Washington, DC: The Executive Board of the International
Monetary Fund (IMF) completed the third and final review under the Policy
Coordination Instrument for Cabo Verde (PCI).
[1]
The Executive Board’s decision was taken without a formal meeting.
[2]
The PCI for Cabo Verde was approved by the Executive Board on July 15, 2019
(
Press Release No. 19/278
). Its implementation supported the authorities’ medium-term objectives for
fiscal and debt sustainability and for broader growth-enhancing reforms
under their Strategic Plan for Sustainable Development (PEDS). Policies and
reforms in recent years, through the beginning of the pandemic, helped
deliver higher growth, maintain low inflation, improve fiscal and external
positions, and put the ratio of public-debt-to GDP on a declining trend.
Performance under the PCI has remained satisfactory throughout the program
period despite challenges generated by the COVID-19 pandemic. All
quantitative targets for end-September 2020 and non-quantitative continuous
targets were met. All, but two reform targets (RT) set under the PCI were
observed, most of them ahead of the program schedule. There has been
important progress on the two remaining RTs, expected to be completed this
year.
The Cabo Verdean economy has been hit hard by the COVID-19 pandemic.
Economic activity is estimated to have contracted by 14 percent in 2020 due
to the global economic downturn, travel restrictions and domestic
containment measures that significantly reduced activities in the major
sectors of the economy. Policy and social protection measures taken by the
authorities are supporting the economy and helping the most vulnerable
groups address the impact of the pandemic.
The authorities’ COVID-19 response plan received financial support from
Cabo Verde’s development partners, including the IMF through the Rapid
Credit Facility (
Press Release No. 20/184
) totaling SDR 23.70 million (about US$32.3 million, 100 percent of quota).
The fiscal framework underpinning the 2021 budget addresses the lingering
effects of the pandemic while setting the stage for the resumption of a
declining path for public debt, after the surge caused by the economic
impact of the pandemic.
The economic outlook remains challenging and uncertain. Real GDP growth is
projected to rebound to 5.8 percent in 2021 and to average around 6 percent
in the medium term. However, there are significant downside risks, most
notably the evolution of the pandemic and its global ramifications.
In addition, economic prospects depend on key factors, including: a firm
global economic rebound, the resumption and increase of tourism and capital
flows to Cabo Verde; the execution of large externally-financed
infrastructure projects delayed by the pandemic, decisive implementation of
structural reforms, notably to restructure State-Owned enterprises and to
facilitate access to finance particularly for small and medium-sized
