REPORT TO CONGRESS ON 

THE INTERNATIONAL MONETARY FUND’S 

 LOANS TO GRENADA, JAMAICA AND GREECE 

A Report to Congress 

consistent with 

Section 1501 of the 

Dodd-Frank Wall Street Reform and Consumer Protection Act, 2010 

United States Department of the Treasury 

August 2015 
Introduction 

This report provides an annual update assessing the likelihood that International Monetary Fund 

(IMF or Fund) loans, made to countries whose public debt exceeds gross domestic product and 

who are not eligible for assistance from the International Development Association, will be 

repaid in full. This report is required by section 1501 of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act, 2010.

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 Three countries — Grenada, Jamaica, and Greece — met the 

conditions of section 1501 and are covered in this report. 

As directed by section 1501, and consistent with its longstanding practice with respect to all 

loans, the Office of the United States Executive Director (USED) at the International Monetary 

Fund (IMF), in close coordination with the Treasury Department, conducted a careful and 

thorough evaluation of the proposed programs for Grenada, Jamaica, and Greece when they were 

submitted to the IMF Executive Board. 

Grenada

Grenada is a small, tourism-driven economy sensitive to the U.S. and UK business cycles and to 

Caribbean weather patterns. Hurricane Ivan, which struck Grenada in 2004, decimated the 

island’s infrastructure and its commercial agriculture. According to some measures, the damage 

caused to Grenada by the storm imposed some of the most substantial economic costs of any 

storm on a Caribbean island country in history. The damage created a need to finance 

reconstruction by taking on debt that has weighed on the country. Grenada first restructured its 

sovereign debt in 2005, issuing 20-year bonds to creditors, but without imposing any principal 

reduction and with gradually increasing coupon payments. In March 2013, the scheduled 

increase in coupon payments on the 2025 bonds led the newly elected government of Grenada to 

pursue a second, comprehensive debt restructuring. 

The global financial crisis brought the recovery following Hurricane Ivan to a halt. With tourism 

down sharply, economic output contracted over 10 percent between 2008 and 2012, leading up to 

the 2013 debt restructuring. In 2013, the economy began to rebound, with real GDP expanding 

by 2.4 percent. Tourism and agriculture contributed to further strengthening in growth, to 3.0 

percent in 2014. 

Grenada’s primary fiscal deficit decreased from 4.0 percent in 2013 to 1.2 percent in 2014, 

outperforming the IMF program targets. Tax revenues recovered to pre-crisis levels, in part due 

to stronger tax collection efforts, while expenditures were kept under control. The overall fiscal 

deficit fell to 4.9 percent of GDP in 2014, from 7.3 percent in 2013. The current account deficit 

shrank to 18 percent of GDP in 2014 from 23 percent in 2013. Grenada is a member of the 

Eastern Caribbean Currency Union (ECCU), which maintains a peg to the U.S. dollar. Deflation 

 

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P.L. 111-203; codified at 22 U.S.C. 286tt(b), section 68(b) of the Bretton Woods Agreements Act: 

“Within 30 days after the Board of Executive Directors of the Fund approves a proposal [to make a loan 

to a country whose public debt exceeds gross domestic product and is not eligible for assistance from the 

International Development Association] and annually thereafter by June 30, for the duration of any 

program approved under such proposals, the Secretary of the Treasury shall report in writing . . . 

assessing the likelihood that loans made pursuant to such proposals will be repaid in full . . . .”
in Grenada over the past two years has led to real exchange rate depreciation, boosting broad 

competitiveness, in particular tourism. 

Program Description 

On June 26, 2014, the IMF Executive Board approved a three-year $21.7 million Extended 

Credit Facility (ECF) for Grenada. The main pillars of the program are: (i) to improve 

competitiveness and medium-term growth prospects; (ii) to restore fiscal and debt sustainability; 

and, (iii) to strengthen financial stability. 

On June 29, 2015, the IMF Board completed its second review of the ECF and approved a $2.8 

million disbursement, bringing total funding disbursed to $8.5 million. Grenada met all but one 

quantitative performance criteria required for its second review, with fiscal consolidation 

proceeding as programmed. (The only criterion that Grenada missed involved a minor technical 

issue regarding the timing of a non IMF loan and does not affect program performance.) The 

government out-performed both its primary balance and primary spending criteria in 2014. The 

authorities have started clearing expenditure arrears, have incurred no new external arrears aside 

from debt under restructuring, and have not contracted any new non-concessional loans. 

The authorities have also pursued an ambitious structural reform agenda. Grenada approved a 

new Public Financial Management Act in line with international best practice, a new Investment 

Bill to make investment more simple and transparent, and a Customs Act to modernize customs 

administration. The government is also taking steps to reform the energy sector. 

