Abstract
IMF Country Report No. 22/235
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IMF Country Report No. 22/235
CABO VERDE
REQUEST FOR AN ARRANGEMENT UNDER THE EXTENDED CREDIT FACILITY—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR CABO VERDE
July 2022
In the context of the Request for an Arrangement Under the Extended Credit Facility, the following documents have been released and are included in this package:
A Press Release including a statement by the Chair of the Executive Board.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on June 15, 2022, following discussions that ended on April 26, 2022, with the officials of Cabo Verde on economic developments and policies underpinning the IMF arrangement under the Extended Credit Facility. Based on information available at the time of these discussions, the staff report was completed on June 3, 2022.
A Debt Sustainability Analysis prepared by the staff of the IMF and the International Development Association.
A Statement by the Executive Director for Cabo Verde.
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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International Monetary Fund
Washington, D.C.
© 2022 International Monetary Fund
Press Release
PR22/202
IMF Executive Board Approves US$60 Million Extended Credit Facility Arrangement for Cabo Verde
FOR IMMEDIATE RELEASE
IMF Board approves SDR 45.03 million (about US$60 million) three-year ECF arrangement for Cabo Verde, with SDR 11.26 million (about US$15 million) available for immediate disbursement.
The financing package will help mitigate the lingering impact of the COVID-19 pandemic and the spillover effects of the war in Ukraine; reduce the fiscal deficit and preserve debt sustainability; protect vulnerable groups; and support a reform agenda that leads to higher and more inclusive growth.
Key policy actions under the program include measures to boost revenue and improve the efficiency of spending, strengthen state-owned enterprises to mitigate fiscal risks, as well as measures to continue modernizing the monetary policy framework and safeguarding financial stability.
Washington, DC – June 15, 2022: On June 15, 2022, the Executive Board of the International Monetary Fund (IMF) approved a 36-month arrangement under the Extended Credit Facility (ECF) for Cabo Verde in an amount equivalent to SDR 45.03 million (190 percent of quota or about US$60 million). The ECF arrangement will help shore up international reserves, preserve debt sustainability, increase resilience to shocks, including from climate change, and make growth more inclusive. The program will help fill financing gaps together with the support of continued financing from Cabo Verde’s development partners.
Approval of the ECF arrangement enables immediate disbursement of SDR11.26 million (47.5 percent of quota, about US$15 million), fully usable for budget financing, in order to support the implementation of the reforms. This follows Fund emergency support to Cabo Verde in April 2020 under the Rapid Credit Facility (100 percent of quota, SDR 23.7 million, equivalent to US$32.3 million at the time of approval).
Cabo Verde’s economy is facing significant challenges associated with the lingering effects of the global pandemic, as well as rising food and fuel prices due to the war in Ukraine and the impact of the ongoing five-year drought. The economy rebounded strongly in 2021 following the COVID-19 induced sharp recession in 2020 (about 15 percent contraction), and recorded growth of 7 percent, which was supported by the easing of international travel restrictions, and the country’s highly successful vaccination program (one of the most successful in Africa). However, the spillover effects of the war in Ukraine are expected to weaken the economic recovery and the growth forecast has been revised downward from 6 percent to 4 percent in 2022. Higher commodity prices and weaker than earlier expected prospects for the tourism sector are projected to result in a significant widening of the current account deficit to about 14.1 percent of GDP in 2022, as well as lower international reserves. The overall fiscal deficit is expected to continue to improve to 6.3 percent of GDP in 2022, from 7.3 percent of GDP in 2021.
The ECF arrangement has four main objectives that are aligned with the government’s medium-term economic development plan (PEDS). First, strengthening public finances to preserve public debt sustainability and expand social safety nets. Second, reducing fiscal risks from public enterprises and improving their financial management and transparency. Third, modernizing the monetary policy framework and improving the resilience of the financial system. Fourth, raising growth potential and building resilience to shocks through structural reforms and economic diversification.
