## tarea2024034

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---

### Mission overview
- Mission: Climate Public Investment Management Assessment (C-PIMA) at the request of the Ministry of Finance and Business Development (MOF) of Cabo Verde, conducted 21-31 March 2023.
- Team leadership and composition:
  - Team led by Nicoletta Feruglio (FAD).
  - Team members: Mr. Rui Monteiro and Ms. Juana Aristizabal (experts, FAD).
  - Research support: Ms. Letitia Li (Research Assistant, FAD).
- Engagements:
  - Preliminary conclusions and draft mission report presented to H.E. Mr. Olavo Avelino Garcia Correia, Vice Prime Minister and Minister of MOF.
  - Meeting with World Bank (WB) at mission start to discuss assessment and cooperation.

### Climate risks and economic impacts
- Exposure and projections:
  - Cabo Verde highly exposed to climate change and natural hazards; 2021 World Risk Report: second in risk to natural disasters compared to 10 other Small Island Developing States (SIDS).
  - Temperature increase projected: 1.2°C to 3.7°C by the end of the century.
  - Sea surface temperature increase projected: 0.7°C to 2.5°C by the 2060s.
  - Sea level rise projection: 0.26m to 0.98m for 2081-2100.
- Recorded disasters and damages:
  - 315 natural disasters recorded in 2018 compared to 350 disasters between 2008 and 2017.
  - Recent specific damages: US$3 million (floods of 2020); US$2.5 million (2015 hurricane).
  - Average economic damage from natural disasters: US$18 million (1 percent of GDP) per year (World Bank estimate).
  - Flood-related risks account for almost 70 percent of aggregated annual average losses.
- Sectoral and social impacts:
  - Tourism: 25 percent of GDP; generates about 45 percent of formal jobs; in 2019 brought 56 percent of receipts by foreign visitors out of total exports revenue.
  - Agriculture: cereal maize production decreased by 80 percent in 2022 compared to the last 5 years; 140,000 people could be in acute nutritional vulnerability; 2019 and 2021 rainfall deficits of 49 percent and 34 percent respectively; in 2021, 93 percent of cereal and 34.5 percent of tuber production were lost.
- Energy vulnerability:
  - In FY 2022, fuel commodity imports represented 7.9 percent of GDP and were three time the level of Cabo Verde’s goods exports.
  - Over 80 percent of electricity production is derived from fossil fuel (mostly heavy fuel oil).

### GHG emissions, targets, and energy policy
- GHG contribution: 0.0018 percent of total global GHG emissions in 2020 (MF staff using UNFCCC, FAO & EDGAR).
- National targets:
  - Unconditional mitigation target: 24 percent of domestic total GHG emissions by 2030.
  - Net-zero economy target by 2050.
  - NDC mitigation target: emissions reductions of between 18 percent and 24 percent (with external assistance) relative to business-as-usual by 2030; 100 percent of reductions expected from the energy sector via renewables and energy efficiency.
- Energy policy actions and projects:
  - 175 charging points will be installed.
  - By the end of 2024, 5 percent of vehicles sold should be electric.
  - Sector projects: Renewable Brava project; Phase III Expansion of the Port of Palmeira; Electricity Master Plan (2018-2040) projects include thermal generation on Sal of 15 MW and the pure pumping project on Santiago; Mitigation and Drought Resilience Program includes solar panels for wells and desalination plants.
  - Adaptation financing target: At least EUR 5 million per year for adaptation measures in pilot municipalities (Ribeira Brava, Mosteiros, Praia, Brava and Boa Vista).

### Status of climate-sensitive public investment management (PIM)
- Overall characterization: at a nascent stage.
- Positive signs:
  - Increasing awareness across government institutions; many initiatives underway but generally at early stages.
- Main constraints:
  - Limited capacity, basic PIM processes and procedures, high dependency on external financing.
  - Weak coordination across central government; no institution strategically positioned to lead adaptation or mitigation investments.
  - Public enterprises (PEs) drive most public investment but regulatory and oversight framework does not promote consistency with national climate policies.
  - PPP framework lacks allocation of climate risks between government and PPP partners.
  - Investment project appraisal and selection practices do not exist; climate-responsive spending in infrastructure is at concept development stage.
  - No ex-post reviews or external audits of projects on climate outcomes; climate impact not integrated into public asset management.
  - Disaster risk management practices could be strengthened; national disaster risk reduction strategy does not identify climate threats to public infrastructure assets.
  - Fiscal climate change risks to public assets are not identified; adequacy of disaster financing instruments needs assessment.

### C-PIMA diagnostic results (summary by pillar and priorities)
- C1 Climate-aware planning: Institutional Strength = Medium; Reform Priority = High.
- C2 Coordination between entities: Institutional Strength = Low; Reform Priority = High.
- C3 Project appraisal and selection: Institutional Strength = Low; Reform Priority = High.
- C4 Budgeting and portfolio management: Institutional Strength = Low; Reform Priority = Medium.
- C5 Risk management: Institutional Strength = Low; Reform Priority = Medium.

### Strategic reform areas and prioritized actions
- Seven strategic reform areas proposed; six high priority actions highlighted:
  - Introduce climate change capital-investment aspects in public sector planning coordination.
  - Define "major project" and varied appraisal procedures by project size and complexity.
  - Develop standardized methodology for project screening and appraisal (including climate analysis).
  - Develop a PPP manual integrating climate requirements across project lifecycle.
  - Revise regulatory framework for PEs to align PE capital projects with national climate objectives.
  - Develop standardized methodology for estimating current and capital maintenance needs including climate risks.
- Three urgent measures (critical for whole PIM system):
  - Define the concept of "capital project".
  - Develop a PIM legal framework regulating the whole capital project cycle (planning, appraisal, selection, capital portfolio management, etc.) including climate considerations.
  - Develop a comprehensive capital investment plan to inform implementation of PEDS II (including climate-relevant capital projects).
- Additional medium-priority actions include: guidelines for integrating climate into sector and municipal public investment plans; finalize municipal risk and vulnerability maps for 22 municipalities; establish transparent selection processes with published climate criteria; develop ex post review and audit methodologies for climate outcomes; include at least one climate change audit of a major capital project each year in the Supreme Audit Institution work plan.

### Strengthen the capital project cycle — reform actions and responsibilities
- Selected actions, responsibilities, priorities, and timing marks:
  - Develop climate-informed medium-term fiscal and budget framework to guide budget preparation.
  - Improve planning of capital projects.
  - Develop PPP manual integrating climate requirements into PPP arrangements from project identification to contract management stage. Responsible: MOF. Priority: High. Timing: XX (2023–2024).
  - Revise PPP legal framework to reflect climate requirements. Responsible: MOF. Priority: Medium. Timing: X (2023).
  - Revise regulatory framework for public enterprises (PEs) to align capital projects with climate objectives. Responsible: MOF. Priority: High. Timing: X (2023).
  - Gradually introduce green budgeting and climate tags in SIGOF. Responsible: MOF, MAA. Priority: Medium. Timing: XXX (2023–2025) for green budgeting; XX (2023–2024) for SIGOF coding.
  - Develop centralized register of infrastructure assets with climate information. Responsible: MOF, MAA, INGT, ICV. Priority: Medium. Timing: XXXX (2023–2026).
  - Develop standardized methodology for estimating maintenance needs including climate risks. Responsible: MOF, MAA, line ministries. Priority: High. Timing: X (2023).
  - Develop PIM legal framework regulating whole capital project cycle including climate considerations. Responsible: MOF, MAA, line ministries. Priority: Urgent. Timing: X (2023).
  - Enhance capacities of DNP and UASE on climate-aware planning and climate-smart PPP arrangements. Responsible: MOF. Priority: Long-term. Timing: XXXX (2023–2026).
  - Strengthen staff capacity across central government and municipalities on mainstreaming climate change into PIM. Responsible: MOF, MAA, line ministries. Priority: Long-term. Timing: XXXX (2023–2026).
  - Develop a PIM IT system integrating climate considerations at each project cycle step. Responsible: MOF. Priority: Long-term. Timing: XX (2023–2024).