enterprises, and policies to support macroeconomic stability.
|
Table 1. Cabo Verde: Selected Economic Indicators,
2018–26
|
|
|
2018
|
2019
|
2020
|
2021
|
2022
|
2023
|
2024
|
2025
|
2026
|
|
|
|
|
CR 20/297
|
Est.
|
CR 20/297
|
Proj.
|
Proj.
|
|
National accounts and prices 1/
|
(Annual percent change)
|
|
Real GDP
|
4.5
|
5.7
|
-6.8
|
-14.0
|
4.5
|
5.8
|
6.0
|
6.1
|
6.1
|
6.2
|
6.2
|
|
GDP deflator
|
1.5
|
0.6
|
1.1
|
0.9
|
1.2
|
1.2
|
1.4
|
1.5
|
1.6
|
1.8
|
1.9
|
|
Consumer price index (annual average)
|
1.3
|
1.1
|
1.0
|
0.6
|
1.2
|
1.2
|
1.4
|
1.5
|
1.6
|
1.7
|
1.7
|
|
Consumer price index (end of period)
|
1.0
|
1.9
|
1.0
|
-0.9
|
1.2
|
1.2
|
1.4
|
1.5
|
1.6
|
1.7
|
1.7
|
|
External sector
|
(Change in percent of broad money, 12 months earlier)
|
|
Exports of goods and services
|
15.9
|
10.0
|
-47.3
|
-48.9
|
25.9
|
33.8
|
18.6
|
11.0
|
11.8
|
11.6
|
9.1
|
|
Of which: tourism
|
10.0
|
8.6
|
-65.7
|
-64.3
|
32.5
|
36.4
|
28.1
|
16.5
|
17.4
|
9.3
|
9.9
|
|
Imports of goods and services
|
8.7
|
2.0
|
-21.5
|
-23.7
|
5.1
|
11.2
|
7.6
|
5.5
|
6.4
|
9.4
|
6.3
|
|
Money and credit
|
|
|
|
|
|
|
|
|
|
|
|
|
Net foreign assets
|
-2.1
|
7.8
|
-5.7
|
-5.1
|
-1.5
|
-0.6
|
-0.6
|
0.5
|
1.5
|
1.5
|
1.6
|
|
Net domestic assets
|
3.5
|
0.6
|
0.5
|
8.2
|
6.0
|
6.2
|
5.1
|
6.4
|
5.1
|
4.3
|
4.3
|
|
Net claims on the central government
|
4.3
|
-4.8
|
1.2
|
1.4
|
1.2
|
0.7
|
0.4
|
0.6
|
0.3
|
0.1
|
0.1
|
|
Credit to the economy
|
1.9
|
2.3
|
0.9
|
2.1
|
3.7
|
4.0
|
3.9
|
4.1
|
4.2
|
4.1
|
4.1
|
|
Broad money (M2)
|
1.4
|
8.4
|
-5.2
|
3.1
|
4.5
|
5.6
|
4.5
|
6.9
|
6.5
|
5.8
|
5.9
|
|
Savings and investment
|
(Percent of GDP, unless otherwise indicated)
|
|
Domestic savings
|
31.3
|
37.1
|
28.0
|
22.7
|
33.0
|
27.7
|
33.8
|
35.9
|
37.7
|
38.2
|
36.0
|
|
Government
|
2.0
|
0.1
|
-7.7
|
-6.6
|
-3.2
|
-2.5
|
-0.1
|
2.7
|
3.7
|
3.9
|
4.2
|
|
Private
|
29.3
|
37.0
|
35.7
|
29.3
|
36.2
|
30.2
|
33.8
|
33.2
|
34.0
|
34.3
|
31.8
|
|
National investment
|
36.5
|
37.5
|
42.2
|
36.5
|
42.2
|
38.2
|
40.1
|
40.6
|
41.0
|
41.0
|
38.7
|
|
Government
|
4.4
|
3.9
|
3.8
|
2.7
|
5.0
|
5.3
|
4.0
|
4.0
|
4.0
|
4.0
|
4.0
|
|
Private
|
32.1
|
33.6
|
38.4
|
33.9
|
37.2
|
32.9
|
36.1
|
36.6
|
37.0
|
37.0
|
34.7
|
|
Savings-investment balance
|
-5.2
|
-0.4
|
-14.2
|
-13.8
|
-9.2
|
-10.6
|
-6.4
|
-4.7
|
-3.3
|
-2.8
|
-2.6
|
|
Government
|
-2.4
|
-3.8
|
-11.5
|
-9.2
|
-8.2
|
-7.9
|
-4.1
|
-1.3
|
-0.3
|
-0.1
|
0.2
|
|
Private
|
-2.8
|
3.4
|
-2.7
|
-4.6
|
-1.0
|
-2.7
|
-2.3
|
-3.4
|
-3.0
|
-2.7
|
-2.9
|
|
External sector
|
|
|
|
|
|
|
|
|
|
|
|
|
External current account (including official transfers)
|
-5.2
|
-0.4
|
-14.2
|
-13.8
|
-9.2
|
-10.6
|
-6.4
|
-4.7
|
-3.3
|
-2.8
|
-2.6
|
|
External current account (excluding official transfers)
|
-8.0
|
-3.4
|
-18.6
|
-17.4
|
-13.6
|
-13.1
|
-9.7
|
-7.1
|
-5.3
|
-4.7
|
-3.7
|
|
Overall balance of payments
|
0.5
|
7.4
|
-5.4
|
-5.1
|
-0.7
|
0.1
|
0.0
|
0.6
|
1.6
|
1.6
|
1.6
|
|
Gross international reserves (months of prospective imports
