by Linda Straker
- Public debt increased during 2020 and first quarter of 2021
- New borrowing to finance emergency spending was a result of Covid-19 crisis
Government’s decision to engage in new borrowing to finance its emergency spending created by Covid-19 Public Health Pandemic has caused the public debt to increase during 2020 and in the first quarter of 2021.
“Total public debt increased during 2020 and further in the first quarter of 2021 primarily due to new borrowing to finance emergency spending, as a result of the Covid-19 crisis. It also increased to a lesser extent due to disbursements received on existing facilities,” said the first quarter public debt bulletin which is published on the Ministry of Finance website and Facebook page.
“Total public debt at the end of the first quarter comprised principally of Central Government’s external and domestic debt which totalled EC$2,110.7 million or 67.2% of GDP,” said the document which provides a breakdown of the fiscal situation in the countries with a specific focus on external and domestic debts.
External debt, said the bulletin, increased between the first quarter of 2020 and the first quarter 2021 as most of the new funding was contracted from external creditors. Domestic debt, on the other hand, decreased between the first quarter of 2020 and fourth quarter of 2020 due to domestic amortisation.
However, it increased between the fourth quarter of 2020 and first quarter of 2021 due to the redistribution of investors on the Regional Governments’ Securities Market, based on their residency.
“Of total public debt, external and domestic CG debts were 77.9% and 22.1% respectively at the end of March 2021,” said the bulletin which also points out that “Loans contracted at fixed interest rates continued to dominate the external portfolio in the first quarter of 2021.”
In the area of Debt Service Payments, the bulletin said that the total actual debt service payments amounted to EC$20.4 million against a budgeted EC$28.2 million in the first quarter of 2021. Off that amount 74.2% was external debt service and 25.8% domestic debt service. “Differences in budgeted and actual payments can be attributed primarily to interest rate and exchange rate fluctuations,” said the bulletin. The Debt Service Suspension Initiative allows 76 IDA countries to suspend principal or interest payments on their debts to G20 members from 1 May to 30 December 2020.
In April 2020, Grenada was approved to receive an emergency loan from the IMF and was invited to participate in the G20 Debt Service Suspension Initiative. The country was able to suspend bilateral debt payments for up to US$ 9 million in 2020, according to World Bank data.
Government has a grace period of one year after which debt service payments on suspended loans will recommence.