### Centralized guidance, coordination, and municipal roles
- Centralized guidance:
  - Neither DNA/MAA nor DNP/MOF have issued centralized guidance or training on climate-responsive public investment planning.
  - DSACSA could provide guidance per Decreto-Lei 57/2021 but has not done so.
- Coordination gaps and existing bodies:
  - No coordination mechanism for public investments across central government from a climate perspective.
  - Inter-ministerial Committee for Climate Change (Res. 16/2009) never operationalized.
  - Inter-ministerial Coordination Committee for Climate Funds (Res. 73/2019) limited to climate funds coordination.
  - Environment and Climate Action Council (created March 2023) chaired by MAA, mandate limited to climate pre-screening of project ideas.
  - High level Risks Coordination Committee (Resoluçao n. 75/2022) created 2022 for fiscal risks coordination but with limited participation.
- Municipalities:
  - Municipal capital transfers planned at CVE 393 million for 2021 (and 2022); executed CVE 8 million per 2021 General Accounts = 0.42 percent of total capital transfers.
  - Fundo do Turismo allocated CVE 2204 million for municipal rehabilitation works 2022-2026.
  - Development Fund (Local Development Platforms Program) provided 2.3 million euros for 22 municipalities until mid-2022.
  - Platforms Program to extend to all 22 municipalities by end-2025; 9 pilot municipalities listed.
  - By law municipalities receive 60 percent of total resources of the Environment Fund.
  - Investment Directives for the Environment (Resolutions 97/2022) list municipal climate investment areas.

### Project appraisal, selection, and EIA pre-screening
- Project appraisal and selection:
  - No standardized climate-related appraisal methodology exists; C3 assessed Low with Reform Priority High.
  - Legal framework does not define major projects or require standardized climate-inclusive appraisals.
  - DNP assigned by law to develop methodology (Decreto-Lei n. 28/2018, Art. 28.2.f) but no methodology exists.
  - Decree-Law n. 63/2015 (PPPs) lacks climate aspects for risk allocation and contract management.
  - Capital projects funded by development partners often undergo climate vulnerability assessment at appraisal stage.
- EIA pre-screening (Decreto-Lei n. 27/2020):
  - Projects categorized into Class A (full study), Class B (simplified study), Class C (swift review) via a multicriteria matrix (Annex II).
  - Climate-related criteria in pre-screening matrix:
    - significative emissions of greenhouse gases (>20,000 t CO2 eq. per year);
    - sensitivity or vulnerability of the project to climate change;
    - direct or indirect increase of environmental or social vulnerability to climate change.
  - Note: EIA pre-screening recognizes climate impact as a risk factor, although EIA scope focuses on project impact on local environment.

### Budgeting, portfolio management (C4) and asset maintenance
- Budgeting and tagging:
  - Climate-related capital spending not identifiable in budget and related documents.
  - 2023 Budget Report identifies two climate-related programs: Energy Transition and Climate Action and Resilience; these include capital and current expenditure and are not solely climate capital expenditures.
  - Luxembourg-supported project initiated procurement for defining climate markers; methodology to be piloted in four ministries.
- Ex-post reviews and audits:
  - No legal requirement or methodology for ex-post reviews or external audits of capital projects’ climate adaptation/mitigation outcomes.
  - DNP responsible for ex-post evaluation by law but has not assumed the task or developed methodology.
  - Tribunal de Contas gaining performance audit experience; no mandated climate audits yet.
- Asset registers and maintenance:
  - No standardized methodology for estimating maintenance needs including climate exposure.
  - No central assets registry; accrual accounting not introduced.
  - ECV procured road resilience study; ICV surveying public assets including climate vulnerability; plan to georeference assets with INGT support.
  - Box 2.B example: SANRAL—delaying road maintenance 3 years increases costs to 6 times annual preventive cost; delaying 5 years increases to 18 times.

### Risk management (C5) — fiscal risks and financing
- National Disaster Risk Reduction Strategy (ENRRD, 2018) does not identify climate threats to public infrastructure assets.
- Retention and contingency instruments:
  - Sovereign Emergency Fund (FSE): off-shore fund created 2019 with initial capital of €10 million; not operationalised for capital post-disaster expenditures.
  - Catastrophic Deferred Drawdown Option (Cat-DDO) accessed in 2019: US$10 million.
  - Annual budget provisional allocation for “unforeseen and unavoidable” expenditures set at maximum 2 percent of ordinary fiscal revenues; 2021-2022 used for recurrent expenses not related to disasters.
  - National Emergency Fund (FNE): funded through annual allocation set at 0.5 percent of non-earmarked revenues collected the second year prior; from 2019 onwards FNE annual allocation around CVE 180 million (US$1.8 million).
  - No risk transfer financing mechanisms; absence of inventory of public infrastructure assets is a key challenge for insurance coverage.
- Institutional developments:
  - Risk Management Service created July 2018 within Treasury to manage operational fiscal risks.
  - 2022 high-level fiscal risk coordination committee created; does not include all critical national counterparts (e.g., MAA and INMG).
  - 2023 Fiscal Risks Statement identifies disaster risks and estimates economic impacts; MOF with World Bank support conducting long-term quantitative modeling with outcomes expected in 2024 Fiscal Risk Statement.
- Recommended reforms:
  - Build technical capacity for fiscal risk analysis with climate change.
  - Include disasters and climate-related shocks in fiscal risk statement.
  - Update ENRRD to include climate and disaster risks to critical public infrastructure supported by municipal-level risk mapping.
  - Develop a Climate Financing Strategy to select cost-effective ex-ante financing mechanisms and assess contingent liabilities.

### Legal, strategic framework developments and gaps
- Recent developments:
  - Updated NDC, energy sector climate-compliant policy and Electricity Master Plan (2018-2040), Decreto-lei 35/2021 for intensive energy consumers, disaster risk reduction strategy since 2018, spatial and urban planning regulations since 2018, National Policy for Territorial Planning and Urbanism (PNOTU) 2020, Resolução n. 75/2022 creating fiscal risk coordination.
- Key legal/strategic instruments listed (selection includes NAP 2022, NDC 2021, Electricity Master Plan 2018-2040, Decreto-lei 35/2021, Decreto-lei 27/2020, Decreto-lei 63/2015, Lei 72/VIII/2014, Lei 79/VI/2005).
- Gaps and recommended legal reforms:
  - No NDC roadmap defining sequenced mitigation/adaptation actions; missing climate investment plan.
  - No PIM legal framework regulating whole project investment cycle including climate considerations.
  - PPP legal framework (Decreto-Law 63/2015) lacks climate-related risk allocation provisions.
  - Public enterprises’ regulations do not require climate considerations in publicly funded investments.
  - Construction Code review needed to introduce climate-induced disaster risk mitigation measures.

