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    Economic Growth By Transforming Domestic Savings into Domestic Investment

    By Mina BookerPosted on

    By Laurel Theresa Bain

    The unstable global environment requires constant review of domestic policies and programmes to maintain economic growth and protect the welfare of the population and, in particular, those in the lower income bracket and other vulnerable segments of the population. Grenada’s economy is projected to grow by 4.1 per cent in 2025, following an estimated growth rate of 3.7 per cent in 2024. At the time of the estimated growth rate for 2025, the global economy was projected to grow by 3.3 per cent, with the growth in the USA of 2.7 per cent and China of 4.6 percent, the two main contributors to global economic growth. The growth rate for the UK and Canada, main trading partners with Grenada, was projected at 1.6 and 2 per cent respectively.

    The impact of the upheavals in the global trading environment and the accompanying uncertainties brought about by the policies of the USA have led to a downward revision of global growth to 2.8 per cent for 2025, with lower growth rates for the USA of 1.8 per cent and China of 4.0 percent. The UK and Canada are now projected to grow at 1.1 per cent and 1.4 per cent respectively.

    The lower global growth is expected to be accompanied with a higher rate of inflation and unemployment among some countries, volatility in the financial markets and disruptions in supply chains which could further supress economic growth.

    Grenada, like the other Small Island Developing States, will be adversely affected by the global developments and hence the focus should be on developing or accelerating strategies to buffer the economy from the negative impact of the volatile global environment. At this time, the economic strategy should prioritise improving the education and skills of the population; strengthening institutions and systems for the efficient utilisation of the education and skills; improving the efficiency of transacting business to reduce cost of operations; increasing exports, particularly the export of services that are not easily subjected to cross border restrictions, and fast tracking policies and programmes for strengthening linkages in the domestic economy.

    This requires the continued pursuit of the reform of the education system; promoting the creative and digital economy as a main economic sector; increasing agriculture production for domestic consumption and export and strengthening its linkages with the other sectors; supporting the utilisation of renewable energy; and developing systems to identify and protect the welfare of the lower income and other vulnerable segments of the population.

    In this challenging global environment, the allocation of available financial resources should be considered in implementing the strategy for robust economic growth, job creation and transforming the economy. As such, the conversion of domestic savings into productive domestic investment should be part of the strategy.

    Domestic savings, by both the public and private sectors, increased in 2024. In the public sector, the Central Government operations resulted in a positive balance (overall fiscal surplus) of $310.5M and this was preceded by an overall surplus in 2023. The fiscal performance resulted in the accumulation of government deposits in the financial system as reflected by the financial position of the Central Government at the Commercial banks as of December 2024.

    The deposits of other public institutions also increased in 2024. For the private sector, growth was recorded in both savings and foreign currency deposits. Consequently, the financial system was highly liquid in 2024, as it was in the previous four years. The excess liquidity in the financial system was channelled into external investments. This was reflected in the net external assets of the commercial banks which increased by $422.2M to $1,776.6M.

    The extent of converting savings into domestic investment influences economic growth. In this regard, the developments on the external accounts are of significance. In 2024, foreign exchange inflows to the Government, which contributed to the overall fiscal surplus, was facilitated by substantial inflows through the Investment Migration Agency (IMA) and the proceeds from the Caribbean Catastrophe Risk Insurance Fund (CCRIFF). In the case of the private sector, the foreign exchange inflows were related mainly to Foreign Direct Investment. However, the foreign exchange inflows were dampened by foreign exchange outflows associated with the external investment in various types of instruments by financial institutions, estimated at $720M, due to the high liquidity in the financial system.

    The international environment is currently unstable, and climatic risks are ever present. Therefore, the Government must maintain adequate reserves to buffer the economy during economic shocks. However, of importance is the management of the reserves to balance between the adequacy of the reserves to safeguard against shocks and the use of savings for developing and transforming the economy. A decision would be required on the optimal level of reserves to be maintained, given the domestic and international environment, and craft a strategy to utilise the reserves that surpasses the optimal level for the promotion of economic growth.

    The notable features in the economy in 2024 were high levels of domestic savings and significant foreign exchange inflows which was accompanied by substantial foreign exchange outflows. There is the need to remodel the financial intermediation process to allow for directing a larger portion of financial resources into domestic investments, thereby contributing to economic growth, employment and ultimately the transformation of the economy.

    An analysis should be undertaken on the optimal level of reserves the Government should maintain. Thereafter, there is the need to facilitate the channelling of the excess reserves (above the optimal level), directly by the Central Government or indirectly through institutions, into specific developmental projects.

    The emerging issues are:

    • What is the optimal level of reserves and how should these be invested?

    • How could more saving be channelled into productive domestic investment and investment incomes be retained in the economy?

    • What are the institutional, technical and capacity constraints in the economy that limit domestic investment?

    The consideration of these issues could lead to the establishment of a strategy for the management of the reserves in this unstable and challenging environment.

    Knowledge is power and Experience is the greatest teacher.

    Disclaimer: This article is written in my personal capacity and not in my capacity as Chairwoman of the Fiscal Resilience Oversight Committee.

