PRIME MINISTER ROLLS OUT STIMULUS PACKAGE IN "OBAMA-STYLE

UNCLAS GRENADA 000026 SENSITIVE SIPDIS DEPARTMENT FOR WHA/CAR MITCHELL E.O. 12958: N/A TAGS: ECON EFIN ELAB GJ SUBJECT: PRIME MINISTER ROLLS OUT STIMULUS PACKAGE IN "OBAMA-STYLE TOWN HALL MEETING ¶1. (U) Grenada Prime Minister Tillman Thomas and his ministers held a hastily arranged "Obama-style" town hall meeting to announce an "Obama-style" stimulus package on March 31. The stimulus package was made possible by a US$7 million (EC$20 million) loan Parliament approved on March 25 to come from three to five banks with branches in Grenada. The original loan legislation was vague about how the money would be used. Thomas' March 31 presentation detailed exactly where the government expected to use the money. Included are plans for continued clearing of vegetation along the country's roads, agriculture, road work, and repairs of several ministry buildings. The focus was on job creation, although the GOG has come up with a complicated, and confusing, system to spread the jobs around. As a result, while the total number to be employed in road work is over 700, people will be rotated in and out of the jobs every few weeks, so that at any given time the total will be lower, and no one would work for the duration of any project. ¶2. (U) The tax amnesty program begun in November 2008 and already extended from December 31 to March 31, 2009, was extended again to the end of April. The government has shied away from giving actual dollar figures for collections to date. All the GOG will say is that the amnesty is a hit with businesses. The overall amount owed the GOG by private individuals, businesses, and investors is about US$28 million (EC$75 million). The expiration on December 31, 2008 of the national reconstruction levy (NRL),and the further delay in implementing value added tax from 2009 to 2010, combined with the non-payment of taxes means that government revenues are most likely down significantly. ¶3. (SBU) The Prime Minister and his ministers took questions from the sparse crowd of 50 after his 20 minute presentation. Concerns were raised about the weak enforcement of Grenada's tax laws, the ineffectiveness and incompetence of the Grenadian legal system and fraternity, and the downside of allowing governments to bid on construction projects funded by the international financial institutions (code here for the Chinese who underbid local contractors, do not use local labor, and import equipment and materials duty-free from China). The government responses were not very detailed and were designed more to reassure than to inform. ¶4. (SBU) Comment: Speculation was rampant about what the loan funds would be used for after the borrowing was approved. During parliamentary discussion, the opposition warned darkly of the dangers of borrowing to pay for regular expenditures. The government plans laid out March 31 appear to include spending at least some of that money on ongoing programs, such as road clearing. On the positive side, the government is trying to figure out ways to put people to work during difficult economic times. The GOG may regret not taking more time to work out the details of the programs it wants to implement with the borrowed money. If the work for any given individual only lasts one or two weeks in order to spread limited funding around, the programs could prove to be unpopular. Ultimately, the GOG must implement VAT and figure out how to ensure people pay taxes and rents they owe on time in order to close the budget gap and to create sustainable, long-term employment. MCISAAC