## Cabo Verde — Request for an Extension of the Program Under the Policy Coordination Instrument (PCI)

## Source details

**Canonical URL:** [Cabo Verde — Request for an Extension of the Program Under the Policy Coordination Instrument (PCI)](https://www.imf.org/-/media/files/publications/cr/2021/english/1cpvea2021001.pdf)

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- [Markdown version](/-/media/files/publications/cr/2021/english/1cpvea2021001.pdf.md)
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### Extension request and procedural facts
- Staff report prepared by IMF staff completed on December 17, 2020.
- The authorities requested an extension of the PCI through March 31, 2021.
- The 18-month PCI was approved by the Executive Board on July 15, 2019.
- Two reviews under the PCI have been concluded; the third and final review requires additional time to conclude.
- Letter of Intent dated December 16, 2020, authorizes publication of the letter and related staff report and requests the extension.

### Macroeconomic impact of COVID-19 and outlook
- 2020: real GDP was projected to contract by 6.8 percent at the time of the second PCI review.
- The 2020 contraction "may need to be marked down further" due to:
  - collapse in tourism and transport flows,
  - sharp decline in activity in other sectors from border closings, supply chain disruptions, and domestic COVID-19 containment measures.
- 2021 and medium-term:
  - A rebound is projected for 2021.
  - Medium-term prospects are generally positive, except for deteriorated debt dynamics due to pandemic-related economic shock and 2020 borrowing.
  - The outlook is subject to important downside risks, notably the duration and strength of the pandemic, global economic recovery, and the authorities’ ability to advance structural reforms and support medium-term objectives.

### Program performance and fiscal/financial measures
- Overall program performance:
  - All reform targets (RTs) were met, except one RT that was partially implemented at the time of the second review and was reset to end-December 2020.
  - All quantitative targets (QTs) were met, except the floor on tax revenue for both reviews.
  - All non-quantitative continuous targets were observed.
  - Available information indicates the authorities maintained efforts toward outstanding RTs and there are indications QTs for end-September 2020 (test date for the third PCI review) were met.
- Policy response to the pandemic:
  - Authorities implemented healthcare, social, fiscal, and monetary policy measures to support vulnerable households and businesses.
  - Cabo Verde received support from development partners, including IMF Rapid Credit Facility assistance.

### Key reform and program measures (selected)
- Fiscal reforms:
  - Review report on exemptions completed by End-December 2019 — Objective: Improve tax collection — Status: Met.
  - Streamline exemptions for Import duties, VAT, and excises — Target date revised to December 2020 for VAT and excises — Objective: Improve tax collection — Status: Not met (partially implemented at the time of the second review).
  - Submit to Parliament the budget for 2020 in line with PCI commitments — End-October 2019 — Status: Met.
  - Prepare Strategy Note on assets and liabilities management of the Sovereign Private Investment Guarantee Fund (SPIGF) — End-April 2020 — Status: Met.
- SOE reforms:
  - Implement quarterly monitoring of actual performance of 6 key SOEs starting end-December 2019 — Continuous — Objective: Improve fiscal reporting and reduce fiscal risk — Status: Met.
  - Compile cash flow performance of the 6 largest SOEs for FY2019 — End-July 2019 — Status: Met.
- Monetary reforms:
  - Release minutes of Monetary Policy Committee meetings at least one month after each meeting starting end-July 2019 — Continuous — Status: Met.
  - Reduce the excessively wide overnight interest rate corridor to a maximum of 150-200 basis points — End-December 2019; implemented in June 2019 — Status: Met.
- Financial sector reforms:
  - Create a functional central registry of mobile collateral — Mid-January 2021 (new target date) — Status: In progress.
  - Revamp public credit registry information system by completing procurement of software — End-December 2020 — Status: In progress.

### Quantitative target outcomes (selected figures from program tables)
- Primary balance, floor: reported entries include 841-3352,510 and other cumulative flows as presented in program tables.
- Tax revenue, floor: documented figures include 31,362; 30,652; 42,015; 10,471; 9,919; 15,888; 23,114 (table shows tax-revenue-related targets and actuals; tax-revenue floors were not met for both reviews).
- Net other liabilities, ceiling: 6,345 with actuals such as 1,657 and 1,022 reported as Met.
- Nominal level of new concessional external debt of central government, ceiling: 9,563 with actuals such as 7,785 and 3,822 reported as Met.
- Net international reserves, floor: figures include 5285 14634 and other entries with Met status; table indicates reported actuals (e.g., 650600) as presented.

### Staff recommendation
- IMF staff supports the authorities’ request for an extension of the PCI through March 31, 2021.
- A decision is proposed for adoption by the Executive Board on a lapse-of-time basis.

*International Monetary Fund. IMF Country Report No. 21/19. December 17, 2020.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2021/english/1cpvea2021001.pdf_