Prime Minister of Grenada Dr Keith Mitchell (Photo: CARICOM Today)

Grenada’s debt service suspension from Paris Club did not include interest and penalty

Prime Minister of Grenada Dr Keith Mitchell (Photo: CARICOM Today)

Despite getting a reprieve from debt payments under the Paris Club Debt Service Suspension Initiative (DSSI), in May 2020, Grenada will have to pay interest and penalty for the duration of the suspended payments to its international creditors.

“What we received from the Paris Club was not a moratorium; it was a suspension of payment,” Trade Minister Oliver Joseph shared last Thursday during the weekly post-Cabinet briefing.

Grenada’s Trade Minister Oliver Joseph (File photo)

“What the Paris Club did was to grant an eight-month suspension of payment of interest and capital to Grenada. This is not a waiver of the interest and penalty; after the suspended period we will have to pay the interest that we did not pay for the eight months,” he explained further.

The Paris Club is an informal group of official creditors whose goal it is to find coordinated and sustainable solutions to the payment difficulties borrower countries face.

In May, Prime Minister and Minister of Finance Dr Keith Mitchell welcomed the Paris Club DSSI, which then granted the suspension of debt service to Grenada between May and December 2020. A news release from the Government also shared that that the Paris Club would suspend up to EC$14 million of Grenada’s debt burden under this arrangement.

(File phtoto)

Earlier that month, in a press release the Paris Club confirmed Grenada’s eligibility for the DSSI, which the G20 also endorsed, indicating that the “time-bound suspension of debt service” will be effective from 1 May to 31 December 2020.

“Of course, we welcome[d] that because we have to had to pay debts and at the same time service our local obligation. Any ease of payment is helpful,” said Joseph.

“Grenada was one of the few countries that got the suspension because of the way we are managing debt and our finances.”

In late March, following the announcement from the World Health Organisation that COVID-19 had become a global pandemic, the World Bank and the International Monetary Fund (IMF) appealed to bilateral creditors to provide debt relief for IDA countries like Grenada, suspending payments on loans and allowing them to use available resources to fight the pandemic.

Subsequently, both G20 and Paris Club endorsed the statement with confirmation this week that Grenada is eligible to benefit from the Paris Club initiative.

The members of the Paris Club which participate in the reorganisation of Grenada’s debt are the governments of France, the United Kingdom (UK), and the United States of America (USA).