At the conclusion of the Executive Board’s discussion, Mr. Bo Li, Deputy Managing Director and Acting Chair, made the following statement:
“Cabo Verde showed a strong track record of commitment to reforms and macroeconomic stability before and during the pandemic, which contributed to a strong rebound of the economy following the COVID-19 induced recession. However, the spillover effects of the war in Ukraine, the lingering effects of the pandemic, and the impact of the ongoing five-year drought have weakened economic recovery and resulted in increasing financing needs.
“The new Fund-supported arrangement will support the authorities’ priorities to preserve debt sustainability, shore up international reserves, increase resilience to shocks, including from climate change, and make growth more inclusive. The reform agenda will be supported by a well-tailored capacity development strategy which is aligned with the program.
“The key strategy focuses on gradual and growth-friendly fiscal consolidation to place public debt on a decisive downward path and maintain debt sustainability. Fiscal policy will also be guided by the need to increase social spending to protect vulnerable groups. Implementing fiscal structural reforms, including strengthening the tax administration, enhancing public financial management, and reforming state-owned enterprises, will help boost revenue, enhance the efficiency of public spending, and reduce fiscal risks. The authorities’ initiatives to further enhance fiscal transparency and governance should continue.
“Modernizing the monetary framework and strengthening the financial sector will help safeguard financial stability and the peg. Bolstering international reserves, carefully unwinding crisis-related support measures, closely monitoring non-performing loans, and further strengthening the AML/CFT framework, will be critical measures in this regard.
“Steadfastly implementing the authorities’ development plan will improve the business environment and help support private sector-led growth. Considering Cabo Verde’s high vulnerability to the effects of climate change, the planned bold steps to climate adaptation will be key to boost the economy’s resilience and growth potential.”
Cabo Verde: Selected Economic Indicators, 2019–27
The Cabo Verdean exchange rate has been pegged to the Euro since 1999, at a rate of 110.265 CVE/€.
Cabo Verde: Selected Economic Indicators, 2019–27
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Proj. | Proj. | Proj. | Proj. | Proj. | Proj. | |||||||
| (Annual percent change) | ||||||||||||
| National accounts and prices 1/ | ||||||||||||
| Real GDP | 5.7 | -14.8 | 7.0 | 4.0 | 4.8 | 5.7 | 5.5 | 5.0 | 4.5 | |||
| GDP deflator | 0.6 | -0.9 | 1.8 | 4.5 | 2.6 | 2.0 | 2.0 | 2.0 | 2.0 | |||
| Consumer price index (annual average) | 1.1 | 0.6 | 1.9 | 6.5 | 3.5 | 2.0 | 2.0 | 2.0 | 2.0 | |||