### Staff capacity and information systems
- Current capacity:
  - Cabo Verde at initial phase for climate actions and climate-related PIM.
  - DNP (MOF) lacks climate expertise; Budget Department to receive assistance under Luxemburg-supported project to develop climate budget tagging.
  - MOF macroeconomic unit and Risk Management Service receiving WB support on quantitative assessment of natural disasters and fiscal risk analysis.
  - MAA has a small climate team; disaster risk capacities exist in National Civil Protection Service, INGT, and municipalities.
- Constraints and recommendations:
  - High civil servant turnover and depletion of staff in critical PIM/climate entities.
  - More climate expertise in public enterprises than central government.
  - Capacity building should prioritize staffing critical entities before specialized training, plan for knowledge retention, and use online training opportunities.
- Information systems:
  - Climate-budget tagging at concept stage; TOR published; methodology to be piloted in MOF, MAA, Health, and Tourism; will build on gender-tagging experience.
  - Planned PIM-IS to support capital project cycle; recommendation to define capital project and document processes in spreadsheets before IT development.

### Annexes included
- Annex 1: C-PIMA Questionnaire — Scoring Rubric for C1–C5 with grading scale 1 = To no or a lesser extent; 2 = To some extent; 3 = To a greater extent.
- Annex 2: C-PIMA Detailed Scores for Cabo Verde — color-coded score table for C1–C5 (scores: 1 Low, 2 Medium, 3 High).

*Source: IMF | Technical Assistance Report – Cabo Verde Climate Public Investment Management Assessment (C-PIMA).*

### Preface _________________________________________________________________________ 5

### Preface

### Mission overview
- At the request of the Ministry of Finance and Business Development (MOF) of Cabo Verde, a team from the IMF’s Fiscal Affairs Department (FAD) undertook a Climate Public Investment Management Assessment (C-PIMA) from 21-31 March 2023.
- Mission leadership and team composition:
  - Team led by Nicoletta Feruglio (FAD).
  - Team members: Mr. Rui Monteiro and Ms. Juana Aristizabal (experts, FAD).
  - Research support: Ms. Letitia Li (Research Assistant, FAD).
- The team presented preliminary conclusions and the draft mission report to H.E. Mr. Olavo Avelino Garcia Correia, Vice Prime Minister and Minister of MOF.
- The team met with the World Bank (WB) at the beginning of the mission to discuss the assessment and identify future avenues for cooperation.

### Stakeholders and institutions consulted
- MOF key departments: National Directorate of Planning (DNP), General Directorate of Public Assets (DGPCP), National Directorate of Budget and Public Accounts (DNOCP), General Directorate of Treasury (DGT) and its Risk Management Service (SGR), Unit supporting Public Enterprises (UASE), Technologies, Innovation and Communication Unit (UTIC).
- Other institutions and agencies consulted:
  - Supreme Audit Institution (TC)
  - National Civil Protection Service
  - Ministries of Agriculture and Environment (MAA), Infrastructure, Spatial Planning and Housing, Commerce, Industry and Energy, Tourism and Transport, the Sea
  - National Institute of Territorial Management (INGT)
  - National Association of Municipalities in Cabo Verde (ANMCV)
  - National Institute of Meteorology and Geophysics (INMG)
  - Electricity and Water Company (ELECTRA)
  - Cabo Verde Port Authority (ENAPOR)
  - Roads of Cabo Verde (ECV)
  - Infrastructure of Cabo Verde (ICV)
- Special acknowledgement: Thanks to MOF staff Messrs. Gilson Pina and Felix Delgado and Mesdames Andrea Lucy Martins, and Keila Patricia Monteiro Lopes for mission support.

### Climate risks and economic impacts (as summarized in the Executive Summary)
- Cabo Verde is highly exposed to climate change and natural hazards; according to the 2021 World Risk Report, Cabo Verde is the second in terms of risk to natural disasters compared to 10 other Small Island Developing States.
- Expected climatic changes: more heatwaves, more irregular rainfalls (heightened hazards of flooding and droughts), and rising sea levels.
- Concentration of infrastructure, population, and tourism in coastal areas amplifies climate-related costs to the economy, physical assets, and population.
- Disasters recorded and trends:
  - 315 natural disasters recorded in 2018 compared to 350 disasters between 2008 and 2017 (noting the increase attributed to climate change).
  - Recent climate change events have caused important damages; the average economic damage from natural disasters is estimated to cost 1 percent of GDP per year (World Bank (WB)’s estimates).
- Sectoral vulnerabilities:
  - Tourism: equivalent to some 25 percent of GDP and generates about 45 percent of formal jobs (mainly women); highly sensitive to climate change.
  - Agriculture: impacted by higher temperatures, rising sea levels, and droughts.
  - Ocean warming: may aggravate coral bleaching, undermining the blue economy via declining marine biodiversity and reduced fish capture potential.

### GHG emissions and energy context
- Cabo Verde's contribution to global GHG emissions in 2020: 0.0018 percent of total GHG emissions (MF staff using UNFCCC, FAO & EDGAR).
- National climate targets:
  - Unconditional mitigation target: 24 percent of domestic total GHG emissions by 2030.
  - Net-zero economy target by 2050.
- Energy dependence and implications:
  - High dependence on imported petroleum products for energy and water needs (water is mainly desalinated and desalination is very energy intensive).
  - Over 80 percent of Cabo Verde’s electricity production is generated from fossil fuel—mostly heavy fuel oil—exposing the country to international commodity price volatility and potential balance of payment shocks.
  - Increasing renewable electricity generation and improving energy efficiency are framed as means to meet emission commitments and provide wider economic benefits.

### Status of climate-sensitive public investment management (PIM)
- Overall characterization: Climate-sensitive public investment management is at a nascent stage in Cabo Verde.
- Positive signs:
  - Increasing awareness across government institutions.
  - Many initiatives underway, though generally at early stages with few concrete results.
- Constraints:
  - Limited capacity, basic PIM processes and procedures, and high dependency on external financing hinder performance in climate-smart PIM.
- Institutional and regulatory gaps:
  - Weak coordination across central government; no institution strategically positioned to lead adaptation or mitigation related investments.
  - Public enterprises (PEs) drive most public investment but regulatory and oversight framework does not promote consistency between PE investments and national climate policies.
  - PPP framework does not define allocation of climate risks between government and PPP partners; PPP use is increasing.
  - Investment project appraisal and selection practices do not exist; climate-responsive spending in infrastructure is at concept development stage.
  - Gender budgeting is a well-recognized practice.
  - No ex-post reviews or external audits of projects on climate outcomes; climate impact not integrated into public asset management.
  - Disaster risk management practices could be strengthened; national disaster risk reduction strategy does not identify climate threats to public infrastructure assets.
  - Fiscal climate change risks to public assets are not identified, and the adequacy of current disaster financing instruments should be ensured.

### C-PIMA diagnostic results and priorities
- The assessment indicates significant work required to enhance climate-awareness and climate resilience in PIM (reference to Figure 0.A., Table 0.A., and Annex 2 for C-PIMA scores).
- Summary Assessment by C-PIMA pillars (Table 0.A.):
  - C1 Climate-aware planning: Medium. PEDS II and some sectoral investment plans are consistent with NDC. Planning regulations from central governments and municipalities address climate related risks. No centralized guidance from MAA or MOF for government agencies on the preparation of climate-aware strategies. Reform priority: High.
  - C2 Coordination between entities: Low. No mechanism for coordinating climate-sensitive public investment planning at central level or with PEs. Municipalities have guidance to prepare strategic plans and investments aligned with PEDS and coordinate climate investments through the Environment Fund. Reform priority: High.
  - C3 Project appraisal and selection: Low. Capital projects are not appraised from a climate perspective nor selected using climate-related criteria. PPP legal framework does not consider climate aspects for risk allocation or contract management. Reform priority: High.
  - C4 Budgeting and portfolio management: Low. Climate-related capital spending cannot be identified in the budget. No legal requirement for ex-post review of capital projects’ impact on climate outcomes. Maintenance policies do not consider climate risks. Reform priority: Medium.
  - C5 Risk management: Low. The national disaster risk reduction strategy does not identify climate threats to public infrastructure assets. Risk retention financing mechanisms are in place to respond to natural disasters. Fiscal risk analysis does not incorporate assessment of climate change risks over the medium term. Reform priority: Medium.

