Numbers & Statistics

IMF Executive Board Completes First Review Under the Policy Coordination Instrument for Cabo Verde

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Via IMF (Den Internationale Valutafond)

Washington, DC – The
Executive Board of the International Monetary Fund (IMF) completed the
first review of Cabo Verde’s economic performance under the

Policy Coordination Instrument

(PCI)

[1]




. The Executive Board’s decision was taken without a meeting

[2]

.

Cabo Verde’s PCI-supported program was approved on July 15, 2019 (

Press Release No.19/278

) to support the implementation of the authorities’ Strategic Plan for
Sustainable Development (PEDS). The main objectives under the program
are: (i) restoring fiscal and debt sustainability; (ii) restructuring
State-Owned Enterprises (SOEs); (iii) enhancing the monetary policy
framework and continuing to build reserves; (iv) fostering financial
system stability; and (v) advancing growth-enhancing structural
reforms.

Performance under the PCI-supported program has been strong. All reform
targets were met, with some measures put in place ahead of schedule;
and all end-September 2019 quantitative targets were met, except for
the floor on tax revenue, missed by a narrow margin due to
lower-than-projected taxes on international trade.

Cabo Verde’s macroeconomic performance has been impressive under the
implementation of the authorities’ PEDS. Economic growth has been
robust, reaching over 6 percent year-on-year at end-September 2019, and
estimated at 5.5 percent for the year, mainly driven by strong activity
in services, notably tourism, construction and industry. Inflation has
remained low, averaging 1.1 percent in 2019. The current account
deficit has narrowed from 7.9 percent of GDP in 2017 to an estimated 3
percent of GDP in 2019, reflecting strong export performance and
deceleration in imports demand. This has helped Cabo Verde maintain an
adequate level of international reserves. The overall fiscal deficit
declined from 2.8 percent of GDP in 2018 to an estimated 1.9 percent of
GDP in 2019, thanks to continued good revenue performance, higher
grants, and expenditure restraint. As a result, and in conjunction with
the robust growth, the ratio of public debt to GDP has declined from
125.9 percent in 2017 to an estimated 123 percent at end-2019.

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Economic prospects for 2020 are clouded by the expected impact of
COVID-19, resulting from the global economic downturn and travel
restrictions which adversely affect tourism flows, foreign direct
investment and remittances. Coordinated support from Cabo Verde’s
development partners will be needed to support the authorities’ efforts
in addressing the economic and social impact of COVID-19.

The medium-term outlook remains positive although risks are tilted to
the downside. Growth is expected to rebound in 2021 and return to the
pre-COVID-19 medium-term trajectory of about 5 percent as the global
economy recovers, and the authorities maintain their structural reform
efforts to improve the business environment and build the economy’s
resilience to adverse shocks.




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