Debt Status

The IMF had projected that debt would equal 86 percent of GDP by 2020 in the absence of 

comprehensive restructuring. The authorities have cleared arrears to multilateral creditors, while 

the Paris Club has provided financing assurances for Grenada and has tentative plans to discuss 

its claim in September 2015. Grenada has also reached debt restructuring agreements with many 

of its creditors, as detailed below. As a result, the IMF expects public debt to decline from a 

peak of 108 percent of GDP in 2013 to 83 percent by the end of the program period (2017) and 

68 percent in 2020, depending on the extent of further restructuring. Roughly two thirds of 

Grenada’s public debt is held externally and is denominated in a foreign currency. 

Debt Management Strategy

The government’s primary objective is to achieve a 60 percent debt-to-GDP ratio by 2020. It has 

committed, through a fiscal responsibility law, to run substantial (3.5 percent of GDP) primary 

surpluses until public debt reaches 55 percent of GDP, and stabilize debt thereafter. The 

government’s debt restructuring efforts will further support fiscal sustainability. 

This past year, the authorities have made significant progress with debt restructuring. In April 

2015, Grenada reached an agreement with its largest private creditors that included a 50 percent 

nominal principal reduction. The agreement is expected to reduce public debt by 13 percentage 

points of 2017 GDP. The government has also reached a restructuring agreement with the 

Export-Import Bank of Taiwan, which will reduce public sector debt by about another two 

percentage points of GDP. A state-owned enterprise has reached an agreement with its own 
private creditors, which will reduce government guaranteed debt (included in public debt figures) 

by half a percentage point of GDP. The authorities are continuing negotiations with their 

remaining bilateral and commercial creditors, including the Paris Club. 

Vulnerabilities

Grenada’s primary external vulnerabilities are the exposure to downturns in advanced economies 

and potential natural disasters, which negatively affect tourism and foreign investment inflows. 

Additionally, the appreciation of the U.S. dollar could put pressure on Grenada’s 

competitiveness. 

Grenada’s primary internal vulnerabilities are the exposure of its banking sector to potential 

cross-border contagion risks in the ECCU region. Thus far, these pressures have been contained 

by the regional authority’s ability to provide full depositor and creditor protection. Domestic 

banks are not particularly at risk from the sovereign debt restructuring, since government debt 

held by banks represents a small fraction of total banking assets. The Grenadian government 

worked with the Eastern Caribbean Central Bank’s (ECCB) regional financial supervisor and 

assessed that the banking system would remain adequately capitalized following a debt 

restructuring. Grenada also faces the risk of stronger than expected growth effects of fiscal 

consolidation. 

Possible tailwinds include: (i) potentially higher investment and growth from initiatives to 

promote foreign investment; (ii) spillovers from significant new investment into St. George’s 

University; and, (iii) a pickup in confidence from improved economic policies. 

Overall Assessment

Grenada is heavily indebted and vulnerable. However, its IMF-supported program, combined 

with debt restructuring, provides the best opportunity for the country to return to a sustainable 

debt path and mitigate its vulnerabilities. Given the demonstrated commitment of the Grenadian 

government to implement the policy measures specified by the IMF program; significant 

progress on debt restructuring; and, the IMF’s preferred creditor status, the Treasury Department 

assesses that the IMF’s loan to Grenada is likely to be repaid in full. 

Jamaica 

On May 1, 2013, the IMF Executive Board approved a four-year Extended Fund Facility (EFF) 

in the amount of $926 million for Jamaica. The main pillars of the program are: (i) structural 

reforms to boost growth; (ii) actions to improve price and non-price competitiveness; (iii) 

upfront fiscal adjustment, supported by extensive fiscal reforms; (iv) debt management 

operations that place public debt on a sustainable path, while protecting financial system 

stability; and, (v) improved social protection programs to help the most vulnerable. 

The eighth review of the IMF program was approved by the IMF Board on June 16, 2015. A 

disbursement of nearly $40 million was approved, bringing total funding under the program to 

approximately $250 million. Jamaica has consistently maintained a large primary surplus of 7.5 

percent of GDP over the lifetime of the EFF, demonstrating commendable fiscal discipline by 
the government. This benchmark was narrowly missed in the most recent quarterly review, by 

just 0.2 percent of GDP, in part because growth and inflation both fell more than expected during 

the review period. However, all other criteria, including overall public debt and social spending, 

were achieved. 

