Via IMF (Den Internationale Valutafond)

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

October 26, 2020

  • The COVID-19 pandemic continues to severely affect the Cabo Verde economy. Real GDP is projected to contract by 6.8 percent in 2020, and to expand by 4.5 percent in 2021.
  • The authorities have been appropriately proactive in addressing the impact of the pandemic through social protection programs as well as fiscal and monetary policy measures.
  • Given the highly uncertain economic outlook and risks to debt sustainability, sound implementation and close monitoring of strong policies and reforms will be key in the post-pandemic environment.

Washington, DC: The
Executive Board of the International Monetary Fund (IMF) completed the
second review under the Policy Coordination Instrument (PCI)


for Cabo Verde today.

Cabo Verde has benefited from the PCI since July 15, 2019 (

Press Release No. 19/278

). The program aims to support the authorities’ reform agenda under their
Strategic Plan for Sustainable Development. The main objectives under the
PCI 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 the financial
system stability; and (v) advancing growth-enhancing structural reforms.

The COVID-19 pandemic continues to severely affect Cabo Verde’s economy,
interrupting several years of strong and positive macroeconomic
developments. Economic growth is projected at -6.8 percent (5.7 percent in
2019), mainly due to the collapse in tourism and transport activities, and
a sharp contraction in other sectors. A recovery is expected in 2021 with
real GDP growth at 4.5 percent. However, there are substantial risks to
this outlook because of uncertainties about the duration of the pandemic
and the expected recovery in the global economy and tourism flows.

Measures taken by the authorities since the onset of COVID-19 have been
appropriately designed and well-targeted. They were aimed at enhancing the
healthcare system, containing the community spread of the disease,
protecting the most vulnerable, providing liquidity to the banking system,
easing access to credit, and facilitating the payment of tax obligations.

Policies and reforms implementation during this difficult period have been
supportive of macroeconomic stability. Hence, performance under the PCI has
remained positive. All quantitative targets at end-March 2020 were met, except for the target on tax
revenue which was narrowly missed because of the economic impact of
COVID-19; and all reform targets were observed at end-June, except for the
streamlining of tax exemptions that was partially met.

The authorities have reaffirmed commitment to medium-term objectives under
the PCI, which expires in January 2021. Consequently, they agreed with
staff that policies and reforms post-pandemic should focus on supporting
economic recovery, enhancing revenue mobilization, containing non-priority
spending as well as fiscal risks, particularly from SOEs, and continuing to
rely on concessional borrowing.

Following the Executive Board’s discussion, Mr. Zhang, Deputy Managing
Director and Acting Chair, issued the following statement:

“The Cabo Verdean economy is facing considerable challenges stemming from
the impact of the COVID-19 pandemic. The sharp contraction in travel and
tourism flows, lower external demand, and domestic containment measures
have dealt a significant blow to the economy. The near-term outlook is
highly uncertain, and there are significant downside risks. Notwithstanding
the difficult circumstances, the authorities have maintained fiscal
discipline and reform implementation efforts. As a result, performance
under the Policy Coordination Instrument has remained strong.

“The authorities have taken swift and appropriate measures to address the
economic and social impact of the pandemic. They have increased testing
capacity, enhanced health care services, expanded social protection
programs, and implemented policy measures to support the corporate sector.
The authorities have also taken actions to execute COVID-related spending
in a transparent manner.

“The shock related to COVID-19 has significantly eroded progress made by
the authorities in recent years to place public debt on a sustained
downward trajectory. With Cabo Verde at high risk of debt distress, it
would be important to refocus on the achievement of medium-term fiscal and
debt sustainability through fiscal consolidation and continued prudent
borrowing policies, relying on highly concessional loans, as the health
crisis abates.

“Progress in reforms aimed at increasing efficiency in the public
enterprises sector, deepening financial intermediation, and improving the
business environment remains critical to support economic recovery and
enhance medium-term growth prospects. The authorities should continue to
focus on completing ongoing reforms in these key areas as the health crisis
situation improves.”


The PCI is available to all IMF members that do not need Fund
financial resources at the time of approval. It is designed for
countries seeking to demonstrate commitment to a reform agenda or
to unlock and coordinate financing from other official creditors or
private investors.

IMF Communications Department

PRESS OFFICER: Gediminas Vilkas

Phone: +1 202 623-7100Email:


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