| Consumer price index (end of period) | 1.9 | -0.9 | 5.4 | 6.5 | 3.5 | 2.0 | 2.0 | 2.0 | 2.0 | |||
| External sector | ||||||||||||
| Exports of goods and services | 10.2 | -58.7 | 39.3 | 11.2 | 32.6 | 11.0 | 9.6 | 9.0 | 9.3 | |||
| Of which: tourism | 9.4 | -69.1 | 48.4 | 14.2 | 22.2 | 18.7 | 11.8 | 8.7 | 5.5 | |||
| Imports of goods and services | 1.6 | -23.2 | 11.0 | 14.4 | 5.8 | 7.1 | 6.4 | 7.3 | 6.4 | |||
| (Change in percent of broad money, 12 months earlier) | ||||||||||||
| Money and credit | ||||||||||||
| Net foreign assets | 7.8 | -6.6 | 6.0 | -10.6 | 2.7 | 1.6 | 2.1 | 2.3 | 1.3 | |||
| Net domestic assets | 0.6 | 10.3 | -4.0 | 12.2 | 5.0 | 5.3 | 4.6 | 4.3 | 4.3 | |||
| Net claims on the central government | -4.8 | -1.3 | 0.6 | 1.8 | 1.6 | 0.7 | 0.3 | -0.1 | -0.4 | |||
| Credit to the economy | 23 | 2.9 | 1.8 | 5.1 | 1.3 | 2.7 | 2.1 | 4.3 | 3.2 | |||
| Broad money (M2) | 8.4 | 3.8 | 2.0 | 1.6 | 7.7 | 6.8 | 6.7 | 6.6 | 5.6 | |||
| (Percent of GDP, unless otherwise indicated) | ||||||||||||
| Savings and investment | ||||||||||||
| Domestic savings | 373 | 20.7 | 31.0 | 30.0 | 35.2 | 33.9 | 35.3 | 34.7 | 34.7 | |||
| Government | 0.1 | -7.4 | -4.5 | -2.6 | -1.8 | -0.1 | 1.7 | 2.9 | 2.5 | |||
| Private | 37.2 | 28.1 | 35.5 | 32.6 | 37.0 | 34.1 | 33.6 | 31.8 | 32.3 | |||
| National investment | 37.1 | 35.7 | 42.3 | 44.1 | 41.4 | 39.8 | 39.9 | 39.3 | 39.0 | |||
| Government | 3.6 | 3.3 | 2.2 | 3.4 | 3.1 | 3.1 | 3.0 | 3.0 | 3.0 | |||
| Private | 33.6 | 32.4 | 40.1 | 40.7 | 38.2 | 36.7 | 36.9 | 36.3 | 36.0 | |||
| Savings-investment balance | 0.2 | -15.0 | -11.3 | -14.1 | -6.2 | -5.9 | -4.7 | -4.6 | -4.2 | |||
| Government | -3.4 | -10.7 | -6.7 | -5.9 | -4.9 | -3.2 | -1.3 | -0.1 | -0.5 | |||
| Private | 3.6 | -4.3 | -4.5 | -8.1 | -1.3 | -2.7 | -3.4 | -4.5 | -3.7 | |||
| External sector | ||||||||||||
| External current account (including official transfers) | 0.2 | -15.0 | -11.3 | -14.1 | -6.2 | -5.9 | -4.7 | -4.6 | -4.2 | |||
| External current account (excluding official transfers) | -2.5 | -17.6 | -14.2 | -16.1 | -8.1 | -7.2 | -5.7 | -5.6 | -5.2 | |||
| Overall balance of payments | 6.8 | -4.6 | -1.0 | -5.2 | 2.6 | 1.5 | 1.9 | 2.1 | 1.2 | |||
| Gross international reserves (months of prospective imports of goods and services) | 9.0 | 7.1 | 6.3 | 5.0 | 5.1 | 5.1 | 5.1 | 5.3 | 5.2 | |||
| Government finance | ||||||||||||
| Revenue | 26.8 | 24.7 | 22.6 | 25.4 | 24.8 | 25.5 | 25.9 | 26.3 | 26.5 | |||
| Tax and nontax revenue | 23.9 | 21.4 | 20.6 | 23.5 | 23.6 | 24.4 | 24.9 | 25.4 | 25.7 | |||
| Grants | 2.9 | 3.2 | 2.0 | 1.9 | 1.2 | 1.1 | 1.0 | 0.9 | 0.8 | |||
| Expenditure | 28.5 | 33.8 | 29.9 | 31.7 | 30.4 | 29.5 | 28.1 | 27.3 | 27.3 | |||
| Primary balance | 0.7 | -6.4 | -5.1 | -3.6 | -2.6 | -1.3 | 0.0 | 1.0 | 1.0 | |||
| Overall balance (incl. grants) | -1.7 | -9.1 | -7.3 | -6.3 | -5.6 | -4.0 | -2.1 | -0.9 | -0.8 | |||
| Net other liabilities (incl. onlending) | -3.0 | -1.2 | 0.9 | -0.7 | -0.5 | -0.2 | -0.2 | -0.2 | 0.0 | |||
