IMF Executive Board Completes First Review Under the Policy Coordination Instrument for Cabo Verde
IMF News, March 30, 2020
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- IMF Executive Board Completes First Review Under the Policy Coordination Instrument for Cabo Verde
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- Published: March 30, 2020
Program purpose and objectives
- The Policy Coordination Instrument (PCI) aims to support the authorities’ Strategic Plan for Sustainable Development (PEDS).
- Main objectives under the PCI-supported program:
- restoring fiscal and debt sustainability;
- restructuring State-Owned Enterprises (SOEs);
- enhancing the monetary policy framework and continuing to build reserves;
- fostering financial system stability;
- advancing growth-enhancing structural reforms.
Program performance and recent fiscal/macro outcomes
- Performance under the PCI-supported program has been strong:
- All reform targets were met, with some measures put in place ahead of schedule.
- All end-September 2019 quantitative targets were met, except for the floor on tax revenue, missed by a narrow margin due to lower-than-projected taxes on international trade.
- Macroeconomic outcomes in 2019:
- Economic growth was robust, reaching over 6 percent year-on-year at end-September 2019, and estimated at 5.5 percent for the year.
- Inflation averaged 1.1 percent in 2019.
- Current account deficit narrowed from 7.9 percent of GDP in 2017 to an estimated 3 percent of GDP in 2019.
- Overall fiscal deficit declined from 2.8 percent of GDP in 2018 to an estimated 1.9 percent of GDP in 2019.
- Public debt-to-GDP ratio declined from 125.9 percent in 2017 to an estimated 123 percent at end-2019.
- Authorities maintained an adequate level of international reserves.
COVID-19 impact and near-term policy needs
- The impact of coronavirus pandemic disease (Covid-19) on the global economy and on tourism flows will adversely affect Cabo Verde’s economy in 2020.
- Expected channels of impact: global economic downturn, travel restrictions, adverse effects on tourism flows, foreign direct investment and remittances.
- Policy implications:
- A policy response is needed to address the economic and social impact of COVID-19.
- Coordinated support from Cabo Verde’s development partners will be needed to support the authorities’ efforts.
Outlook and risks
- Medium-term outlook: positive, though risks are tilted to the downside.
- Growth projections:
- Growth is expected to rebound in 2021 and return to the pre-COVID-19 medium-term trajectory of about 5 percent as the global economy recovers and structural reforms continue.
- Key risk drivers: global economic recovery pace, tourism sector rebound, continuation of structural reforms to improve the business environment and build resilience to shocks.
Key statistics and projections (Table 1 excerpts)
- Real GDP:
- 2017: 3.7
- 2018: 5.1
- 2019 (Prel.): 5.0
- 2019 (Prog.): 5.5
- Consumer price index (annual average):
- 2017: 0.8
- 2018: 1.3
- 2019: 1.2
- 2019 (Prel.): 1.1
- Exports of goods and services (annual percent change):
- 2017: 9.5
- 2018: 15.0
- 2019: 8.9
- 2020: 11.3
- 2021: 10.0
- Of which: tourism (annual percent change):
- 2017: 13.0
- 2018: 8.8
- 2019: 8.1
- 2020: 12.2
- 2021: 8.4
- Imports of goods and services (annual percent change):
- 2017: 16.7
- 2018: 8.7
- 2019: 6.4
- 2020: 9.1
- 2021: 7.5
- Broad money (M2) (annual change):
- 2017: 6.5
- 2018: 7.0
- 2019: 6.3
- 2020: 6.2
- 2021: 5.9
- Domestic savings (percent of GDP):
- 2017: 30.2
- 2018: 31.0
- 2019: 32.7
- 2020: 32.8
- 2021: 31.3
- National investment (percent of GDP):
- 2017: 38.1
- 2018: 36.3
- 2019: 36.9
- 2020: 35.7
- 2021: 35.2
- External current account (including official transfers) — savings-investment balance (percent of GDP):
- 2017: -7.9
- 2018: -5.3
- 2019: -4.2
- 2020: -3.0
- 2021: -4.1
- Gross international reserves (months of prospective imports of goods and services):
- 2019 (Prel.): 5.3
- Government finance (percent of GDP):
- Revenue:
- 2017: 28.6
- 2018: 28.2
- 2019: 31.7
- 2020: 30.4
- 2021: 32.5
- Expenditure:
- 2017: 31.6
- 2018: 33.9
- 2019: 34.2
- 2020: 29.9
- 2021: 29.6
- Overall balance (incl. grants):
- 2017: -2.2
- 2018: -1.9
- 2019: -1.5
- 2020: -1.7
- 2021: -1.0
- Total nominal government debt (percent of GDP):
- 2017: 125.9
- 2018: 124.0
- 2019: 121.4
- 2020: 123.0
- 2021: 116.8
- 2022: 118.1
- 2023: 111.1
- 2024: 104.5
- 2025: 98.1
- 2026: 91.9
- External government debt (percent of GDP):
- 2017: 93.8
- 2018: 91.0
- 2019: 89.3
- 2020: 90.6
- 2021: 86.3
- 2022: 87.2
- 2023: 82.8
- 2024: 78.3
- 2025: 73.9
- 2026: 69.4
- Present value of PPG external debt (percent of GDP; risk threshold: 55%):
- 2017: …
- 2018: 60.6
- 2019: 64.0
- 2020: 62.9
- 2021: 62.4
- 2022: 62.1
- 2023: 59.5
- 2024: 56.7
- 2025: 53.8
- 2026: 50.9
- Present value of PPG external debt (percent of exports; risk threshold: 240%):
- 2017: 123.8
- 2018: 128.2
- 2019: 123.6
- 2020: 118.8
- 2021: 110.7
- 2022: 102.6
- 2023: 94.9
- 2024: 87.4
- Present value of total debt (percent of GDP; benchmark: 70%):
- 2017: 96.0
- 2018: 95.8
- 2019: 92.7
- 2020: 87.7
- 2021: 82.7
- 2022: 77.9
- 2023: 73.3
- Memorandum items:
- Nominal GDP (billions of Cabo Verde escudos):
- 2017: 173.1
- 2018: 184.7
- 2019: 197.8
- 2020: 197.4
- 2021: 211.1
- 2022: 210.3
- 2023: 224.3
- 2024: 239.8
- 2025: 256.4
- 2026: 274.3
- Gross international reserves (€ millions, end of period):
- 2017: 525.4
- 2018: 533.7
- 2019: 596.6
- 2020: 606.6
- 2021: 645.8
- 2022: 651.7
- 2023: 700.1
- 2024: 750.7
- 2025: 805.8
- 2026: 864.4
- Exchange rate note:
- The Cabo Verdean exchange rate has been pegged to the Euro since 1999, at a rate of 110.265 CVE/€.
Press Release No. 20/121 — March 30, 2020; IMF Communications Department.
