by Linda Straker
- FRA Escape Clause triggered in September 2024, following Hurricane Beryl
- Primary surplus of 11.3% of GDP recorded in 2024
- Negative fiscal balances are projected for 2025
The Fiscal Resilience Oversight Committee (FROC) in its 2024 report said that Central Government finances strengthened substantially in 2024, and deterioration in the fiscal balances projected due to the impact of Hurricane Beryl, and which was included in the memorandum to support the activation of Section 9 of the Fiscal Resilience Act (FRA), did not materialise.
“This was attributable mainly to higher receipts from the IMA [Investment Migration Agency Grenada], and proceeds from CCRIF [Caribbean Catastrophe Risk Insurance Facility], despite the increase in total expenditure. Consequently, a primary surplus of 11.3% of GDP was recorded in 2024. Negative fiscal balances are projected for 2025, influenced by a fall-off in revenue and greater expenditure.” The 2024 report will be officially discussed and presented to the media in a news conference on 7 May.
Finance Minister Dennis Cornwall triggered the Escape Clause of the FRA in September 2024, approximately 2 months following Hurricane Beryl. This means that the government does not have to comply with the fiscal rules requirements for the public debt target and the primary balance rule during a fiscal year when the condition for suspension is applicable.
The Fiscal Resilience Act became effective from 1 January 2024, with one of the main objectives of providing greater flexibility for the government to manage the economy. The Fiscal Resilience Oversight Committee is established by that law, and its 5 members are appointed by parliament.
The committee, chaired by Laurel Bain, prepares the Annual FROC Report, an assessment of the compliance of the government with the Fiscal Resilience Act. In its executive summary, the report said that negative fiscal balances are projected for 2025, influenced by a falloff in revenue and greater expenditure. “As such, the primary and overall balances (including grants) are estimated at -5.1% of GDP (-$208.6 million) and -8.3% of GDP (-$337.4 million) respectively, necessitating an extension of Section 9 of the FRA.”
“The negative fiscal balances are projected to persist in 2026, with the primary and the overall balances projected at -0.6% of GDP (-$25.7 million) and -2% of GDP (-$86.9 million) respectively. Thereafter, both the primary and overall balances are projected to return to surplus at 3.9% of GDP ($178.1 million) and 2.6% of GDP ($121 million) respectively in 2027,” the report suggested.