### Strategic reform areas and action plan (high-level)
- The C-PIMA proposes seven strategic reform areas to improve climate-related PIM and support green, sustainable growth.
- Six high priority actions highlighted:
  - Introduce climate change's capital investment related aspects in public sector planning coordination.
  - Define what is a major project and different appraisal procedures according to the size and complexity of the project.
  - Develop standardized methodology for project screening and project appraisal (including climate change analysis).
  - Develop a PPP manual integrating climate requirements into PPP arrangements from project identification to contract management stage.
  - Revise the overarching regulatory framework for PEs to ensure alignment of PEs capital projects with national climate objectives.
  - Develop a standardized methodology for estimating current and capital maintenance needs including climate related risks.
- Three urgent measures (critical for the whole PIM system):
  - Define the concept of "capital project".
  - Develop a PIM legal framework regulating the whole capital project cycle (planning, appraisal, selection, capital portfolio management, etc.) including climate considerations.
  - Develop a comprehensive capital investment plan to inform the implementation of the National Sustainable Development Plan II (PEDS II) (including climate relevant capital projects).
- Additional medium priority and other important actions are listed in the action plan (Table 0.B.), including—but not limited to—developing guidelines on integrating climate perspectives into sector and municipal public investment plans, finalizing risks and vulnerability maps for the 22 municipalities, establishing transparent selection processes with published climate criteria, developing ex post review and audit methodologies for climate adaptation and mitigation elements, and including at least one climate change audit of a major capital project each year in the Supreme Audit Institution (Tribunal de Contas) work plan.

*Source: IMF | Technical Assistance Report – Cabo Verde Climate Public Investment Management Assessment (C-PIMA) — Preface and Executive Summary, mission 21-31 March 2023.*

### 3. Strengthen the capital project

### 3. Strengthen the capital project cycle.

### Reform areas and implementation timeline
- Develop a climate informed medium-term fiscal and budget framework to guide budget preparation.
- Improve the planning of capital projects.
- Develop a Public-Private Partnership (PPP) manual integrating climate requirements into PPP arrangements from project identification to contract management stage.
  - Responsible: MOF
  - Priority: High
  - Timing marks: XX (2023–2024)
- Revise the PPP legal framework to reflect these requirements.
  - Responsible: MOF
  - Priority: Medium
  - Timing marks: X (2023)
- Revise the overarching regulatory framework for public enterprises (PEs) to ensure alignment of PEs capital projects with national climate objectives.
  - Responsible: MOF
  - Priority: High
  - Timing marks: X (2023)
- Gradually introduce green budgeting identifying and tracking climate-related expenditures with the MOF quality review.
  - Responsible: MOF, MAA
  - Priority: Medium
  - Timing marks: XXX (2023–2025)
- Include the climate tags in the coding structure of the financial management information system (Sistema Integrado de Gestão Orçamental e Financeira (SIGOF)).
  - Responsible: MOF
  - Priority: Medium
  - Timing marks: XX (2023–2024)
- Gradually develop a centralized register of infrastructure assets indicating the value and condition of the assets including climate related information and ensure regular updates to support determination of appropriate maintenance levels.
  - Responsible: MOF, MAA, INGT, ICV
  - Priority: Medium
  - Timing marks: XXXX (2023–2026)
- Develop a standardized methodology for estimating current and capital maintenance needs including climate related risks.
  - Responsible: MOF, MAA, line ministries
  - Priority: High
  - Timing marks: X (2023)
- Develop a Public Investment Management (PIM) legal framework regulating the whole capital project cycle (planning, appraisal, selection, capital portfolio management, etc.) including climate considerations.
  - Responsible: MOF, MAA, line ministries
  - Priority: Urgent
  - Timing marks: X (2023)
- Enhance capacities of DNP in MOF to provide guidance on climate aware planning and preparation of public investments plans and projects (also from a climate change perspective).
  - Responsible: MOF
  - Priority: Long-term
  - Timing marks: XXXX (2023–2026)
- Enhance the supervision capacities of the PEs Supervisory Unit (Unidade de Acompanhamento do Setor Empresarial do Estado (UASE)) on climate smart PPP arrangements and PEs.
  - Responsible: MOF
  - Priority: Long-term
  - Timing marks: XXXX (2023–2026)
- Strengthen staff capacity on mainstreaming climate change into public investment management across the central government and municipalities.
  - Responsible: MOF, MAA, line ministries
  - Priority: Long-term
  - Timing marks: XXXX (2023–2026)
- Develop a PIM IT system integrating climate considerations at each project cycle step.
  - Responsible: MOF
  - Priority: Long-term
  - Timing marks: XX (2023–2024)

### Key climate vulnerabilities and economic impacts
- Cabo Verde is an archipelago of ten small and dispersed volcanic islands with no permanent water courses, only two islands with underwater reserves, no natural forests, limited mineral resources and with only 12 percent of arable land.
- Temperature projections: increase by 1.2°C to 3.7°C by the end of the century.
- Sea surface temperature projection: increase by 0.7°C to 2.5°C by the 2060s.
- Sea level rise projection: 0.26m to 0.98m for 2081-2100.
- 2021 World Risk Report: Cabo Verde is the second in terms of risk to natural disasters compared to 10 other Small Island Developing States (SIDS).
- 2020 ND-GAIN: climate change and natural disasters particularly affect infrastructure and habitats (including coastal, energy, transport and urban infrastructure) vulnerable to flooding, heat and sea level rise.
- Recorded disasters: 315 disasters in 2018 compared to 350 disasters between 2008 and 2017.
- Recent damages:
  - US$3 million from floods of 2020.
  - US$2.5 million from the 2015 hurricane.
- Agricultural impacts:
  - Decrease by 80 percent of cereal production of maize in 2022 compared to the last 5 years.
  - 140,000 people could be in a situation of acute nutritional vulnerability.
  - Successive rainfall deficits of 49 percent in 2019 and 34 percent in 2021 have caused significant decreases in agricultural production.
  - In 2021, 93 percent of cereal and 34.5 percent of tuber production were lost.
- Average economic damage from natural disasters: US$18 million (1 percent of GDP) per year (World Bank estimate).
  - Flood-related risks account for almost 70 percent of aggregated annual average losses.
- Economic structure:
  - Tourism represents 25 percent of GDP, generates about 45 percent of formal jobs, and brought 56 percent of receipts by foreign visitors out of total exports revenue in 2019.
- Energy vulnerability:
  - In FY 2022, fuel commodity imports represented 7.9 percent of GDP and were three time the level of Cabo Verde’s goods exports.
  - Over 80 percent of Cabo Verde’s electricity production is derived from fossil fuel (mostly heavy fuel oil).

