Grenada
- Total external debt: $422 million
- Total external debt payments: gives $12.2 million each year to the rich world in debt payments.
- Population: 108,100 (2006)
- Percentage of adults who can read and write: 96%
- Average life expectancy: 68.2 years
- Total health spending: 2.4% of GDP (2003)
- Total spending on debt service payments: 2.6% of GDP
- Annual GDP: $0.5 billion
(Statistics from World Bank, 2005, and UN Human Development Report, 2005)
DROP THE DEBT FAST
Grenada is the focus of the Drop the Debt Fast on Sunday 20 April.
Background
Grenada is known for its beautiful scenery, including rainforests and beaches, which has stimulated a growing tourism industry. It is also the world's second-largest producer of nutmeg and is a significant producer of mace, cinnamon, ginger and cloves. But poverty is widespread and the country is prone to hurricanes - Hurricane Ivan swept through the island in 2004 killing dozens of people, damaging 90% of the island's buildings and devastating the nutmeg crop and Hurricane Emily in 2005 caused major damage as well.
Political History
Christopher Columbus arrived in Grenada in 1498. After years of battling between French and British, Grenada was ceded to the British in 1783. British and French colonisers exterminated the native Carib population and brought in enslaved Africans and Indian labourers. Grenada became a Crown Colony in 1877 and finally gained full independence in 1974.
In 1979 the ruling government was ousted by the ‘New Jewel Movement’, a group of young left-wing radicals who introduced reforms aimed at improving the lot of the island’s impoverished majority, and aligned themselves with Castro’s Cuba, much to the suspicion of the United States. In 1983 a split in the Movement led to the overthrow and execution of the country's charismatic leader, Maurice Bishop, and provided the pretext for a US invasion of the islands. The promised huge amounts of aid from the US which followed this brief invasion, never materialised.
Keith Mitchell, head of the centre-right New National Party, began a third consecutive term in late 2003. The party has encouraged business and foreign investment, but has suffered economically in recent years, largely as a result of devastating hurricanes.
Where has the debt come from?
Hurricanes Ivan (2004) and Emily (2005) caused widespread devastation to this small island economy, destroying important agricultural production assets and infrastructure. This contributed to slower economic growth, and the cost of recovery and reconstruction has increased the debt burden. The 2005 debt-to-export ratio of 236.3% was way above the IMF’s own debt sustainability threshold. Like other upper-middle income countries, Grenada has to borrow more money on commercial markets, making their debts very expensive to service. While there have been some economic improvements more recently, and the government’s recent commercial debt restructuring resulted in some debt service savings, nevertheless debt levels remain extremely high.
The IMF is calling on Grenada to make cuts, including to its public sector wages, in order to pay off some of its debt burden. Campaigners argue that these debts should be cancelled instead, and the resources used to tackle poverty – most recent estimates put 32% of Grenada’s population living below the poverty line and the unemployment rate at 12.5%.
Debt cancellation status
Grenada is officially classed as an upper-middle income country by the World Bank. It is therefore not eligible for concessionary finance from IDA, the part of the World Bank that lends to the poorest countries, and so does not qualify for the Heavily Indebted Poor Countries initiative or the Multilateral Debt Relief Initiative. Nor is it eligible for additional debt relief from the UK or other bilateral donors. This is regardless of the size of Grenada’s external debt in comparison to the value of exports, or its domestic debt or what it needs to spend on tackling poverty.
The New Economics Foundation calculates that Grenada requires 68% debt cancellation in order for the government to meet the basic needs of its citizens, such as health, education and infrastructure, without taxing those living below an ethical poverty line of $3 a day.
Sources:
IMF, World Bank, CIA World Factbook, BBC Country Profile, New Internationalist, grenadaguide.com
Last updated: April 2008
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