The 2023 Annual Report of the Fiscal Resilience Oversight Committee (FROC), is now officially out.
The document has been handed over to the Speaker of the House of Representatives, Leo Cato to be tabled in Parliament.The fiscal responsibility/resilience legislation provides a framework for Government’s adherence to fiscal discipline, transparency and accountability in Government’s financial transactions, and fiscal and debt sustainability.
The report notes that Grenada’s foreign exchange earnings from tourism, inflows from the Citizenship by Investment Programme and foreign direct investment contributed to financing the merchandise trade transactions. It said the Central Government fiscal performance was favourable, and the financial system remained stable, Inflation eased and the rate of unemployment declined.
It also said that Economic growth and Central Government finances are projected to moderate over the medium-term. As a public service, THE NEW TODAY has decided to reproduce in full the remarks made by the head of FROC, former economist with the Eastern Caribbean Central Bank (ECCB) Laurel Bain about the work of the committee during the past year.
It was indeed an honour to serve as Chairwoman of the Fiscal Responsibility Oversight Committee in 2023. In meandering through the challenges in a period of the reform of the Fiscal Responsibility Act, it is obvious that the approach to attaining fiscal and debt sustainability will be an ongoing debate.
The framework for achieving fiscal and debt sustainability must be based on the nature of the economy and its stage in the process of development and transformation. This is even more important for small countries such as Grenada where economic activity is strongly influenced by international developments. This international environment will remain fluid and unpredictable.
The uncertainties in the international environment which began as early as 2019 with the trade disputes between China and the USA, the two largest economies, intensified during and in the aftermath of the Covid-19 Pandemic.
The upheaval and uncertainties in the global environment were manifested in 2023 with the ongoing Russia/Ukraine war and developments within Russia; the long-standing simmering conflict between Israel and the Palestinians which flared into war between Israel and the Harakat al – Muqawama al–Islamiya (Hamas) heightening geo-political tensions in the Middle East; unsettling political exchanges between China and Taiwan; the reaffirming and/or realignment of trading arrangements and political ties; the downward stickiness of core inflation despite aggressive interest rate policy and its impact on the financial system; and political and social upheavals, along with dysfunctional social behaviour within countries.
In the midst of all the uncertainties, there is a permanent feature, namely, the rapid advancement in technology. This is expanding the productive potential of countries and has implications for the skills needed to operate in the international environment. Technological advancement is making broad-based information global and instant.
To overcome the challenges and embrace the opportunities, the country has to be in a constant RESET mode. In this RESET mode, the country is expected to be:
(i). Reflective: actions must be guided by clear vision and deep thoughts to determine and pursue the opportunities that could be derived from the ongoing challenges.
(ii). Equipped: its human resources must be capable and nimble; productive natural resources must be used effectively; and there must be social consensus on the development of a competitive and dynamic economy.
(iii). Strategic: This involves well developed and executed plans, with clearly defined objectives, outputs and outcomes to achieve established goals.
(iv). Energetic: all segments of the population must contribute with vigour in order to achieve the national goals.
(v). Tactful: operating nationally and in the international environment with discernment.
This is the RESET mode that should underpin the transformation of the economy. The Government will need to lead the RESET mode. This requires the Executive, the Legislature and a supportive cadre of public service professionals to be capable and alert and able to respond with agility to ongoing and potential challenges.
The efficient management of the economy and, in particular, the management of the public finances, is important to operate in this RESET mode. The Government has embarked on a strategy that is consistent with the reset mode.
This is manifested through the policies, programmes and projects for increased access to both academic and vocational education and for reduced cost of such education, the development of the creative and digital economy, and the strengthening of the main productive sectors and enhancing linkages among these sectors, which is accompanied by strengthening the social and economic infrastructure.
Additionally, the Government has repealed the Fiscal Responsibility Act (2015) which was replaced with the Fiscal Resilience Act (2023). The more simplified and less rigid Fiscal Resilience Act allows for greater flexibility for the Government to manage the economy and implement its transformation agenda.In this fluid and unpredictable economic environment, it is important for the Government to prudently manage the public finances to maintain fiscal and debt sustainability.
This will support the development of a productive, dynamic and competitive economy and the achievement of the Government’s stated goal of transforming the economy to “A Sustainable, Equitable and Prosperous Grenada for All”. On my behalf, and that of the other members of the FROC, I extend appreciation to all who contributed to the completion of the Report.