### Climate objectives, strategies, and targets
- 2021 Nationally Determined Contribution (NDC) focuses on adaptation in six sectors: i) water, ii) agriculture, iii) oceans and coastal zones, iv) spatial planning, v) disaster risk reduction and vi) health.
- NDC Implementation Roadmap and Strategy and Work Plan are planned to define delivery targets and a project and investment pipeline eligible for climate financing.
- 2021 National Adaptation Plan (NAP) period: 2021-2026; pillars: institutional framework, knowledge technology and financing, and resilience of the most vulnerable.
- NDC mitigation target: emissions reductions of between 18 percent and 24 percent (with external assistance) relative to business-as-usual by 2030.
  - 100 percent of the reductions are expected to come from the energy sector through ramp up of renewables and improved energy efficiency.
- Energy policy actions:
  - 175 charging points will be installed.
  - By the end of 2024, 5 percent of vehicles sold should be electric.
- Sectoral project examples:
  - Renewable Brava project in the energy sector.
  - Construction of Phase III Expansion of the Port of Palmeira.
  - Electricity Master Plan (2018-2040) includes investment needs; projects include thermal generation in the island of Sal of 15 MW and the pure pumping project on Santiago Island.
  - Mitigation and Drought Resilience Program includes solar panels for existing wells and desalination plants.
- At least EUR 5 million per year for adaptation measures should be allocated in the pilot municipalities of Ribeira Brava (S. Nicolau), Mosteiros (Fogo), Praia (Santiago), Brava (Brava) and Boa Vista (Boa Vista).

### Public Investment Management (C-PIMA) assessment — C1 Climate-aware planning
- Institutional Strength: Medium; Reform Priority: High.
- Assessment dimensions:
  - Consistency of public investment strategies and plans with government climate objectives and expected outcomes.
  - Regulatory requirements for spatial and urban planning and building codes to address climate risks.
  - Existence of centralized guidance on climate-aware public investment planning.
- Findings:
  - PEDS II 2022-2026 integrates national climate objectives from the NDC and includes some NDC targets such as GHG emissions reductions and increased renewable energy share; PEDS II presents priorities as broader programs and does not include a comprehensive list of capital projects.
  - Energy sector has a developed public investment strategy (Electricity Master Plan 2018-2040).
  - Sector examples with concrete climate-related investments: renewable Brava project; Port of Palmeira Phase III; thermal generation project on Sal (15 MW); pure pumping project on Santiago; solar panels for wells and desalination under the Mitigation and Drought Resilience Program.
  - Some sector plans (e.g., tourism) include climate-related measures but lack investment plans.
  - Water and sanitation strategies are being updated to better align with NDC targets.
- Spatial planning and building regulation findings:
  - 2020 National Policy on Land Use Planning and Urbanism (PNOTU) introduces resilience and climate change as a guiding principle.
  - Decree-Law no. 61/2018 requires mapping of disaster risks and consideration of disaster risk in territorial planning instruments.
  - Municipal risk maps have been prepared in 4 municipalities; work will extend to 22 municipalities by 2025 and be used to update Municipal Master Plans (PDM) and Detailed Plans (PD).
  - Tourism Management Plans for the Coastal Border and the Adjacent Sea are being developed (first published in 2020 for Boavista; more planned for Maio, Santiago, Sal and São Vicente).
  - Building regulations only address energy efficiency since adoption of the Code for Energy Efficiency of Buildings in 2020; the 2012 Building Code does not include elements addressing climate-induced disaster risks and is being updated to integrate energy efficiency for non-residential buildings and to introduce resilience.
  - School resilience project with World Bank support recommended adopting specific national regulations addressing natural hazards for resilient schools.

*Source: IMF | Technical Assistance Report – Cabo Verde Climate Public Investment Management Assessment (C-PIMA).*

### 10.        There is no centralized guidance or support for government agencies on climate-

### 10. There is no centralized guidance or support for government agencies on climate-responsive planning

### Centralized guidance and capacity
- Neither the National Environment Directorate (DNA) of the Ministry of Agriculture and Environment (MAA) nor the National Directorate of Planning (DNP) of MOF have issued centralized guidance or support for government agencies on planning public investment with a climate angle.
- No training has been organized for the same purpose.
- There is no central government mechanism or institution that provides technical guidance or capacity support to line ministries and government agencies specifically on how climate-related risks should be incorporated into planning public investments.
- The Directorate of Service for Climate Action and Sanitation (Direçao de Serviço de Ação climática e Saneamento Ambiental – DSACSA) could be providing this guidance as part of its role to “Monitor and encourage sectoral policies with impact on climate change, promote the development of sectoral initiatives and low carbon sectoral plans” (Decreto-Lei 57/2021).

### Reform priorities and recommendations
- Developing comprehensive and costed public investment plans that will support the achievement of the country’s climate change targets is a high-priority reform.
- Planning guidelines and a manual should be developed on how to integrate climate change concerns into investment plans, accompanied by capacity development actions.
- A comprehensive capital investment plan should be prepared to inform the implementation of the PEDS II.
- The revision of the Building Code is an opportunity to include elements addressing climate-induced disaster risks (e.g. floods and landslides) such as selection of site, resistant construction materials and architectural design requirements.

*Key legal and regulatory references cited: Decreto-Law no. 61/2018; Decreto-Law 43/2010; Lei 4/2018 (LBOTPU); Lei 42/IX-2018; Portaria Conjunta 24/2020 Código de Eficiência Energética de Edifícios; 2012 Código Técnico da Edificação (CTE), Portaria conjunta 4/2012; Decreto-Law no 18/2011; Decreto-Law Dec.no2.2007.*

### Coordination between entities (Institutional Strength: Low; Reform Priority: High)
- The assessment emphasizes adopting a whole-of-government approach to climate change; municipalities and public enterprises (PEs) play key roles in realizing climate-related public investment.
- There is no coordination mechanism for public investments across central government, let alone from a climate-change perspective.
- The 2014 law on the National Planning System assigns a role to a National Planning Council on strategic planning and to provide guidance on program monitoring and management, but it has no specific role related to the preparation and costing of climate-aware public investment strategies (Lei 72/VIII/2014 Sistema Nacional de Planeamento).
- Existing inter-ministerial committees:
  - Inter-ministerial Committee for Climate Change (Res. 16/2009) created in 2009 was never operationalized.
  - Inter-ministerial Coordination Committee for Climate Funds (Res. 73/2019) has a mandate limited to coordination of Climate Funds and to define climate programs.
  - Environment and Climate Action Council (created March 2023) is chaired by MAA and has a mandate limited to a climate pre-screening of project ideas.
- The MAA only acquired the mandate on climate since 2020.
- The National Committee for Civil Protection (Lei 100/V/1999) coordinates only in civil protection and disaster management.
- Within MOF there are three departments managing post-disaster financing mechanisms and fiscal risks; the High level Risks Coordination Committee (Resoluçao n. 75/2022) was created in 2022 for coordination of fiscal risks but with limited participation.

### Table of key institutions and responsibilities (selected entries)
- National Environment Directorate (DNA/MAA): Designated national authority for UNFCCC; leader of Committee Climate Change created in 2009; coordinating institution of climate change policy at national level.
- National Directorate of Planning (DNP/MOF): Designated national authority for the Green Climate Fund (GCF).
- Budget Department: Manages the ex-ante financing mechanism for post-disasters.
- Treasury Department and its Risk Management Service: Manages the ex-ante financing mechanism for post-disasters; manages operational fiscal risks —including those associated with disaster and climate-related shocks.
- High level Risks Coordination Committee: Manages fiscal risks associated with climate and disaster risk.
- Environment and Climate Action Council (2023): Recently created to coordinate climate pre-screening of climate project ideas. Chaired by MAA.
- Interministerial Coordination Committee for Climate Funds: Articulates between departments and private sector for climate funds; coordinates preparation of country’s climate program and defines priority projects.
- Interministerial Committee for Climate Change: Articulates government actions related to UNFCCC/Kyoto Protocol instruments.
- National Council for Civil Protection: Multisectoral consultation and coordination in civil protection matters; proposes institutional collaboration mechanisms in civil protection events.