| Total financing (incl. onlending and capitalization) | 4.6 | 14.0 | 6.4 | 7.0 | 6.2 | 4.2 | 2.3 | 1.1 | 1.2 | |||
| Net domestic credit | 1.3 | 2.8 | 1.6 | 3.5 | 3.0 | 1.3 | 0.6 | -0.3 | -0.8 | |||
| Net external financing | 3.3 | 11.2 | 4.8 | 3.5 | 3.2 | 2.9 | 1.7 | 1.4 | 1.6 | |||
| Public debt stock and service | ||||||||||||
| Total nominal government debt | 114.0 | 142.6 | 143.0 | 145.9 | 139.7 | 132.5 | 124.0 | 116.2 | 109.6 | |||
| External government debt | 82.6 | 103.1 | 101.5 | 103.6 | 97.7 | 93.1 | 88.4 | 83.7 | 79.6 | |||
| Domestic government debt | 31.4 | 39.5 | 41.5 | 42.3 | 42.0 | 39.4 | 35.5 | 32.4 | 30.0 | |||
| External debt service (percent of exports of goods and services) | 5.4 | 14.8 | 13.4 | 17.7 | 14.7 | 11.0 | 10.3 | 9.5 | 9.0 | |||
| Present value of PPG external debt | ||||||||||||
| Percent of GDP (risk threshold: 55%) | 55.8 | 70.3 | 60.3 | 55.9 | 53.4 | 51.4 | 49.3 | 47.3 | 45.6 | |||
| Percent of exports (risk threshold: 240%) | 119.9 | 335.9 | 208.1 | 188.4 | 145.8 | 136.3 | 128.4 | 121.0 | 113.7 | |||
| Present value of total debt | ||||||||||||
| Percent of GDP (benchmark: 70%) | 92.4 | 105.4 | 104.7 | 97.9 | 95.0 | 90.5 | 84.7 | 79.7 | 75.5 | |||
| Memorandum items: | ||||||||||||
| Nominal GDP (billions of Cabo Verde escudos) | 213.9 | 180.7 | 196.8 | 213.8 | 229.8 | 247.7 | 266.6 | 285.5 | 304.2 | |||
| Gross international reserves (€ millions, end of period) | 666.1 | 582.4 | 591.3 | 491.0 | 544.3 | 577.6 | 623.3 | 677.5 | 710.3 | |||
The Cabo Verdean exchange rate has been pegged to the Euro since 1999, at a rate of 110.265 CVE/€.
Cabo Verde: Selected Economic Indicators, 2019–27
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Proj. | Proj. | Proj. | Proj. | Proj. | Proj. | |||||||
| (Annual percent change) | ||||||||||||
| National accounts and prices 1/ | ||||||||||||
| Real GDP | 5.7 | -14.8 | 7.0 | 4.0 | 4.8 | 5.7 | 5.5 | 5.0 | 4.5 | |||
| GDP deflator | 0.6 | -0.9 | 1.8 | 4.5 | 2.6 | 2.0 | 2.0 | 2.0 | 2.0 | |||
| Consumer price index (annual average) | 1.1 | 0.6 | 1.9 | 6.5 | 3.5 | 2.0 | 2.0 | 2.0 | 2.0 | |||
| Consumer price index (end of period) | 1.9 | -0.9 | 5.4 | 6.5 | 3.5 | 2.0 | 2.0 | 2.0 | 2.0 | |||
| External sector | ||||||||||||
| Exports of goods and services | 10.2 | -58.7 | 39.3 | 11.2 | 32.6 | 11.0 | 9.6 | 9.0 | 9.3 | |||
| Of which: tourism | 9.4 | -69.1 | 48.4 | 14.2 | 22.2 | 18.7 | 11.8 | 8.7 | 5.5 | |||
| Imports of goods and services | 1.6 | -23.2 | 11.0 | 14.4 | 5.8 | 7.1 | 6.4 | 7.3 | 6.4 | |||
| (Change in percent of broad money, 12 months earlier) | ||||||||||||
| Money and credit | ||||||||||||
| Net foreign assets | 7.8 | -6.6 | 6.0 | -10.6 | 2.7 | 1.6 | 2.1 | 2.3 | 1.3 | |||
| Net domestic assets | 0.6 | 10.3 | -4.0 | 12.2 | 5.0 | 5.3 | 4.6 | 4.3 | 4.3 | |||
| Net claims on the central government | -4.8 | -1.3 | 0.6 | 1.8 | 1.6 | 0.7 | 0.3 | -0.1 | -0.4 | |||
