IMF Executive Board Approves US$60 Million Extended Credit Facility Arrangement for Cabo Verde
IMF News, June 15, 2022
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- Published: June 15, 2022
Approval and Financing
- Executive Board approved a 36-month arrangement under the Extended Credit Facility (ECF) for Cabo Verde equivalent to SDR 45.03 million (190 percent of quota or about US$60 million).
- Immediate disbursement: SDR 11.26 million (47.5 percent of quota, about US$15 million), fully usable for budget financing to support reform implementation.
- Prior Fund support: Rapid Credit Facility in April 2020 (100 percent of quota, SDR 23.7 million, equivalent to US$32.3 million at the time of approval).
- The ECF will help shore up international reserves, preserve debt sustainability, increase resilience to shocks (including climate change), and make growth more inclusive.
- The financing package is intended to help mitigate the lingering impact of the COVID-19 pandemic and the spillover effects of the war in Ukraine, reduce the fiscal deficit and preserve debt sustainability, protect vulnerable groups, and support a reform agenda that leads to higher and more inclusive growth.
Program objectives and key policy actions
- Four main objectives aligned with the government’s medium-term economic development plan (PEDS):
- Strengthen public finances to preserve public debt sustainability and expand social safety nets.
- Reduce fiscal risks from public enterprises and improve their financial management and transparency.
- Modernize the monetary policy framework and improve the resilience of the financial system.
- Raise growth potential and build resilience to shocks through structural reforms and economic diversification.
- Key policy actions under the program:
- Measures to boost revenue and improve the efficiency of spending.
- Strengthening state-owned enterprises to mitigate fiscal risks.
- Continue modernizing the monetary policy framework and safeguarding financial stability.
- Capacity development strategy aligned with the program.
- Specific measures mentioned: gradual and growth-friendly fiscal consolidation, increase social spending to protect vulnerable groups, strengthen tax administration, enhance public financial management, reform state-owned enterprises, bolster international reserves, carefully unwind crisis-related support measures, monitor non-performing loans, and further strengthen the AML/CFT framework.
- Emphasis on climate adaptation given Cabo Verde’s high vulnerability to climate change.
Economic context and outlook
- Recent performance and shocks:
- Severe COVID-19 recession in 2020: about 15 percent contraction.
- Strong rebound in 2021: growth of 7 percent, supported by easing travel restrictions and a highly successful vaccination program.
- Growth forecast for 2022 revised downward from 6 percent to 4 percent due to spillovers from the war in Ukraine, higher commodity prices, weaker tourism prospects, and an ongoing five-year drought.
- Balance and reserves impacts:
- Projected significant widening of the current account deficit to about 14.1 percent of GDP in 2022 and lower international reserves.
- Overall fiscal deficit expected to improve to 6.3 percent of GDP in 2022, from 7.3 percent of GDP in 2021.
Selected economic indicators (2019–27)
- Real GDP (annual percent change): 5.7; -14.8; 7.0; 4.0; 4.8; 5.5; 5.0; 4.5; (2027 value listed without number in table header)
- GDP deflator: 0.6; -0.9; 1.8; 2.6; 2.0
- Consumer price index (annual average): 1.1; 1.9; 6.5; 3.5
- Consumer price index (end of period): 5.4
- Exports of goods and services (annual percent change): 10.2; -58.7; 39.3; 11.2; 32.6; 11.0; 9.6; 9.0; 9.3
- Of which: tourism: 9.4; -69.1; 48.4; 14.2; 22.2; 18.7; 11.8; 8.7; (final years continue in table)
- Imports of goods and services (annual percent change): 1.6; -23.2; 14.4; 5.8; 7.1; 6.4; 7.3
- Money and credit (change in percent of broad money, 12 months earlier):
- Net foreign assets: 7.8; -6.6; 6.0; -10.6; 2.7; 2.1; 2.3; 1.3
- Net domestic assets: 10.3; -4.0; 12.2; 5.3; 4.6; 4.3
- Net claims on the central government: -4.8; -1.3; 0.7; 0.3; -0.1; -0.4
- Credit to the economy: 2.9; 5.1; 3.2
- Broad money (M2): 8.4; 3.8; 7.7; 6.8; 6.7; 6.6; 5.6
- Savings and investment (percent of GDP unless indicated):
- Domestic savings: 37.3; 20.7; 31.0; 30.0; 35.2; 33.9; 35.3; 34.7
- Government (component): 0.1; -7.4; -4.5; -2.6; -1.8; 1.7; 2.5
- Private (component): 37.2; 28.1; 35.5; 37.0; 34.1; 33.6; 31.8; 32.3
- National investment: 37.1; 35.7; 42.3; 44.1; 41.4; 39.8; 39.9; 39.0
- Savings-investment balance: 0.2; -15.0; -11.3; -14.1; -6.2; -5.9; -4.7; -4.6; -4.2; -3.4; -10.7; -6.7; -4.9; -3.2; -0.5; -4.3; -8.1; -2.7; -3.7
- External current account (including official transfers): -2.5; -17.6; -14.2; -16.1; -7.2; -5.7; -5.6; -5.2
- Overall balance of payments: -1.0; 1.5; 1.2
- Gross international reserves (months of prospective imports of goods and services): 6.3; 5.2
- Government finance (percent of GDP):
- Revenue: 26.8; 24.7; 22.6; 25.4; 24.8; 25.5; 25.9; 26.3; 26.5
- Tax and nontax revenue: 23.9; 21.4; 20.6; 23.5; 23.6; 24.4; 24.9; 25.7
- Grants: 1.0; 0.9; 0.8
- Expenditure: 28.5; 33.8; 29.9; 31.7; 30.4; 29.5; 27.3
- Primary balance: -6.4; -5.1; -3.6; 0.0
- Overall balance (incl. grants): -1.7; -9.1; -7.3; -6.3; -2.1; -0.8
- Net other liabilities (incl. onlending): -3.0; -1.2; -0.7; -0.2
- Total financing (incl. onlending and capitalization): 14.0; 6.2; 4.2
- Net domestic credit: 2.8; -0.3
- Net external financing: 1.4
- Public debt stock and service:
- Total nominal government debt: 114.0; 142.6; 143.0; 145.9; 139.7; 132.5; 124.0; 116.2; 109.6
- External government debt: 82.6; 103.1; 101.5; 103.6; 97.7; 93.1; 88.4; 83.7; 79.6
- Domestic government debt: 31.4; 39.5; 41.5; 42.0; 39.4
- External debt service (percent of exports of goods and services): 14.8; 13.4; 17.7; 14.7; 9.5
- Present value of PPG external debt:
- Percent of GDP (risk threshold: 55%): 55.8; 70.3; 60.3; 55.9; 53.4; 51.4; 49.3; 47.3; 45.6
- Percent of exports (risk threshold: 240%): 119.9; 335.9; 208.1; 188.4; 145.8; 136.3; 128.4; 121.0; 113.7
- Present value of total debt:
- Percent of GDP (benchmark: 70%): 92.4; 105.4; 104.7; 97.9; 95.0; 90.5; 84.7; 79.7; 75.5
- Memorandum items:
- Nominal GDP (billions of Cabo Verde escudos): 213.9; 180.7; 196.8; 213.8; 229.8; 247.7; 266.6; 285.5; 304.2
- Gross international reserves (€ millions, end of period): 666.1; 582.4; 591.3; 491.0; 544.3; 577.6; 623.3; 677.5; 710.3
- Exchange rate note: The Cabo Verdean exchange rate has been pegged to the Euro since 1999, at a rate of 110.265 CVE/€.
IMF Press Release No. 22/202