### Municipalities and public corporations
- Municipal responsibilities include infrastructure in water and sanitation, rural development, basic health, social housing, administrative public buildings, municipal roads, pre-primary and basic education, social, cultural, local markets, and municipal civil protection (Lei 134/IV/95 Estatuto dos Municipios).
- Municipal capital transfers from central government were planned at CVE 393 million for 2021 (and 2022).
  - Only CVE 8 million were executed according to the 2021 General Accounts (Conta Geral do Estado 2021) representing only 0.42 percent of total capital transfers.
- Municipalities also fund investments from the Environment Fund and the Tourism Fund.
  - Fundo do Turismo allocated CVE 2204 million for municipal rehabilitation works for the period 2022-2026.
- Development Fund under the Local Development Platforms Program: created in 2020 with funding from Luxemburg Cooperation; provided 2.3 million euros for development and capital projects in 22 municipalities until mid-2022.
- The Platforms Program started in 2017 with 9 pilot municipalities and will be extended to all 22 municipalities by the end of 2025; specific integration of climate change into PEMDs is the key objective.
  - The 9 pilot municipalities are: Mosteiros, Ribeira Grande de Santiago, Ribeira Grande de Santo Antão, Paúl, Porto Novo, Santa Catarina do Fogo, São Felipe, São Salvador do Mundo and Islha da Brava.
- By law municipalities receive 60 percent of the total resources of the Environment Fund.
- Central government prioritized water and sanitation sectors for funding allocation for the period 2021-2025.
- Investment Directives for the Environment (Resolutions 97/2022 and previous ones) list municipal climate investment areas, including integrated management of urban solid waste and environmental rehabilitation, in particular wastewater drainage and urban rehabilitation with improvement of the environmental and health quality of cities and localities.
- The process of coordinating capital spending between central government and municipalities has not yet been institutionalized; municipalities must transmit their budget including capital projects to MOF for information and consolidation purposes (Lei das Finanças Locais, Lei nº79/VI/2005) and municipal budgets must be published.

- The regulatory and oversight framework for public corporations (PCs) (Lei 58-IX-2019) does not promote consistency between their climate-related investments and national climate policies and guidelines.
  - Public corporations indicated they have not received climate related guidance when preparing multi-annual business plans and investment plans.
  - Some PEs (e.g., ELECTRA) are implementing projects contributing to climate change targets (e.g., hydraulic energy storage system on the island of Santiago).
  - ENAPOR’s 2022-2025 business plan emphasizes emission reduction and contributing to PEDS’ objectives, including supplying electricity to docked ships (OPS) in Porto Grande’s cruiser terminal and participation in the Green port initiative.
  - The airports concession with Vinci Airport includes a proposal to increase by 8 percent the renewable assets capacities of Cabo Verde by 2030 through investments in wind turbines and solar panels.

### Coordination recommendation summary
- Operationalize an inter-ministerial coordination mechanism of national and sectoral public investment strategies and plans addressing climate change adaptation and mitigation policies and targets; avoid multiplying and overlapping Committees given limited staff availability.
- Ensure both domestically and externally financed investments contribute to achieving climate change strategic objectives.
- Formalize piloted guidance on planning and implementation of municipal capital spending from a climate-change perspective in a regulatory framework.
- Upgrade the regulatory framework for PEs to require investments to be aligned with the government’s mitigation and adaptation targets and learn from advanced practices already in place by some public corporations.

### Project appraisal and selection (Institutional Strength: Low; Reform Priority: High)
- The appraisal of major infrastructure projects does not demand climate-related analysis according to a standard methodology; no such methodology exists.
- The distinction between a capital and a development project is not clearly mainstreamed in the PIM system, and the greater share of capital projects is externally funded.
- The legal framework does not define major projects and does not require appraisal of capital projects according to a standardized methodology that includes technical details on climate change adaptation and mitigation.
- Ministry of Finance Organic Law (Decreto-Lei n. 28/2018, dated May 24, Article 28.2.f) assigns DNP responsibility to develop a methodology for preparing and assessing capital projects, but such methodology does not exist.
- Decree-Law n. 27/2020 (dated March 19) on Environmental Impact Assessment (EIA) introduced a pre-screening of submitted projects allowing for a more robust assessment of larger and climate riskier projects; however, the Decree does not explicitly require any climate-related assessment and does not provide an assessment methodology.
  - MAA estimates that in the past two years only four or five PEs’ projects were subject to the EIA.
- Capital projects funded by development partners (for example, the World Bank) undergo climate vulnerability assessment at appraisal stage.
- Climate-related aspects are not considered explicitly in the PPP legal framework for risk allocation or contract management.
  - Decree-Law n. 63/2015 regulates PPPs and stresses pre-feasibility and feasibility studies to be considered by the Council of Ministers; terms of reference for those studies are to be approved by the PPP Unit in the MOF (currently under UASE, but not fully operational).
  - Given the high relevance of climate considerations for long-term contracts such as PPPs, the absence of climate elements is noted as a gap.

*IMF Staff. Technical Assistance Report – Cabo Verde Climate Public Investment Management Assessment (C-PIMA).*

### Box 2.A. Using climate criteria for EIA pre-screening

### Box 2.A. Using climate criteria for EIA pre-screening

### EIA pre-screening and legal framework
- Decreto-Lei n. 27/2020, dated March 19, replaced Decreto-Lei n. 29/2006, dated March 6.
- Projects are categorized via a pre-screening process into Class A, B, or C:
  - Class A: full environmental study required.
  - Class B: simplified study required.
  - Class C: swift review.
- Pre-screening is based on a multicriteria matrix (pondered by the impact and probability of occurrence of each risk) presented in Annex II of the decree-law.
- Climate-related criteria explicitly included in the pre-screening matrix:
  - significative emissions of greenhouse gases (>20,000 t CO2 eq. per year);
  - sensitivity or vulnerability of the project to climate change; and
  - direct or indirect increase of environmental or social vulnerability to climate change.
- Note: climate impact was explicitly recognized as a risk factor in EIA pre-screening, although not in the scope of EIA, which focuses on the impact of the project on the local environment.
- Source: Decreto-Lei n. 27/2020.

### Project appraisal, selection, and PPPs
- Current practice:
  - No explicit climate-related criteria are applied to the selection of capital projects in the Programa de Investimento Público (PIP).
  - Most capital projects in PIP are externally funded and included following negotiations with development partners.
  - No projects are included in PIP based on explicit identification and assessment of criteria such as consistency with government policy priorities or expected net benefits.
- Recommended reforms and priorities:
  - Integrate climate assessment (adaptation and mitigation) into project appraisal and selection processes incrementally.
  - Develop capital-project preparation and appraisal methodology (required by law) with a clear definition of capital project and explicit guidance for technical, legal, financial, economic appraisal and climate change appraisal for all major projects (including PPPs).
  - Make climate considerations, in terms of climate risk assessment, an integral part of appraisal studies.
  - Include guidelines for PPP climate change appraisal and contractual risk allocation related to climate challenges in the PPP manual MOF is required to prepare.
  - Ensure appraisal studies for all major capital projects including PPPs are reviewed by an entity independent from proposing ministries and agencies; good practice suggests DNP should conduct careful review.
  - Associate a government entity with adequate technical expertise (for instance, within DNA or a public university) to review climate appraisal documents.
- PPP contractual example:
  - The recently procured airport private partner raised climate-related issues in final negotiations and included climate-related commitments in the contract, increasing Capex but expectedly reducing Opex.

