Statement at the Conclusion of an IMF Staff Mission to Cape Verde
October 3, 2008Press Release No. 08/230
An International Monetary Fund (IMF) mission, led by Mr. Lamin Leigh, visited Praia from September 22-October 3, 2008. The purpose of the visit was to conduct the fifth review of Cape Verde's reform program supported by the IMF's Policy Support Instrument (PSI). The Cape Verde government's macroeconomic and structural program under the country's three-year PSI was approved by the IMF Executive Board in July 2006.
The mission issued the following statement in Praia today:
"Cape Verde's main challenge is to sustain its good macroeconomic performance that has enhanced its policy credibility in recent years and to pursue structural reforms that would enhance medium-term growth prospects, reduce poverty, and increase the economy's resilience to shocks. The fifth PSI review discussions focused on how best to execute the 2009 budget against the background of the current global economic challenges; the authorities' medium-term fiscal framework, and measures to strengthen public financial and debt management.
"The performance of the Cape Verde economy was solid during the first half of 2008 thanks to the continued implementation of prudent economic policies. Economic growth continues to be driven by strong tourism exports and foreign direct investment (FDI) flows although it is expected to moderate in 2008/09 reflecting the impact of slower global growth. Inflation remains in single digits despite rising in recent months due to food and fuel price increases. While high food and fuel prices have posed some difficulties, they are manageable given the buffers created by Cape Verde's reform efforts that have placed it in a position of strength to address such economic challenges. In this regard, the fiscal space created in the last two years is particularly notable and the mission supports the measures that the government has taken to address higher food and fuel prices.
The Cape Verde government should continue to make the economy more flexible to enhance its resilience to economic shocks. Consistent with PSI program goals, domestic public debt is coming down as a share of GDP thanks to strong revenue performance, improvements in tax administration and continued expenditure restraint. The exchange rate peg continues to be supported by domestic policies and serves Cape Verde well as an anchor for financial stability. Steady progress is also being made in the implementation of structural reforms."