The IMF has published Article IV consultation report after consultation with Grenada authorities for 2023. In this report IMF has warned Grenada, recent developments may impact CBI revenues in the future and has provided key recommendations to elevate the CBI program.
According to Citizenship-byInvestment (CBI) revenues have averaged about 5 percent of GDP since the launch of the program in 2014. In 2022, FDI rose to 14.1 percent of GDP, in part due to an increase in CBI investment, but is expected to moderate in 2023.
Economic growth in Grenada is expected to continue in 2023, although at a slower pace of 3.9 percent, led by activity in tourism-related sectors. Inflation is expected to peak at 3.2 percent toward the end of this year. But, An economic slowdown of key tourist source markets, renewed increases in food and fuel prices, a natural disaster, or an abrupt decline in revenues from the Citizenship-by-Investment (CBI) program could weaken growth, worsen the fiscal position, and threaten debt sustainability.
Regulation and supervision of credit unions need strengthening, and the vetting and approval process used for the CBI program should continue to be improved.
– IMF Report
“The inflow of CBI revenues is projected to decline from current high levels going forward, as Grenada stopped accepting Russian applications and other countries may tighten scrutiny on the entrance by CBI citizens.” IMF warned Grenada.
In February 2023, the U.S. passed legislation that requires people who earned Grenada citizenship through the CBI program to live in Grenada for three years before being eligible to apply for access to the U.S. through the E-2 investment visa. In March 2023, Grenada suspended processing new Russian and Belarusian applications. These developments are expected to negatively impact Grenada’s CBI revenues in the coming years.
IMF has provided these key recommendations for the citizenship by investment scheme.
1.Contingency fund – Strictly implementing the authorities’ plan to save 10 percent of the CBI inflows into the contingency fund would help smooth government expenditures and provide resources for future generations. A fully operationalized contingency fund—that is capitalized by the government’s undrawn SDR holdings—would provide insurance for major shocks.
2.CBI statistics should be improved (through publishing the flows and usage of resources). transparency around the Citizenship-by-Investment (CBI) program should be strengthened to enhance the reporting and efficiency of asset management and the capacity for asset/liability operations.
3.A strengthened AML/CFT framework would mitigate risks associated with the CBI program and potential threats to correspondent banking relationships. The CFATF’s mutual evaluation report (published in July 2022) highlighted weaknesses in Grenada’s understanding of the ML/TF risk associated with legal persons and the CBI program. The report also highlighted deficiencies related to the verification of basic and beneficial ownership information. The authorities recently staffed the AML/CFT committee and should:
(i) strengthen measures to mitigate the misuse of legal persons,
(ii) enhance arrangements for the verification of basic and beneficial ownership information,
(iii) improve the vetting and approval process used for the CBI program, and
(iv) continue to engage with counterparts in Europe and the U.S. to address their national security concerns arising from Grenada’s CBI program.