| Credit to the economy | 23 | 2.9 | 1.8 | 5.1 | 1.3 | 2.7 | 2.1 | 4.3 | 3.2 | |||
| Broad money (M2) | 8.4 | 3.8 | 2.0 | 1.6 | 7.7 | 6.8 | 6.7 | 6.6 | 5.6 | |||
| (Percent of GDP, unless otherwise indicated) | ||||||||||||
| Savings and investment | ||||||||||||
| Domestic savings | 373 | 20.7 | 31.0 | 30.0 | 35.2 | 33.9 | 35.3 | 34.7 | 34.7 | |||
| Government | 0.1 | -7.4 | -4.5 | -2.6 | -1.8 | -0.1 | 1.7 | 2.9 | 2.5 | |||
| Private | 37.2 | 28.1 | 35.5 | 32.6 | 37.0 | 34.1 | 33.6 | 31.8 | 32.3 | |||
| National investment | 37.1 | 35.7 | 42.3 | 44.1 | 41.4 | 39.8 | 39.9 | 39.3 | 39.0 | |||
| Government | 3.6 | 3.3 | 2.2 | 3.4 | 3.1 | 3.1 | 3.0 | 3.0 | 3.0 | |||
| Private | 33.6 | 32.4 | 40.1 | 40.7 | 38.2 | 36.7 | 36.9 | 36.3 | 36.0 | |||
| Savings-investment balance | 0.2 | -15.0 | -11.3 | -14.1 | -6.2 | -5.9 | -4.7 | -4.6 | -4.2 | |||
| Government | -3.4 | -10.7 | -6.7 | -5.9 | -4.9 | -3.2 | -1.3 | -0.1 | -0.5 | |||
| Private | 3.6 | -4.3 | -4.5 | -8.1 | -1.3 | -2.7 | -3.4 | -4.5 | -3.7 | |||
| External sector | ||||||||||||
| External current account (including official transfers) | 0.2 | -15.0 | -11.3 | -14.1 | -6.2 | -5.9 | -4.7 | -4.6 | -4.2 | |||
| External current account (excluding official transfers) | -2.5 | -17.6 | -14.2 | -16.1 | -8.1 | -7.2 | -5.7 | -5.6 | -5.2 | |||
| Overall balance of payments | 6.8 | -4.6 | -1.0 | -5.2 | 2.6 | 1.5 | 1.9 | 2.1 | 1.2 | |||
| Gross international reserves (months of prospective imports of goods and services) | 9.0 | 7.1 | 6.3 | 5.0 | 5.1 | 5.1 | 5.1 | 5.3 | 5.2 | |||
| Government finance | ||||||||||||
| Revenue | 26.8 | 24.7 | 22.6 | 25.4 | 24.8 | 25.5 | 25.9 | 26.3 | 26.5 | |||
| Tax and nontax revenue | 23.9 | 21.4 | 20.6 | 23.5 | 23.6 | 24.4 | 24.9 | 25.4 | 25.7 | |||
| Grants | 2.9 | 3.2 | 2.0 | 1.9 | 1.2 | 1.1 | 1.0 | 0.9 | 0.8 | |||
| Expenditure | 28.5 | 33.8 | 29.9 | 31.7 | 30.4 | 29.5 | 28.1 | 27.3 | 27.3 | |||
| Primary balance | 0.7 | -6.4 | -5.1 | -3.6 | -2.6 | -1.3 | 0.0 | 1.0 | 1.0 | |||
| Overall balance (incl. grants) | -1.7 | -9.1 | -7.3 | -6.3 | -5.6 | -4.0 | -2.1 | -0.9 | -0.8 | |||
| Net other liabilities (incl. onlending) | -3.0 | -1.2 | 0.9 | -0.7 | -0.5 | -0.2 | -0.2 | -0.2 | 0.0 | |||
| Total financing (incl. onlending and capitalization) | 4.6 | 14.0 | 6.4 | 7.0 | 6.2 | 4.2 | 2.3 | 1.1 | 1.2 | |||
| Net domestic credit | 1.3 | 2.8 | 1.6 | 3.5 | 3.0 | 1.3 | 0.6 | -0.3 | -0.8 | |||
| Net external financing | 3.3 | 11.2 | 4.8 | 3.5 | 3.2 | 2.9 | 1.7 | 1.4 | 1.6 | |||
| Public debt stock and service | ||||||||||||
| Total nominal government debt | 114.0 | 142.6 | 143.0 | 145.9 | 139.7 | 132.5 | 124.0 | 116.2 | 109.6 | |||
| External government debt | 82.6 | 103.1 | 101.5 | 103.6 | 97.7 | 93.1 | 88.4 | 83.7 | 79.6 | |||
| Domestic government debt | 31.4 | 39.5 | 41.5 | 42.3 | 42.0 | 39.4 | 35.5 | 32.4 | 30.0 | |||
| External debt service (percent of exports of goods and services) | 5.4 | 14.8 | 13.4 | 17.7 | 14.7 | 11.0 | 10.3 | 9.5 | 9.0 | |||
