Washington, DC – the
Executive Board of the International Monetary Fund (IMF) today approved
a disbursement of SDR 23.70 million (about US$32.3 million, 100 percent
of quota) to Cabo Verde under the
Rapid Credit Facility (RCF)
. It will help the country to meet urgent balance of payment needs
generated by the economic impact of the COVID-19 pandemic.
The pandemic is severely affecting Cabo Verde’s economy, which is
heavily dependent on tourism, that is significantly hit by the global
economic downturn, and travel restrictions. The impact of COVID-19 is
also compounded by measures put in place by the authorities to prevent
an extensive local spread. In the short run, the shocks generated by
the pandemic are expected to result in a contraction of growth,
increased external and fiscal financing needs and social hardship.
Mitigating measures taken by the authorities are aimed at preventing an
extensive spread of the pandemic, and helping the private sector,
households and vulnerable groups mitigate the fallouts of the pandemic.
However, important challenges remain in view of the existing uncovered
financing gaps and uncertainties on the duration of the pandemic,
calling for financial support from Cabo Verde’s development partners.
IMF financing under the RCF will provide additional foreign exchange
and much-needed budget support.
While addressing the impact of the COVID-19 pandemic, the authorities
should stand ready to resume reforms and policies needed to return the
economy to its pre-pandemic medium-term trajectory, anchored in
sustained growth, stronger external and fiscal positions, and declining
ratio of public debt to GDP.
Following the Executive Board’s discussion, Mr. Tao Zhang, Deputy
Managing Director and Acting Chair, issued the following statement:
“Cabo Verde has been severely hit by the COVID‑19 pandemic. As a small
tourist dependent island economy, the global economic downturn, travel
restrictions, and the lock down have led to social hardship and is
likely to result in a significant output loss and increased fiscal and
external financing gaps. The authorities have acted swiftly to stem the
local transmission of the virus and taken pro-active measures to help
mitigate the economic and social impact of the pandemic.
“Addressing the impact of these shocks requires a combination of policy
actions from the authorities with support from Cabo Verde’s development
partners. There is a need to further scale‑up health and social
protection programs, which will put public finances under additional
strain. Grants and concessional loans from Cabo Verde’s development
partners are critically needed to help the authorities respond timely
and effectively to the crisis while preserving debt sustainability.
“Beyond the crisis, the medium‑term outlook remains broadly favorable,
under the assumption of a recovery of the global economy, resumption of
tourism and capital inflows, and the growth‑enhancing reforms envisaged
under the authorities’ Plan for Sustainable Development (PEDS).
Therefore, it will be critical that after the pandemic, policies and
reforms remain focused on achieving medium‑term objectives in the
authorities’ development program supported by the IMF’s Policy
Coordination Instrument (PCI).”
IMF Lending Tracker (emergency financing request approved by the IMF
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