Blog from Grenada: Why the ‘Spice Isle’ has stopped paying its debts

It’s 10:30 at night and I’m trying a short cut through the grounds of an upmarket hotel in Grenada to get to my much cheaper room on the other side. A security guard stops me to ask what I’m doing. I explain I’ve been at a meeting with the government about the island’s debt problems.

“So you are the IMF?”

“No, I’m anti-IMF”

“That’s all good then man, go on through”

Housing in St George's, Grenada
Housing in St George’s, Grenada’s capital

Everyone in Grenada knows the International Monetary Fund, and conversations can be held about the island’s debt in the middle of the street, or on the bus. The country is enduring a prolonged economic crisis. One-third of people are unemployed, with over half of young people out of work. More than a third of the population live in poverty.

Travelling across the hilly island, forested woodland abounds, but much of this rich growth is recent. The land used to be covered with banana plantations and nutmeg trees. Then in the 1990s, American companies used the World Trade Organisation to make the EU import bananas and sugar from Latin America on the same terms as from the Caribbean. The smaller Caribbean producers could not compete with the US companies of Latin America, and production was decimated. All of the Eastern Caribbean was badly hit, but nowhere more so than Grenada, which has not benefitted from any “fairtrade” bananas sold in British shops.

Grenada is known as “The Spice Isle” because of the spices such as nutmeg and cinnamon which thrive in the fertile ground and climate. In 2004, Hurricane Ivan arrived, sweeping away buildings, and crucially, toppling the vast majority of nutmeg trees. The trees take ten years to grow into full production, so require a huge amount of upfront investment. Many Grenadian farmers just did not have the money to do all the clearing and planting from the hurricane, and then waiting for ten years for the income to begin.

Today, ten years since the devastation of Ivan, nutmeg production is back to just 20% of the level before the hurricane.

If trouble arrives in threes, then the third blow was the western banking crisis. Following 2008, many tourists from the US, Canada and Britain stopped coming, and those who did spent less money. Grenadians living overseas had to cut back on how much money they could send home. Local NGO activist Judy Williams tells me:

“The crisis in advanced countries in 2008 had nothing to do with us, but it has had a huge impact on us.”

The government of Grenada had been lent money by institutions such as the World Bank and Caribbean Development Bank, and private lenders, on the assumption that such shocks would not happen. In order to try to cope with the crises, and to help pay the debts, more loans were taken out. To pay overseas debts requires income from overseas through exports and tourism. The collapse in revenues across these areas has meant debt payments have been bleeding Grenada dry.

In March last year, the government stopped paying the private lenders and foreign governments, including Taiwan, Trinidad and the UK. But institutions such as the World Bank, IMF and Caribbean Development Bank have continued to receive Grenadian money.

The government’s lack of money is having disastrous impacts. One teacher reports that the lack of security – many teachers are now on temporary contracts – leads to a high turnover affecting the quality of teaching. And now when teachers leave jobs, they are often not replaced. Meanwhile things are very hard for young people because there are no jobs and no hope. A headteacher tells me:

“Pupils have no motivation because they can’t see what can be achieved through studying.”

Class room in Grenada secondary school
A secondary school classroom in Grenada

Children from impoverished backgrounds may struggle to concentrate at school. One church member tells me that over recent years, with the high unemployment and lack of income, some children come to school without any breakfast.

Medical drugs for the public health system are sourced through the Organisation of Eastern Caribbean States. But the government has had difficulty making payments, so drugs have become scarce. One mother tells me she has often had to pay much higher prices at private pharmacies for drugs for her ill husband and children. This has meant taking out loans to be able to pay for the healthcare. She says:

“I think about leaving the island because of the lack of hope here. But my husband is not well, and the children are still in school.”

Last year, the Conference of Churches in Grenada started working with the Government on alternatives to austerity to deal with the debt crisis. A ‘Jubilee Committee’ was created with representatives of both the government and the conference of churches. Following this, the Government publicly called for debt cancellation from all its lenders, to negotiate a reduction in the debt down to a sustainable level. Campaigners in the UK and elsewhere have been calling on governments to publicly support this proposal. But so far they haven’t.

The Caribbean Debt Network meets Grenada Minister for Economic Development Oliver Joseph along with Jubilee Debt Campaign UK, Jubilee USA and Erlassjahr.de (Jubilee Germany)
The Caribbean Debt Network meets Grenada Minister for Economic Development Oliver Joseph along with Jubilee Debt Campaign UK, Jubilee USA and Erlassjahr.de (Jubilee Germany)

Instead, the government of Grenada is negotiating separately with different lenders. It is likely that there will be a significant reduction in the debt owed to private lenders, which may have been helped by the work done by the Conference of Churches, and support from international campaigners. But it is still unclear what the response from the UK government and others is. And institutions such as the IMF, World Bank and Caribbean Development Bank have insisted on being paid in full, with them falsely telling the government they are not legally allowed to cancel debt (something the IMF and World Bank have done for 35 countries through the Heavily Indebted Poor Countries initiative).

On one bus journey, the driver Perry is delighted to hear that there are people in Europe and the US trying to help get Grenada’s debt cancelled. He doesn’t see it as an act of charity, but one of justice:

“England bled us dry for many years of our cocoa and nutmeg, being made rich whilst we were made poor. It’s time for them to give something back. We really need your help in getting the debt written-off.”

Act now

eu-flag-smallThis article has been produced with the assistance of the European Union. It is the sole responsibility of Jubilee Debt Campaign and can in no way be taken to reflect the views of the European Union.


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