December 9, 2010 No. 50/10-BD CDB REVISES SCOPE OF POLICY-BASED LOAN TO GRENADA The Caribbean Development Bank (CDB) has revised the scope of the policy-based loan (PBL) which it approved for the Government of Grenada in October 2009. At that time, the Bank approved a loan equivalent to USD12.8 million as part of a broader framework of multilateral assistance to Grenada. This PBL was approved to support the implementation of the Government of Grenada's comprehensive policy reform agenda to improve fiscal and debt sustainability, sustain growth and reduce poverty. Disbursement of the first tranche of the loan was made in December 2009, and it was anticipated that conditions precedent to disbursement of the second tranche would have been satisfied within twelve months, allowing for release of the second tranche in December 2010. However, while substantial progress has been made in satisfying these conditions, there are some conditions which have not been met. Therefore, a revision in scope of the PBL's terms and conditions was requested in relation to the non-observance of one condition precedent, and other conditions which are not expected to be fully satisfied by year-end. This request was approved by the Board of Directors. BORROWERGovernment of Grenada (GOGR)COUNTRYGrenadaEXECUTING AGENCYMinistry of Finance LOAN AMOUNT$12.8 mnSUMMARY OF PROJECT DESCRIPTIONThe Loan will be disbursed in two equal tranches. Disbursement will be based on agreed benchmarks in relation to a set of policy reforms. The reforms have been identified by GOGR and are at varying stages of implementation. These reforms cover revenue policy and administration; expenditure management; debt management; public sector enterprise (PSE) oversight; the investment climate; and poverty reduction. The ‘home grown' nature of the policy reform agenda is expected to translate into timely implementation of the reforms. This should enhance the efficacy and development impact of the programme.BENEFITSThe proposed loan will support reforms that are being undertaken to strengthen economic management systems and help generate fiscal outcomes that are superior to what they would have been in the absence of these reforms. The loan will also assist GOGR to contain borrowing costs during a period in which GOGR has had to incur additional social safety net expenditure and forego revenue in response to the fallout from the global recession. The relatively low cost lending will help to mitigate the adverse debt dynamics that could have resulted from the need for a fiscal response to the fallout. It is also expected that the programme will assist in strengthening growth prospects; and improving human development outcomes through enhancements in the institutional arrangements that govern public sector resource management.BORROWERGovernment of Grenada (GOGR)COUNTRYGrenadaEXECUTING AGENCYMinistry of Finance LOAN AMOUNT$12.8 mnSUMMARY OF PROJECT DESCRIPTIONThe Loan will be disbursed in two equal tranches. Disbursement will be based on agreed benchmarks in relation to a set of policy reforms. The reforms have been identified by GOGR and are at varying stages of implementation. These reforms cover revenue policy and administration; expenditure management; debt management; public sector enterprise (PSE) oversight; the investment climate; and poverty reduction. The ‘home grown' nature of the policy reform agenda is expected to translate into timely implementation of the reforms. This should enhance the efficacy and development impact of the programme.BENEFITSThe proposed loan will support reforms that are being undertaken to strengthen economic management systems and help generate fiscal outcomes that are superior to what they would have been in the absence of these reforms. The loan will also assist GOGR to contain borrowing costs during a period in which GOGR has had to incur additional social safety net expenditure and forego revenue in response to the fallout from the global recession. The relatively low cost lending will help to mitigate the adverse debt dynamics that could have resulted from the need for a fiscal response to the fallout. It is also expected that the programme will assist in strengthening growth prospects; and improving human development outcomes through enhancements in the institutional arrangements that govern public sector resource management.