A view of St George's, the capital of Grenada. (Photo: Britannica)

Grenada makes debt payment to avoid default

A view of St George's, the capital of Grenada. (Photo: Britannica)

As Grenada engages with international creditors, waiting for a concrete response to its request for debt payment moratorium, the Caribbean island’s Government will proceed to pay bondholders today, May 12, 2020.

Making the announcement via text message, Prime Minister Dr Keith Mitchell said, “We will be making the payment so we won’t default.”

A view of St George’s, the capital of Grenada. (Photo: Britannica)

The prime minister recently wrote a letter to Christopher Olsen, vice-president of The Bank of New York Mellon, requesting an eight-month suspension of its obligation on the holders of its 2030 bonds as per the terms of the COVID-19 G20 initiative.

“As you are undoubtedly aware, our world is grappling with the unprecedented impact of the COVID-19 pandemic with both devastating mortality and socioeconomic impact,” Dr Mitchell stated in the letter dated May 4, 2020.

Grenada issued the bond Mitchell referred to in 2017 for approximately US$100 million with maturity in May 2030 and a coupon of seven per cent. So far, amortisation payments have reduced the outstanding principal to US$94.3 million.

(Photo: Bloomberg)

On Sunday night, in an address to the nation, the prime minister and minister finance told Grenadians that despite projections for an eighth-consecutive year of growth, the Government is now facing the reality of negative growth, triggered largely by the significant impact on tourism, construction and education.

“This has resulted in a drastic decline in government revenue. In April, for example, the combined revenue collection by Customs and Internal Revenue Division dropped by about EC$30 million compared to that of 2019; a decline likely to be replicated across our main revenue-generating departments over the next few months,” Mitchell explained.

“We will be making the payment so we won’t default.”

— Keith Mitchell, prime minister and minister of finance of Grenada

He then disclosed that the Government is, therefore, using its reserves and has sought international help to finance any deficits and bring relief to its citizens, while continuing the fight against the deadly virus.

“Already, we have attracted funding from the International Monetary Fund, the World Bank, the European Union, the Government of India, the Eastern Caribbean Central Bank, and the Caribbean Development Bank, among others. We continue to look at other sources for grant and soft loan financing, as well as explore options for debt relief,” Mitchell noted.

The Eastern Caribbean Central Bank in Basseterre, St Kitts-Nevis, has provided financial support to the Government of Grenada since the onset of the coronavirus pandemic.
(File photo)

Just last week, on Wednesday, the prime minister announced that his Government has applied to the international community for a suspension on EC$60 million in debt payment scheduled for payment for the period of April to December 2020. The moratorium request with The New York Bank Mellon will accumulate US$15,438,875. The principal is US$8,983,312 while the interest is US$6,455,563.

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