CATEGORY:BUDGET
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The following excerpt is taken from the 2006 Estimates of Revenue and Expenditure,delivered by the Hon. Anthony Boatswain, the Minister of Finance, under the theme, "Consolidating Growth, Enhancing Revenue and Providing Safety Nets for the Vulnerable.”




MR. SPEAKER performance of the domestic economy in 2006 was influenced primarily by developments in the major industrial economies to which our economy is linked. Those developments include:
 An increase in global output by 5.1 per cent, and
 Relatively high rates of inflation, fueled mainly by the high price of oil particularly during the earlier part of the year.

In this regard, preliminary data show that in 2006, the economy of Grenada recorded positive real growth of 1.3 per cent compared to an unsustained rate of 12.1 per cent recorded in the previous year. All the major productive and services sectors of the economy have shown signs of recovery and are contributing to this growth. For example, the agricultural sector grew by 20.5 per cent in 2006 following decline of 38.1 per cent in the previous year, and reflected increased production of crops, livestock, forestry and fishing.

The Hotels and Restaurant sector, a proxy for the tourism industry grew by 65.0 per cent as most of our hotels are now up and running. On the other hand, value added in the construction sector declined by 20 per cent (as is expected) following substantial growth of 91 per cent in the previous year. In short, with all of our productive and service sectors contributing positively to growth, the economy of Grenada has become more diversified, and less dependent on one sector.

Undoubtedly, these higher levels of output have impacted positively on Government's revenue. Preliminary data indicate that Government will achieve a surplus on its current operations of EC$63.8m (4.5 per cent of GDP), which is higher than what was achieved last year. Current revenues increased by 6.6 per cent to EC$383.7m due mainly to higher collections from property tax and the National Reconstruction Levy. However, current expenditure grew by 5.5 per cent to EC$319.8m on account of growth in all categories of current expenditure except outlays on discretionary spending on goods and services which declined relative to the previous year.

On the other hand capital expenditure increased substantially (and understandably so) by 31.8 per cent to EC$270.5m, reflecting the acceleration in the implementation of ongoing and reconstruction projects.

This higher level of capital spending was financed in part by capital grants of EC$98.8m and the current account surplus of EC$63.8m, resulting in an overall deficit after grants of EC$89.4m (6.3 per cent of GDP) which was financed by net loans from domestic and external sources.

In summary, in spite of the higher outlays on capital spending, the fiscal performance of Government in 2006 represents an improvement over 2005, to the extent that Government achieved a surplus on its current activity and as a result, was able to mobilize higher levels of capital grant to finance the country's capital programme.