### C4. Budgeting and portfolio management (Institutional Strength: Low; Reform Priority: Medium)
- Purpose: assess management of government’s portfolio of climate-related public investment projects from budgeting to asset management.
- Three dimensions covered:
  - Whether planned climate-related projects are presented in budget and related documents and at what level of detail.
  - Whether ex post reviews of public investment projects consider climate change adaptation and mitigation outcomes.
  - Whether asset management policies and practices address climate-related risks.

Key findings:
- Climate-related capital spending are not identified in the budget and related documents.
  - The 2023 Budget Report identifies two climate-related programs: the Energy Transition (Transição Energética) and the Climate Action and Resilience (Acção Climática e Resiliência).
  - These programs include capital and current expenditure and cannot be classified as climate capital expenditure alone.
  - Several other projects (e.g., water, agriculture, and sea sectors) address climate challenges but are not included in those programs.
  - A Luxembourg-supported Project has initiated procurement of services for defining climate markers; the methodology will be piloted in four ministries.
- Ex-post reviews and external audits:
  - No legal requirement or specific methodologies exist to undertake ex-post reviews or external audits of capital projects’ impact on climate adaptation or mitigation outcomes.
  - DNP is responsible for ex-post evaluation of capital projects (ministry of finance organic law, Art. 28.2.f) but has not assumed this responsibility nor developed a methodology; existing DNP organigram and capacity limit this task.
  - Legislation regulating external auditing does not require auditing of capital projects or climate-change-smart projects.
  - The Supreme Audit Institution (Tribunal de Contas) is gaining performance auditing experience via INTOSAI peer-to-peer collaboration and may later use it for capital project auditing.
  - Absence of ex-post review or audit prevents identification of climate-related challenges during implementation and knowledge sharing of solutions.
- Asset registers and maintenance:
  - No standardized methodologies for estimating normal maintenance needs, let alone for climate change-exposed infrastructure assets.
  - A central assets registry does not exist, and accrual accounting has not been introduced in Cabo Verde.
  - Roads of Cabo Verde (ECV) procured a study on road resilience; Cabo Verde Infrastructure (ICV) is surveying public assets including climate vulnerability; expectation to georeference surveyed assets with INGT support.
- Reform priority:
  - Introduction of climate-related risks in asset management policy and practices is medium priority.
  - Climate budget tagging reform is in process and can build on gender-tagging experience.
  - Plans to revamp the government asset register are an opportunity to introduce periodic monitoring of asset condition with climate-related information.
  - Methodologies for estimating maintenance requirements and costs need revision to incorporate climate change impacts.
  - A geo-referenced inventory of public assets at risk and their attributes is key to inform maintenance, prioritize reconstruction, and build an exposure database for fiscal disaster risk profiling.

### Box 2.B. The relevance of asset maintenance
- Climate events, including extreme events such as flashfloods and hurricanes, are a major source of capital asset deterioration and require adaptation of maintenance standards to climate change.
- Adequate maintenance optimizes life-cycle cost of infrastructure.
  - South African National Roads Agency (SANRAL) example:
    - Delaying road maintenance for 3 years leads to increased costs of 6 times the original annual cost of preventive maintenance.
    - Delaying road maintenance for 5 years increases costs to 18 times the annual preventive cost.
- Consequences of inadequate maintenance include potholes, poor lighting, leaks, and life-threatening failures in critical equipment.

### C5. Risk management (Institutional Strength: Low; Reform Priority: Medium)
- Scope: assesses government identification and management of fiscal risks associated with public investment impacted by climate change and natural disasters.
- Three dimensions assessed:
  - Publication of a national disaster risk management strategy that incorporates exposure of public infrastructure to climate-related disasters.
  - Existence of financing mechanisms to meet costs of climate-related damages to public infrastructure.
  - Conduct of fiscal risk analysis that considers climate-related risks to public infrastructure assets.

Key findings:
- National Disaster Risk Reduction Strategy (ENRRD, 2018) does not identify climate threats to public infrastructure assets; an implementation plan was delayed by the COVID-19 pandemic.
- Retention financing mechanisms exist but with limitations:
  - Sovereign Emergency Fund (FSE): off-shore fund created in 2019 with an initial capital of €10 million, managed by the Bank of Portugal; it has not been operationalised to finance capital post-disaster expenditures.
  - Catastrophic Deferred Drawdown Option (Cat-DDO) accessed in 2019: US$10 million.
  - Annual budget provisional allocation for “unforeseen and unavoidable” expenditures set at a maximum of 2 percent of ordinary fiscal revenues; in 2021-2022 it was only used to cover recurrent expenses not related to disasters and climate risks.
  - National Emergency Fund (FNE): funded through an annual allocation set at 0.5 percent of non-earmarked revenues collected the second year prior to the year for which the budget is being prepared; from 2019 onwards, FNE has received an annual budgetary allocation of around CVE 180 million (US$1.8 million).
  - The country does not have risk transfer financing mechanisms; lack of an inventory of public infrastructure assets and values is a key challenge for insurance coverage.
- Fiscal risk analysis and institutions:
  - A Risk Management Service was created in July 2018 within the Treasury Department of the MOF to manage operational fiscal risks, including disaster and climate-related shocks.
  - In 2022, a high-level fiscal risk coordination committee was created, explicitly tasked with managing fiscal risks associated with climate and disaster risk; the committee does not include all critical national counterparts (e.g., MAA and INMG).
  - The 2023 Fiscal Risks Statement identifies disaster risks such as rainfall, flooding and drought and estimates the economic impact of those events.
  - With World Bank support, MOF is conducting a long-term quantitative modeling of fiscal risk from natural disasters; outcomes expected to be included in the 2024 Fiscal Risk Statement.
- Reform recommendations:
  - Continue building technical capacity for fiscal risk analysis with climate change.
  - Include disasters and climate-related shocks in the fiscal risk statement.
  - Update the ENRRD to include climate and disaster risks to critical public infrastructure, supported by ongoing municipal-level risk and vulnerability mapping.
  - Develop a Climate Financing Strategy to inform selection of most cost-effective ex-ante financing mechanisms and better assess explicit and implicit contingent liabilities.

*Source: IMF Technical Assistance Report – Cabo Verde Climate Public Investment Management Assessment (C-PIMA).*

### 32.        There have been some developments in the legal and strategic framework underpinning

### 32.        There have been some developments in the legal and strategic framework underpinning

### Legal and strategic framework — recent developments
- Updated NDC provides an updated framework of climate measures, particularly for adaptation to climate change risks.
- Energy and electricity sector: adopted a climate-compliant policy and legal framework with very specific targets and projects included in the Electricity Master Plan since 2018.
- Energy efficiency: specific legal requirements for intensive energy consumers since the adoption of Decreto-lei 35/2021.
- Disaster risk reduction: strategy since 2018; disaster risk and adaptation considerations included in regulations for spatial and urban planning since 2018 with the adoption of law and regulations for National Territorial Planning and Urban Planning and of the National Policy for Territorial Planning and Urbanism in 2020.
- Public financial management of climate-related fiscal risks: creation of the Committee for Coordination of fiscal Risks (Resolução n. 75/2022) is an important first step; requires further enhancement (ref. Institution C5).
- Institutional developments: The Risk Management Service was created with support of the 2019 World Bank (WB) Disaster Risk Management Development Policy Financing with the Cat-DDO.