of goods and services)
|
5.5
|
9.0
|
7.3
|
7.2
|
6.7
|
6.7
|
6.3
|
6.1
|
5.9
|
5.8
|
5.8
|
|
Government finance
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
28.2
|
29.4
|
29.2
|
25.8
|
29.2
|
29.7
|
30.9
|
30.8
|
31.0
|
31.1
|
31.4
|
|
Tax and nontax revenue
|
26.8
|
26.2
|
24.5
|
22.8
|
25.6
|
27.5
|
28.8
|
29.6
|
29.8
|
29.9
|
30.2
|
|
Grants
|
1.4
|
3.2
|
4.7
|
3.1
|
3.6
|
2.2
|
2.1
|
1.2
|
1.2
|
1.2
|
1.2
|
|
Expenditure
|
30.9
|
31.2
|
38.8
|
34.7
|
35.8
|
37.6
|
34.6
|
32.5
|
31.7
|
31.4
|
31.3
|
|
Primary balance
|
-0.1
|
0.7
|
-7.0
|
-6.0
|
-3.8
|
-5.2
|
-0.7
|
1.0
|
1.9
|
2.2
|
2.4
|
|
Overall balance (incl. grants)
|
-2.7
|
-1.8
|
-9.7
|
-8.9
|
-6.6
|
-7.9
|
-3.6
|
-1.7
|
-0.7
|
-0.3
|
0.1
|
|
Net other liabilities (incl. onlending)
|
-1.0
|
-3.3
|
-2.5
|
-1.1
|
0.2
|
0.3
|
-0.2
|
-0.2
|
-0.2
|
-0.2
|
-0.2
|
|
Total financing (incl. onlending and capitalization)
|
2.9
|
5.1
|
12.1
|
9.1
|
6.4
|
7.6
|
3.8
|
2.0
|
0.9
|
0.5
|
0.2
|
|
Net domestic credit
|
1.4
|
1.4
|
2.6
|
3.0
|
2.2
|
1.5
|
0.8
|
1.3
|
0.5
|
0.2
|
0.2
|
|
Net external financing
|
1.5
|
3.6
|
9.5
|
6.1
|
4.2
|
6.1
|
3.0
|
0.6
|
0.3
|
0.3
|
0.0
|
|
Public debt stock and service
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nominal government debt
|
124.7
|
125.0
|
137.5
|
140.9
|
134.8
|
138.7
|
132.0
|
124.2
|
115.8
|
107.4
|
98.9
|
|
External government debt
|
91.4
|
91.4
|
97.0
|
97.6
|
93.8
|
97.3
|
93.0
|
86.8
|
80.8
|
75.1
|
69.3
|
|
Domestic government debt
|
33.3
|
33.5
|
40.5
|
43.4
|
41.0
|
41.4
|
39.1
|
37.4
|
35.0
|
32.3
|
29.6
|
|
External debt service (percent of exports of goods and
services)
|
5.9
|
5.4
|
12.5
|
14.5
|
13.4
|
9.5
|
13.4
|
12.6
|
11.5
|
10.4
|
10.2
|
|
Present value of PPG external debt
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of GDP (risk threshold: 55%)
|
60.6
|
60.8
|
69.2
|
74.2
|
65.8
|
70.8
|
67.4
|
63.3
|
59.2
|
55.5
|
51.7
|
|
Percent of exports (risk threshold: 240%)
|
123.8
|
119.9
|
244.3
|
249.2
|
194.8
|
193.3
|
166.0
|
150.7
|
135.8
|
123.4
|
114.0
|
|
Present value of total debt
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of GDP (benchmark: 70%)
|
96.0
|
94.3
|
107.7
|
113.0
|
106.5
|
111.6
|
106.4
|
100.6
|
94.2
|
87.8
|
81.3
|
|
Memorandum items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominal GDP (billions of Cabo Verde escudos)
|
183.7
|
195.2
|
183.9
|
169.3
|
194.4
|
181.3
|
194.7
|
209.5
|
225.9
|
244.2
|
264.3
|
|
Gross international reserves (€ millions, end of period)
|
531.9
|
663.4
|
573.2
|
583.9
|
561.0
|
586.6
|
587.1
|
598.1
|
631.6
|
667.4
|
706.8
|
|
Sources: Cabo Verdean authorities; and IMF staff estimates
and projections.
|
|
1/ The Cabo Verdean exchange rate has been pegged to the
Euro since 1999, at a rate of 110.265 CVE/€.
|
[2]
The Executive Board takes decisions under its lapse-of-time
procedure when the Board agrees that a proposal can be considered
without convening formal discussions