| Present value of PPG external debt | ||||||||||||
| Percent of GDP (risk threshold: 55%) | 55.8 | 70.3 | 60.3 | 55.9 | 53.4 | 51.4 | 49.3 | 47.3 | 45.6 | |||
| Percent of exports (risk threshold: 240%) | 119.9 | 335.9 | 208.1 | 188.4 | 145.8 | 136.3 | 128.4 | 121.0 | 113.7 | |||
| Present value of total debt | ||||||||||||
| Percent of GDP (benchmark: 70%) | 92.4 | 105.4 | 104.7 | 97.9 | 95.0 | 90.5 | 84.7 | 79.7 | 75.5 | |||
| Memorandum items: | ||||||||||||
| Nominal GDP (billions of Cabo Verde escudos) | 213.9 | 180.7 | 196.8 | 213.8 | 229.8 | 247.7 | 266.6 | 285.5 | 304.2 | |||
| Gross international reserves (€ millions, end of period) | 666.1 | 582.4 | 591.3 | 491.0 | 544.3 | 577.6 | 623.3 | 677.5 | 710.3 | |||
The Cabo Verdean exchange rate has been pegged to the Euro since 1999, at a rate of 110.265 CVE/€.
Title page
CABO VERDE
REQUEST FOR AN ARRANGEMENT UNDER THE EXTENDED CREDIT FACILITY
June 3, 2022
EXECUTIVE SUMMARY
Context. Cabo Verde’s economy is facing significant economic challenges associated with the lingering effects of the pandemic, as well as rising food and fuel prices triggered by the war in Ukraine. Climate change is also creating new difficulties after a fourth consecutive drought year. The economy rebounded strongly in 2021 following the COVID-19 induced recession in 2020, due in part to the authorities’ effective policy response, including one of the most successful vaccination programs in sub-Saharan Africa. However, the spillover effects of the Ukraine war are likely to weaken the economic recovery, worsen the fiscal and external positions, lead to higher inflation, and result in a substantial decline in international reserves. As a result, strong policy measures are needed to shore up international reserves, preserve debt sustainability, increase resilience to shocks, including climate change adaptation and mitigation, and make growth more inclusive.
Program Objectives and Modalities. The authorities have requested a new Extended Credit Facility (ECF) to help bolster reserves and support their economic reform program which is anchored on four key pillars: (i) fiscal consolidation to place public debt on a decisive downward path and preserve debt sustainability; (ii) public finance management (PFM) reforms to improve the efficiency of public spending and reduce fiscal risks from state-owned enterprises (SOEs); (iii) improvements to modernize the monetary policy framework and strengthen the financial system; and (iv) structural reforms to raise potential growth and increase resilience to external shocks. Staff support the authorities’ request for a 36-month ECF arrangement with semi-annual reviews and access at 190 percent of quota (SDR45.03 million, about US$63.37 million). The authorities would use the ECF to shore up reserves and for budget support. Overall public debt remains at high risk of distress but there is adequate capacity to repay the Fund.
