The International Monetary Fund (IMF) team led by Justin Tyson was on mission in Praia from November 2-11, 2022 to discuss the implementation of Cape Verde’s economic reform agenda under the Fund-supported program. On June 15, 2022, the IMF Executive Board approved a 36-month arrangement under the Extended Credit Facility (ECF) for Cape Verde for an amount equivalent to SDR 45.03 million (190 percent of quota or about $60 million at the time of approval) to help fill financing gaps, along with continued financing support from Cape Verde’s development partners (see Press Release No. 22/2022). At the conclusion of the mission, Mr. Justin Tyson issued the following statement:
“After productive discussions, the IMF team and the Cape Verdean authorities have reached a consensus at the technical level regarding the first program evaluation under the ECF arrangement, subject to IMF Executive Board approval in January 2023. Upon completion of the evaluation, SDR 11.26 million (about US$16 million) will be made available to Cape Verde, for a total cumulative disbursement under the program of approximately US$32 million.
Cape Verde’s economy is recovering from the pandemic of COVID-19. After contracting by almost 15 percent in 2020, the economy recorded 7 percent growth in 2021 and the recovery continued strong during the first half of 2022 (17 percent year-on-year change in the first half of the year), supported by a recovery in tourism receipts. Economic activity was supported by credit growth. The outlook for risks remains high for the future due to the difficult external environment, with higher food and fuel prices around the world also starting to push up inflation in Cape Verde.
Overall performance and progress on the reform program has been strong despite the challenges posed by the war in Ukraine, rising commodity prices, and the lingering effects of the COVID-19 pandemic. All quantitative targets assessed at the end of June 2022 as well as structural benchmarks have been met.
Preliminary data suggest an improvement in the fiscal situation during the first half of 2022. Gains in tax revenues were broad-based, driven by the recovery in economic activity and supported by policy measures. The risks posed to the budget by SOEs continue to be closely monitored.
Monetary policy remains focused on fixed parity protection and policy tightening. Reserves are at comfortable levels. The BCV is phasing out COVID-19 related support, the resumption of robust economic activity and considering liquidity in the banking system.
The mission met with Prime Minister Ulisses Correia e Silva, Deputy Prime Minister and Minister of Finance and Business Development Olavo Correia, Governor of the Bank of Cape Verde Óscar Santos, Minister of State, Family, Inclusion and Social Development Fernando Freire, members of the National Assembly’s Economic and Financial Committee, other government and central bank officials, private sector representatives and development partners.
The team thanks the authorities for the open and constructive discussions and looks forward to continued close cooperation as the program unfolds.”
Source: Ministry of Finance and Business Development