Mr. Loungani: As I mentioned, the government is embarked on a fairly well-defined process. After Hurricane Ivan, the government immediately realised that the debt was unsustainable under the circumstances of the severe damage the country had suffered, and issued a press statement to that effect.
In January this year the government appointed professional financial and legal advisors and it has over the last few months been working closely with those advisors to work out a strategy such that it can reach a very cooperative deal with its creditors, both commercial and official.

We fully support what the government has been doing on this front. What I understand from the Finance Minister and the Permanent Secretary is that the timetable is to reach an agreement in the next few months.

We don't know how the deal will work out, what the precise details will be, but there is hope at this point that if a cooperative deal is struck that it will move Grenada's debt not quite out of the woods but to a much safer place than where you are at present.

Questioner: So it would bring debt down to EC$10,000 instead of EC$15,000 a person?

Mr. Loungani: That's a very good question. I honestly can't give you a numerical answer to that. But the process is moving along.

Ms. Sahay: Let me add to the response. What Prakash mentioned is one aspect of the debt strategy, that is, directly appealing to the creditors, both commercial and official, for debt relief.

This is a very complicated negotiation, you need highly skilled people to carry it out. The government has hired the top people in the profession. And they appealed to the donors to pay for the fees for these advisors, and USAID and the UK are doing that.

But the main point I wanted to make is that there are also other ways in which the government can reduce debt.

The first is fiscal measures: reducing government borrowing so you reduce the debt. You can have fiscal surpluses, for instance. A second way is privatization. Many developing countries own enterprises that are better off belonging in the private sector.

Grenada has done better than many other countries in this regard. When you privatize, you can use the proceeds to retire the debt.
The third way is to implement measures to improve growth in the economy. The fourth is getting new money from donors rather than borrowing.

Questioner: What is the opposition's view of the situation?

Mr. Loungani: We've been talking to the Opposition, to the trade unions, to civil society - I see we have one of our friends here from the Grenada National Organisation of Women who we spoke to - and to people we run into in the street.

What has impressed us the most is that there is a realization that the government is in a difficult situation, that it is your government, and that sacrifice is needed.

So there is a consensus on the need to do something, for people to contribute to the recovery and reconstruction of their own country. With the Opposition, I would not want to put words in their mouth, but I think they do agree with the need for a medium-term framework. A lot of people say: "We realize the government is doing a lot but we don't get the big picture. How is it all going to fit together? What will the steps look like?'

People would like to see what the targets are so that you can hold the government somewhat accountable. I think that kind of realization is there and that kind of support for these difficult steps is there. And I think that is there among the unions as well.

Ms. Sahay: I want to add that this is a time when a lot of support is still needed from outside the country. One of the things the external donors are saying is they will provide some financing but there has to be some adjustment by Grenada also. And it's not just the government, it's also the people.

This was something we felt was quite well understood by the people of Grenada. We had very productive discussions with the Opposition and the unions. Many of the issues we're talking about here today is what we discussed with them as well.

But what we think would be very helpful is for the various stakeholders to actually work together and for there to be better communication among them.

Questioner: What is your assessment of the Agency for Reconstruction and Development (ARD)?

Mr. Loungani: As the Permanent Secretary said, we've been here many times and we've had discussions with ARD on each of our visits.

My own view is that it's very difficult to come to any judgment yet on the effectiveness of the agency. It was only launched formally on March 15 and it only coming up to a critical level of staffing.

I know that the task it has been assigned of coordinating the recovery is an important one and the people are relying on it a lot. We have had very productive discussions with the staff there and they're working very hard.

I know they are putting together a document of what they have done over the past few months and what their plans are over the period ahead.

Questioner: Well, in the concluding statement that you distributed you call for transparency and accountability of ARD. Why don't you say honestly ... here what your position is?

Mr. Loungani: We have said that clearly in all our documents. At the time of the donors' conference, the government did say the ARD would be fully transparent and accountable. And in our concluding statement we do call for that. We're obviously not backing away from that-that's a given.

Ms. Sahay: In fact, we want to reinforce that point each time we come.

Questioner: Are you trying to change the negative perception of the IMF in the region?

Mr. Loungani Well, I certainly hope so. This (press conference) is part of changing the perception. We hope we've succeeded.

Ms. Sahay: The IMF has changed over the years. There was a period of time, in the 1970s and 1980s, when the IMF was willing to take the heat on behalf of governments that wanted to take difficult measures but say that it was the IMF that made them do it.

Over time, we have realized that is creating a problem for us. So today we are more likely to want to work with governments who are more openly committed to reform.