Statement by the IMF Staff Representative

In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.

Abstract

In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.

1. The following information has become available since the staff report was prepared. These developments do not alter the thrust of the staff appraisal.

2003 budget

2. The National Assembly approved the 2003 budget on December 11, 2003. The budget differs from the preliminary fiscal program agreed with the authorities in the context of the first PRGF review. The 2003 budget is based on higher revenues, grants, expenditures, and external financing than projected in the staff report. The budgeted overall fiscal deficit (including grants) is 4.7 percent of GDP, compared with a projected 2.5 percent in the staff report, reflecting a more optimistic outlook regarding donor disbursements of project loans. However, the budgeted domestic surplus (revenue less domestic expenditure) is somewhat larger than projected in the program, and recourse to domestic bank financing is in line with program limits.

3. The authorities have assured the staff that they will adhere to the fiscal targets for the first half of 2003 as set forth in Table 1 of the Supplementary Memorandum of Economic and Financial Policies (Attachment I to Appendix I of the staff report). They have informed staff that the budgeted expenditures are spending ceilings, that are contingent upon available revenues, and not authorizations to spend. The Minister of Finance will release warrants for expenditures only if revenues are adequate to ensure the fiscal targets contained in the MEFP are attainable. The authorities have followed the same approach this year, and have kept domestic expenditures not only below budget, but also below the program limit. While this approach has been an effective means of controlling expenditure and adhering to programmed fiscal targets, it is not transparent, and the staff has informed the authorities that the issue of realistic budgeting will need to be taken up during the negotiations of the second annual program.

Other developments

  • The Safeguards Assessment Report has been completed. The authorities accepted the findings and recommendations of the assessment and an implementation plan is underway.

  • The government has issued the decree liquidating EMPA (the food import and distribution public enterprise).

  • The law for combating money laundering and the financing of terrorism has been approved by the National Assembly.

  • World Bank staff have indicated that all conditions for disbursement of the second tranch under the Structural Adjustment Credit (SAC) have been met and the request for a supplementary credit under the SAC has been sent to the Bank Board. Approval of the supplementary credit will close the remaining financing gap for 2002.

  • Net international reserves fell by about euro 3.6 million between end-October and December 6, but are still about euro 30 million above the revised target for end-December 2002.

Cape Verde: 2002 Article IV Consultation, First Review Under the Poverty Reduction and Growth Facility, and Request for Waiver of Performance Criteria-Staff Report; Staff Statement; Public Information Notice and News Brief on the Executive Board Discussion; and Statement by the Executive Director for Cape Verde
Author: International Monetary Fund