Program Policies. Strong fiscal adjustment is needed to boost policy credibility and set public debt on a decisive downward path. Protecting social spending to mitigate the impact of the pandemic and the war in Ukraine is essential. The program also supports the authorities’ fiscal reform agenda, with an emphasis on domestic revenue mobilization, improvements in public finance management and efforts to contain possible fiscal risks from SOEs – especially Cabo Verde Airlines. The program also includes steps to contain risks from non-performing loans (NPLs) and the possible erosion in banks’ asset quality at the expiration of the exceptional COVID-19 support measures.
Staff views. The Letter of Intent and Memorandum of Economic and Financial Policies signal strong program ownership with the set of policies to attain the objectives of the authorities’ program. The main risk to the program is from uncertainty regarding the duration and impact of the Ukraine war, however, strong commitment and the track record of implementing reforms, program ownership, capacity development support and continued engagement by development partners will provide the impetus for success.
Approved By
Costas Christou (AFR) and Johannes Wiegand (SPR)
Discussions took place during three separate missions between January 31-April 26, 2022, virtually, in-person in Praia, and in-person in Washington DC. The staff team comprised Alex Segura-Ubiergo (head), Charles Amo-Yartey, Reginald Darius, Nombulelo Gumata, and Tomas Picca (all AFR). Ms. Carla Cruz and Mr. Ricardo Velloso (both OED) participated in most of the meetings. The mission met with Prime Minister Silva, Vice Prime Minister and Minister of Finance and Economic Development Correia, Central Bank Governor Santos, members of the Economic and Finance Committee of the National Assembly, other government and central bank officials, representatives of the private sector, and development partners. Mr. Lester Magno (AFR) assisted in the preparation of this report.
Contents
CONTEXT
RECENT ECONOMIC DEVELOPMENTS
MACROECONOMIC OUTLOOK AND RISKS
THE EXTENDED CREDIT FACILITY
A. Program Objectives and Policies
B. Strengthening Public Finances to Preserve Public Debt Sustainability
C. Monetary Policy and Financial Stability
D. Structural Reforms: Supporting Private Sector-Led Growth
FINANCING AND PROGRAM MODALITIES
STAFF APPRAISAL
FIGURES
1. Recent Economic Developments
2. External Sector Developments
3. Fiscal Sector Developments
4. Monetary Developments
TABLES
1. Selected Economic Indicators, 2019–27
2. Balance of Payments, 2018–27
3a. Statement of Operations of the Central Government, 2018–27 (Millions of Cabo Verde Escudos)
3b. Statement of Operations of the Central Government, 2018–27 (Percent of GDP)
4. Monetary Survey, 2018–27
5. Financial Soundness Indicators of the Banking Sector, 2018–21Q4
6. Indicators of Capacity to Repay the Fund, 2020–35
7. Decomposition of Public Debt and Debt Service by Creditor, 2021–23
8. Quantitative Performance Criteria and Indicative Targets Under the ECF, June 2022-June 2023
9. Structural Benchmarks Under the ECF, 2022–23
10. Proposed Schedule of Reviews Under the ECF, 2022–25
ANNEXES
I. Performance Under the 2019 Policy Coordination Instrument
11. GDP Rebasing
III. Risk Assessment Matrix
IV. External Sector Assessment
V. Public Enterprises Reforms: Progress and Next Steps
VI. Capacity Development Strategy
VII. Enhanced Safeguards for Cabo Verde
APPENDIX
I. Letter of Intent
Attachment I. Memorandum of Economic and Financial Policies for 2022–2025
Attachment II. Technical Memorandum of Understanding