In 2012, Jamaica experienced a widening of its current account deficit to nearly 15 percent of 

GDP and a significant loss of foreign exchange reserves, due in part to an inflexible exchange 

rate regime and unsustainable fiscal expansion. Since its IMF program was approved in mid2013, the exchange rate has substantially adjusted toward its equilibrium level under a more 

flexible regime, the fiscal situation has stabilized, and Jamaica has begun to rebuild reserve 

buffers. Economic performance for Jamaica’s fiscal year 2015 (ended March 2015) was broadly 

in line with the program framework, though GDP growth was weaker than expected at 0.2 

percent. Inflation fell to 4.0 percent year-over–year in March 2015, from a recent high of 9.8 

percent in August 2014. Lower oil prices have helped narrow the current account deficit to 6.0 

percent of GDP for fiscal year 2015, from 8.0 percent in fiscal year 2014. 

During its 2015 fiscal year, Jamaica’s structural reform agenda focused on improving tax and 

customs administration, public financial management, the framework for monetary policy, and 

implementing financial reforms. Jamaica completed an entity-by-entity review of all firms 

grandfathered into 2013 tax incentive legislation. The Large Taxpayer Office hired significantly 

more auditors and increased audits by 100 percent. The government has also tabled legislation to 

amend the property tax law and introduce a Minimum Business Tax, and its electricity sector 

reform is expected to become effective this month. On the monetary side, the authorities have 

refined their operational practices. Exchange rate flexibility has improved and, after two years of 

exchange rate and current account adjustment, IMF models do not show evidence of 

misalignment of the currency. Lastly, the Banking Services Act was adopted in June 2014, and 

implementing regulations are expected to be promulgated in fall 2015. 

Debt Status 

Debt-to-GDP had fallen to 137 percent at end-March 2015 from 142 percent in March 2014. 

Jamaica’s high primary government surplus is expected to further reduce its debt-to-GDP ratio. 

Additionally, as growth-enhancing reforms take hold, improvement in public revenue and GDP 

growth should directly help to ease the debt burden. Jamaica’s fiscal rule places a floor of the 

overall fiscal balance with the goal of reducing debt-to-GDP to 96 percent by 2020 and 60 

percent by 2026. Moreover, the rule requires escalating expenditure cuts if the cumulative 

deviations from annual fiscal balance targets threshold exceed 1.5 percent and 3.5 percent of 

GDP. The rule will be phased in after the conclusion of the EFF so that program targets do not 

overlap. In February 2013, Jamaica’s government conducted a domestic debt exchange, which is 

projected to result in savings of 8.6 percent of GDP by 2020. The exchange involved both lower 

coupon rates as well as a maturity extension of 3-5 years for domestic instruments, though did 

not incorporate haircuts to the principal. 

Debt Management Strategy 

The government’s primary objective is to place Jamaica’s public debt on a downward trajectory. 

In order to meet this objective, the government is committed to running large primary surpluses 

that reduce the need for additional debt and allow for a reduction in outstanding debt. Jamaica is 
on track, with a primary surplus of 7.5 percent of GDP for fiscal year 2015 and at least 7.0 

percent targeted through fiscal year 2021. The government has implemented a number of 

structural and competitiveness reforms, as well as a tax reform that includes broadening the tax 

base. The IMF baseline analysis projects a continued decline in debt. However, the IMF notes 

that this baseline assumption is sensitive to lower-than-expected growth, contingent liability 

shocks emerging from the financial sector, and higher-than-expected external financing needs in 

case of an external shock. 

Vulnerabilities 

Jamaica’s tourism sector is dependent on economic conditions in the United States, Canada, and 

the United Kingdom. The economy is also highly vulnerable to commodity price shocks and 

natural disasters. Additionally, the possibility of higher U.S. interest rates and the appreciation 

of the U.S. dollar could put pressure on Jamaica’s international reserves. 

Jamaica’s primary internal vulnerability is the large exposure of its banks and securities dealers 

to government debt. The Financial Sector Support Fund, established with financing from the 

IMF under its previous arrangement and bolstered under this one, will provide a liquidity 

backstop to financial institutions, if required, to help address vulnerabilities arising in the 

financial sector due to the debt exchange. Securities dealers are also changing the structure of 

their repurchase transactions as part of the government’s implementation of bank reform, which 

should enhance financial stability. However, persistent slow growth could erode public support 

for the IMF program and continued tight fiscal policy. 

