ICZM) Act; and
approval of the Nagoya Policy.
|Marine ecosystem health
|7. Cabinet Approval re:
Total Ban on Styrofoam food containers; and
a total ban on plastic shopping bags (single use bags), disposable plastic plates, spoons and forks, with a view to facilitating optimal conditions for ecosystem restoration, rehabilitation and recovery and improving the quality of the marine environment.
||Prior action addresses the harmful effects of non-biodegradable products on the marine and coastal environment
prior action is expected to lead to a 20% reduction in imports. of Styrofoam food containers: and of single use plastic bags relative to 2016
|8. Updated National Climate Change Policy and National Adaptation
Plan with a view to reiterating its commitment to its targets re reduction of greenhouse gas emissions in Nationally Determined Contributions
|8. Enforcement of climate screening of PSIP proposals (approval targeted for FY18) for climate resilience
||Climate adaptation considerations are integrated into PSIP proposal project design with high climate change relevance.
60% of annual PSIP infrastructure project proposals will have advanced climate screening by 2020, relative to a baseline of no screening in 2016.
|9. Modification of building codes with a view to improve resilience of housing infrastructure
||Adoption of a policy on Sustainable Public Procurement and implementation of standards, specifications and contractual conditions which enforce sustainability requirements in publicly funded contracts
||By 2020, at least 25% of GoG contracts should be governed by sustainable requirements.
Notes re WB, First Fiscal Resilience and Blue Growth Development Policy Credit
 aired on the radio programme Encounter on Sunday, July 29th via Wee FM radio
 Caribbean Development Bank, Financing the Blue Economy, Section 3.2.3. Debt Swaps, pg. 72
 Caribbean Development Bank, Financing the Blue Economy, Section 3.2.3. Debt Swaps, Box. 4, pg. 73-74
 Ref. Blue Growth Coastal Master Plan
 Notice of Appointment for said FROC (Grenada Government Gazette dated August 18, 2017
release of the FROC 2016 Annual Report dated 10 November 2017 ; FROC to present said report to Parliament, as evidenced by the letter dated 21 November 2017 sent by FROC Chairman to the Clerk of Parliament to submit the FROC 2016 report,
 Advance Cabinet Conclusion dated 3 April 2018.
 Cabinet Conclusion [No. 273] dated 27 February 2017.
 Act No. 32 of 2017 dated 22 December 2017 and Act No. 35 of 2017 dated 28 December 2017, both published in the Grenada Government Gazette on December 29, 2017 as well as the enactment of Act No. 6 of 8 May 2017, as published in the Grenada Government Gazette on 19 May 2017
 Cabinet Conclusion 297 of 5 March 2018
 Advanced Cabinet Conclusion dated 5 March 2018
 Cabinet Conclusion 1245 of 28 August 2017
 Cabinet Conclusion expected to come into force on 1 August 2018
 Advanced Cabinet Conclusion of 5 March 2018; expected to come into force on 1 February 2019
 Cabinet Conclusion No. 1568 of 30 October 2017
 Enactment of Act 23 of 2017 dated 29 September 2017, amending the Physical Planning and Development Control Act of Act 23 of 2016, gazetted 6 October 2017; introduced additional regulations to make infrastructure design, including for housing, more resilient to extreme weather events. The new building codes apply to new as well as existing buildings. In addition to strengthening the resilience of roads, bridges and overall built environment