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    Budget Alert 5.7: Budget Time Again: What is the National Budget

    By Mina BookerPosted on

    By Laurel Bain


    The cycle has begun for the preparation of the 2026 national budget, which will be Grenada’s financial plan for 2026 with estimates for developments in 2027 and 2028. This financial plan comprises three components, namely the current or recurrent account, the capital account and the financing section.

    The national budget is based on an estimation of the available financial resources comprising domestic or current revenue, capital revenue, grants and loans; and shows the allocation of the financial resources between current and capital expenditure. For ease of economic analysis, the revenues and expenditure are classified according to functions. As such, tax revenue is subdivided into taxes on income and profits, taxes on property, taxes on domestic transactions and taxes on international trade; and the current expenditure classified into compensation to employees (wages), goods and services, transfers and subsidies, and interest payment, and the capital or investment expenditure subdivided into administration, economic services and social services.

    The operations of the Government could result in a surplus due to the collection of more revenue than expenditure or a deficit as a result of more expenditure than revenue. The financing component of the national budget shows how the Government would dispose of a surplus or how the Government would finance a deficit. This section includes all financial transactions of the Government with financial institutions and agencies to deposit funds or for transactions related to disbursements and repayments on public debt.

    The content of the national budget is summarised in the Budget Statement. The details of the national budget are presented in the Estimates of Revenue and Expenditure, which is submitted with the Appropriation Bill for approval by Parliament of expenditure for the financial year.

    Therefore, the core of the budget encompasses the Budget Statement, the Estimates of Revenue and Expenditure and the Appropriation Bill.

    The provisions for financial management are outlined in the Constitution and the Public Finance Management Act, as amended. The Constitution, subsection 77, makes provision for the establishment of the Consolidated Fund. It specifies that all revenues must be deposited in the Consolidated Fund and all expenditure must be made from the Consolidated Fund.

    Provisions have also been made for the establishment of special funds under the Consolidated Fund. All expenditure by the Government must be approved by Parliament. In cases where the Government has to incur expenditure that is not in the approved budget, the Constitution makes provision for a supplementary budget to be approved by Parliament.

    The Public Finance Management Act stipulates that no more than two (2) supplementary budgets must be approved in one fiscal year.

    The Constitution also makes provision for a Contingencies Fund from which expenditure could be made to cater for urgent and unforeseen expenses, following which a supplementary budget must be approved by Parliament. On approval of the supplementary budget, a supplementary Appropriation bill should be enacted for replenishing the Contingencies Fund.

    The Public Finance Management Act stipulates that 2 percent of revenue must be reserved for contingencies. In relation to the oversight and monitoring of the implementation of the national budget, the Public Finance Management Act makes provision for the preparation of a Mid-Year Fiscal Policy Review, within two months of the end of the period, for the consideration of Cabinet, and to be laid in Parliament together with the next supplementary budget. Regular reporting on the public finances and the public debt is provided for in the Public Finance Management Act and the Debt Management Act.

    The legislation make provisions for financial accountability. In this regard, an important constitutional requirement of the budget process is the auditing of the public accounts. The Constitution, in Section 82 stipulates:

    (2) It shall be the duty of the Director of Audit to audit and report on the public accounts of Grenada, the accounts of all officers and authorities of the Government of Grenada, the accounts of all courts in Grenada (including any accounts of the Court of Appeal or the High Court maintained in Grenada), the accounts of every Commission established by this Constitution and the accounts of the Clerk to the Senate and the Clerk to the House of Representatives.

    The constitutional provisions for preparing the national budget and for financial management are detailed and made operational by the Public Finance Management Act as amended, the Debt Management Act as amended and the Audit Act.

    It is the responsibility of citizens to understand the budget and monitor its preparation and implementation and review the reports on its evaluation in the context of the legislation for financial management.

    Knowledge is power and Experience is the greatest teacher.

    Disclaimer: This article is written in my personal capacity and not in my capacity as Chairwoman of the Fiscal Resilience Oversight Committee.

    29th August 2025

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    Budget Alert 5.6: Implications of a Deficit Budget by Laurel Bain

    By Mina BookerPosted on

    A surplus budget is generally anticipated. However, fiscal policy dictates that, at some times, the budgets will be in deficit over a cycle. In the 2025 national budget, presented to Parliament on 7 th March 2025, an overall deficit of $337.4M is estimated for 2025. This deficit was influenced by a projected decline in revenue which was combined with higher expenditure when compared with 2024. The factors contributing to the growth in expenditure and the falloff in revenues are not the main subject of analysis in this article, Instead, the article focuses on the implications of the overall fiscal deficit.


    This fiscal deficit implies that the Government plans to spend more than it projects to collect in tax and non-tax revenue, and any grants that it may receive during 2025.

    Budget Alert 5.6 Implications of a Deficit Budget

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    Budget Alert 4.1 (H)-Highlights of the National Housing and Population Census 2021 – Population by Social Indicators

    By adminPosted on

    By Laurel Theresa Bain

    The census provides data showing the high dependence of the population on statutory bodies and the state-owned enterprise for the provision of water, electricity and waste disposal, and in this article, the dependence on the National Water and Sewerage Authority.

    Budget Alert 4.1 (H) Highlights of the National Housing and Population Census 2021

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