### Key legal and strategic instruments (as listed in Table 2.B.)
- Main Climate Change strategies:
  - 2022 Plano Nacional de Adaptação (NAP)
  - 2021 Contribuição Nacional Determinada (NDC) - atualização do primeiro NDC de 2015
  - Plano de Desenvolvimento Sustentável setor de energia 2019-2021
  - Decreto lei 35/2021 Programa Nacional para a Sustentabilidade Energética
  - 2019 Programa de mitigação e de resiliência à seca em cabo verde
  - Resolução 114/2018 que aprova a Estratégia Nacional de Redução de Riscos de Desastres
  - Resoluçao 39/2019 Plano director do sector eléctrico 2018-2040
  - 2018 Carta Política para Mobilidade Elétrica e primeiros carros elétricos em Cabo Verde
  - 2017 Terceira Comunicação Nacional
  - 2010 Segunda Comunicação Nacional
  - 2007 Programas de Ação de Adaptação Nacional (NAPAs)
  - 1999 Primeira Comunicação Nacional
- Main legal documents with specific references to Climate Change:
  - Resoluçao 75/2022 que cria a Commissão de Coordenação en materia de gestão dos riscos orcamentais
  - Decreto-lei 35/2021 - Regime dos Consumidores Intensivos de Energia (RCIE)
  - Decreto Lei 59/2020 Estatutos do Fundo do Ambiente
  - Portaria Conjunta 24/2020 Código de eficiência energética de edifícios
  - Resoluçao 24/2020, Política Nacional de Ordenamento do Território e Urbanismo (PNOTU)
  - Lei 61/IX/2019 sobre o Fundo Soberano de Emergência, adiante designado Fundo de Emergência e, ainda, extingue o Fundo Especial de Estabilização e Desenvolvimento (FEED), criado pela Lei 71/V/98, de 17 de agosto
  - Decreto-lei 61/2018 (alteraçao da Decreto-Lei 43/2010) approva dos Regulamentos Nacionais do Ordenamento do Território e Planeamento Urbano
  - Lei 4/2018 Bases do Ordenamento do Território e Planeamento Urbano (LBOTPU)
  - Decreto-lei 42/IX/2018 primera alteraçao da Lei 60/VIII/2014 que establece o regime das operaçoes urbanisticas, designadamente, o loteamento, a urbanizaçao a edificaçao e a utilizaçao e conservaçao de edificios
  - Resolução 115/2018 Quadro Operativo Pos- Desastre
  - Lei 59/2018 Fundo Nacional de Emergencia
  - Resoluçao 108/2017, de 09/25 Diretivas de Investimentos para o Ambiente relativo ao período 2017-2021
  - Portaria conjunta 4/2012 - Código Técnico da Edificação (CTE)
  - Lei 100/V/99 Lei de Bases de Protecção Civil
- Public Investment Management related legal instruments:
  - Lei 5/X/2021 Bases do Orçamento (alteraçao da lei 55/IX/2019)
  - Decreto-Lei 27/2020, março 19, Avaliação de impacte ambiental (AIA) (alteração da Decreto-Lei 29/2006)
  - Lei 24/IX/2018 Organização, Composição e Competência do Tribunal de Contas
  - Resolução 3/2018 do Tribunal de Contas (establishes its regulations)
  - Decreto-Lei 28/2018 Aprova a estrutura, a organização e as normas de funcionamento do Ministério das Finanças
  - Decreto-Lei 63/2015 Parcerias Público Privadas
  - Lei 72/VIII/2014 Sistema Nacional de Planeamento
  - Lei 79/VI/2005 das Finanças Locais

### Gaps and recommended legal reforms (findings and reforms)
- Give a stronger policy basis to climate change-related reforms:
  - No NDC roadmap defining sequenced mitigation and adaptation actions; accompanying climate investment plan is missing (ref. Intro and C1).
- Develop the PIM legal framework:
  - No legal framework regulating the whole project investment cycle that includes climate considerations (planning, appraisal, selection, monitoring of physical and financial implementation, ex post assessment).
- Include climate requirements in the PPP regulatory framework:
  - Decreto-Law 63/2015 regulating PPPs has no provisions on climate-related risks and the allocation of this risk between parties (ref. C3).
- Include climate requirements in public enterprises’ regulations:
  - Public enterprises do not have requirements to account for climate aspects in their publicly funded investments (ref. C2).
- Review the Construction Code to introduce climate considerations:
  - Climate-induced disaster risks and mitigations are not taken into account in the existing Construction Code (ref. C1).

### Staff capacity (Reform Priority: High)
- Current capacity status:
  - Cabo Verde is at an initial phase of capacity development for implementing climate actions and climate-related PIM.
  - DNP of the MOF, the leading department for PIM processes, does not have capacity on climate aspects.
  - The Budget Department will receive technical assistance under the ‘Strengthening of the Governance and the Climate Action in Cabo Verde’ Luxemburg supported Project to develop a climate budget tagging framework.
  - MOF’s macroeconomic analysis & forecasting unit within the DNP, and the Risk Management Service within Treasury are receiving capacity development support from the WB on quantitative assessment of natural disasters and climate change in fiscal risk analysis.
  - MAA has a small climate team acting as secretariat to the National Council of Environment and Climate Action and as national UNFCCC focal point.
  - Disaster risk management capacities developed in the National Civil Protection Service, the INGT, and the municipalities.
- Constraints:
  - Capacity development hindered by civil servants’ high turnover and depletion of staff in critical PIM/climate change entities.
  - More climate expertise is found within public enterprises than central government institutions.
- Recommendations for capacity building:
  - Plan capacity building based on recipient entities’ ability to retain knowledge.
  - Prioritize prior staffing of critical entities before specialized PIM/climate training.
  - Enhance knowledge on climate issues related to public investments primarily in MOF, MAA and Infrastructure.
  - Actively seek online training opportunities to train more staff at once and limit costs.

### Information systems (Reform Priority: Medium)
- Climate-change budget tagging:
  - At concept development stage; should be supported by MOF IT systems.
  - Purpose: identification, measurement, and monitoring of climate-relevant public investment expenditures; support monitoring of NDC, NAP and reporting on international commitments.
  - TOR to develop a methodology for climate budget tagging have been recently published; methodology will be piloted in MOF, MAA, Health, and Tourism.
  - Initiative will capitalize on existing gender budget tagging practice in Cabo Verde.
  - Note: Examples of countries tagging climate in their FMIS systems include: Bangladesh, Ecuador, Ghana, Honduras, Indonesia, Kenya, Nicaragua, Pakistan, Philippines and Uganda.
- Public Investment Management Information System (PIM-IS):
  - Authorities intend to develop a system supporting different phases of the capital project cycle (electronic submission, appraisal, selection, report generation, capital portfolio analysis).
  - Before development, critical to clearly define what constitutes a capital project and document processes/procedures for project cycle stages in excel format, disseminate them, train line ministries/agencies, and later develop an IT system to support PIM functions.

### Annexes included in the content unit
- Annex 1. C-PIMA Questionnaire — Scoring Rubric for C1–C5 with grading scale 1 = To no or a lesser extent; 2 = To some extent; 3 = To a greater extent. Detailed criteria for:
  - C1. Climate-aware planning (C.1.a, C.1.b, C.1.c)
  - C2. Coordination between entities (C.2.a, C.2.b, C.2.c)
  - C3. Project appraisal and selection (C.3.a, C.3.b, C.3.c)
  - C4. Budgeting and portfolio management (C.4.a, C.4.b, C.4.c)
  - C5. Risk management (C.5.a, C.5.b, C.5.c)
- Annex 2. C-PIMA Detailed Scores for Cabo Verde — color-coded score table for C1–C5 (scores: 1 Low, 2 Medium, 3 High).

*Source: IMF Staff.*

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_Source: https://www.imf.org/-/media/files/publications/tar/2024/english/tarea2024034.pdf_