Country UpdateNovember 30, 2020
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Market Pricesgrenada sovereign
|GRENAD 9 09/15/25||33.20||33.70||40.35||4442||+6||2025-09-15|
|GRENAD 7 05/12/30||97.30||97.80||7.37||747||+1||2030-05-12|
Market Mapgrenada sovereign
The very probably extension of the Debt Service Suspension Initiative (DSSI) at next month's G20 meeting could lead to increased pressure for private participation.
A global approach to the DSSI that involves involuntary exchanges would turn participation into an event of distressed debt exchange.
Any material change in contract terms that implies NPV losses is considered as a default by rating agencies.
Among the list of possible beneficiaries of the DSSI, there are 21 countries at high risk of facing external debt problems and another 4 in already in distress.
The process of defaulting and restructuring usually involves a sharp spike in yields just before the credit event.
Then yields lose their economic meaning and only prices make sense, as they turn into a summary of market expectations for the recovery values.
This period ends when an exchange takes place and the old bonds are replaced by new bonds with a given exit yield
One year after the agreement, yields fall on average 4.1 pp from 12.6% to 8.5%.
This shows that there is potential to pick up price gains by entering a credit just after restructuring, and waiting for spread compression during the first year.
36 of the 77 eligible countries have applied for the G20’s Debt Service Suspension Initiative (DSSI).
Chinese debt has grown significantly, but has remained highly opaque. The recently released World Bank dataset is a big step forward in this regard.
Countries that would benefit the most from DSSI owe on average 42% of their 2020-2021 and 41.1% of their 2022-2025 debt service to China.
So far, DSSI only extends for payments scheduled for 2020, but there are many voices calling for an extension to 2021.
To put it bluntly, a program of debt relief or a generalized standstill on official debt would go nowhere wit...
Emerging debt continues to be in trouble given current market conditions.
So far debt relief proposals by the G20, IMF and World Bank have only included private creditors on a voluntary basis.
It seems more costly to deal with relief or restructuring of Eurobonds than to advocate for this type of request in bilateral and commercial debt.
Multilateral organizations are also constrained from granting debt relief by its potential impact on their own credit profiles.
Low interest rates and the hunt for yields of the last decade has left broad swaths of EMs overindebted and vulnerable.
The first half of 2020 is not yet over and we already have 3 countries in default.
The recent record of most defaults on Eurobonds on a single year was 4 in 2017, so 2020 is not far from setting new records.
Eurobond restructuring processes are usually among the most complicated due to the variety of holders and the different interests they represent.
Suriname, Zambia, Belize, Sri Lanka and Angola are in the most risk to engross the default-statistic for the year.
As of May 22, 8 countries have at least one USD-denominated sovereign bond trading below 50 cents on the dollar.
The Covid-19 crisis could lead to a new wave of sovereign defaults from prolonged confinements.
We discuss the worst debt restructuring events so far this century.
Argentina 2005 remains at the forefront of these events if we exclude the exceptional cases of countries at war or leaving them.
The countries with the most compromised solvencies that could generate problems with their debt are Angola and somewhat behind, Sri Lanka, El Salvador, Egypt and Pakistan.
The 2015 restructuring put the public debt onto a sustainable trajectory. Debt relief by private sector creditors during the 2016-2020 period was a total of USD 8 mn. With the fiscal adjustment provided in the ECF program of 8.5% of GDP, the debt-to-GDP ratio decreased from its peak of 104% in 2013 to 80% in 2016.
Grenada remains in external public debt distress according to the IMF because it has USD 19 mn (1.6% of GDP) in unresolved arrears to official bilateral creditors. Nevertheless, debt is on a sustainable path, the country almost reached its IMF target of debt-to-GDP ratio (60% of GDP) two years before the year set by the Fun...
In the World Economic Outlook report, the IMF forecasts that Grenada will grow 3.1% in 2019 and its GDP per capita will rise 4% to USD 30,730. In addition, the economy would continue expanding, but at a slower pace to reach 2.7% in 2020.
The Fund also expects inflation to close the year at a moderate 0.99%, while expects a slight rebound for next year, to reach 1.9% year-on-year. Exports of goods and services would expand by 4.2% in 2019 and 4% next year. Imports would grow by 5.7% and 3.8% during the same period.
The IMF figures shows that the government's gross debt to GDP ratio will fall from 63.5% in 2018 to 59.1%...
On October 22, the cabinet approved the draft budget and for November 20 is scheduled the submission in parliament. The house of representatives is expected to review and approve it before the presentation date. The presentation will be made by Prime Minister and Finance Minister Keith Mitchell.
On October 4, in his traditional throne speech in the parliament, Governor-General Cécile La Grenade mentioned that the goals and fiscal policies of the 2020 budget will be guided by the National Sustainable Development Plan 2020-2035. This national plan is in the final stages of the review process and it will be submitted for approval...
The Caribbean country fights against climate change. On September 22, Grenada and a group of fourteen countries committed to increase its greenhouse gas emission reduction targets by the beginning of 2020 and to present a joint plan to achieve zero net emissions by 2050.
In turn, on September 30, Foreign Minister Peter David signed the Escazú Agreement. The agreement was approved in March 2018 and seeks to ensure access to information, citizen participation and access to justice in environmental matters. After the signatures the minister said: "Our foremost goal must be to aggressively pursue policies and strategies that ...
On September 2, it began a legal discussion about the classification of the debt that Granada has with Petrocaribe after the chairman of the Fiscal Responsibility Supervision Committee (FROC) Richard Duncan said during a conference: "When we calculate our data, PetroCaribe is part of the public sector debt, that is our understanding of PetroCaribe. "
This committee was created by the government to monitor and supervise the compliance with Fiscal Responsibility Law. The conference was convened to share additional details about the 2018 report that was recently presented in the Houses of Parliament.
On the other hand, a...
On July 29, the Tourism Authority of Grenada (GTA) in a press release reported the slight increase in the number of visitors during the first half of 2019 compared to the same period of the previous year. The GTA also pointed out that this has been a “record-breaking” season of tourism for the entire Caribbean.
According to the GTA, 314,916 tourists arrived to the country in the first six months of 2018, while in 2019 318,559 visitors were registered, which implies a slight increase of 1.2%.
Currently, Grenada is focus on expanding its relationship with traditional home markets, by incorporating four flights coming ...
In the IMF Article IV report published on July 3, , the staff highlighted the remarkable path of growth in which the economy of the country has been for five years, with a 4.2% growth in 2018 and a estimated projection of 3.5% for 2019.
On the downside, Grenada has a high fiscal deficit, which they estimate is approximately 11% of GDP. However, this figure has been decreasing due to the increase in tourism revenues.
As for the risks that could negatively affect Grenada are "the growth prospects of the United States, the withdrawal of international multilateralism and stricter global financial conditions."<...