Overall Assessment 

Jamaica is heavily indebted and vulnerable. However, its IMF-supported program, combined 

with its progress on debt restructuring, provides the best opportunity for the country to return to a 

sustainable debt path and mitigate its vulnerabilities. Performance under the IMF program has 

been very strong. Almost all performance targets have been met, and all reviews and additional 

disbursements have been approved by the IMF Board. In addition, Jamaica completed a debt 

restructuring in 2013. Based on these factors and the IMF’s preferred creditor status, the 

Treasury Department assesses that the IMF’s loan to Jamaica is likely to be repaid in full. 

Greece 

On March 15, 2012, the IMF Executive Board approved a four-year Extended Fund Facility 

(EFF) for Greece, with the potential for about $36 billion in funding. The fifth review of 

Greece’s progress under the program was concluded on May 30, 2014, and the total amount 

disbursed under the IMF program is approximately $15.4 billion. The IMF program is slated to 

expire in March 2016. However, the program has been on hold pending negotiations between 

the IMF, Europe, and the current Greek government, which came into power in January 2015 

after campaigning against the previous government’s policies. 

In late June, Greece entered into arrears with the IMF when it missed payments to the IMF 

totaling about $2.2 billion. On July 12, Greek and euro area leaders reached an agreement on a 

path forward for a new assistance program with the European Stability Mechanism (ESM) that is 
conditional on Greece implementing additional fiscal measures and structural reforms in 

exchange for an estimated €82-86 billion in financial support. The Greek authorities have since 

passed a number of reforms required by the July 12 agreement, enabling commencement of 

negotiations on a three-year financing program. Greece’s European partners agreed to provide 

bridge financing from the European Financial Stabilization Mechanism to help Greece meet its 

immediate financing needs while the new ESM program is negotiated. As soon as the bridge 

funds were available, on July 20, Greece repaid the IMF and cleared its arrears in full, 

underscoring the IMF’s preferred creditor status and the priority placed on the relationship with 

the Fund. 

Debt Status 

Greece’s gross public debt is estimated to have been 177 percent of GDP in 2014, up slightly 

from 175 percent in 2013. Greece’s debt burden is expected to increase in 2015 due to the recent 

deterioration of the economy, which has been adversely impacted by the closure of banks and the 

imposition of capital controls. In a short update to the debt sustainability analysis published in 

mid-July, the IMF projected debt to peak at close to 200 percent of GDP in the next two years. 

The IMF’s debt sustainability analysis indicates that Greece will need debt relief on its European 

debt. The Eurogroup has reiterated that it stands ready to consider possible additional measures 

aiming at ensuring that gross financing needs remain at a sustainable level, in the context of a 

new economic reform program. The July 12 agreement between Greece and euro area leaders 

ruled out a nominal haircut, but included a commitment on the part of European leaders to 

consider other options to reduce Greece’s debt burden, such as longer grace periods and maturity 

extensions. 

Vulnerabilities 

The European authorities are seeking to reach a new financing program under the ESM in the 

coming weeks, which will likely require Greece to undertake additional tax, pension, labor, 

financial sector, and structural reforms. The reforms could face significant political hurdles to 

implementation. For the past several months, Greece has faced an acute short-term liquidity 

shortage, which necessitated a bank holiday and the imposition of capital controls in July, 

leading to further stress on the financial system. 

Greece faces a number of challenges that hinder its ability to strengthen economic growth and 

improve public finances. The key variables that will influence Greece’s public debt trajectory 

are the rate of growth, the fiscal balance, and the nature of its financing. Greece’s banks 

continue to hold a substantial amount of non-performing loans, and stronger efforts from the 

authorities are needed to improve the insolvency framework, facilitate debt resolution, and 

restore bank balance sheets to health, so that the banking system can contribute to growth going 

forward. The long-term growth trajectory will also depend on the ability to implement structural 

reforms that improve Greece’s competitiveness and productivity. 

Overall Assessment 

Greece is heavily indebted and vulnerable, and the situation in Greece has deteriorated since the 

last program review in May of 2014. Since an initial agreement with European partners in midJuly 2015, Greece has adopted substantive reform measures, obtained bridge funding from 
Europe, and commenced negotiations with its creditors on a new three-year ESM financing 

program. The agreement also recognized that there are serious concerns regarding the 

sustainability of Greek debt and articulated a commitment on the part of European authorities to 

consider additional measures aimed at bringing Greece’s debt to a sustainable level. The 

Treasury Department will continue to encourage all parties involved to press forward with 

negotiations on this program, with the goal of putting Greece on a path toward economic growth 

within the euro area on the basis of needed economic reforms and requisite financing that 

achieves debt sustainability. Such a solution is in the best interests of all parties and the global 

economy. 

The Treasury Department continues to assess that the IMF’s loan to Greece will be repaid in full. 

Treasury is monitoring developments closely and will update Congress as the situation evolves.