IMF Executive Board Completes Fourth Review of the Arrangement Under the Extended Credit Facility and First Review of the Arrangement Under the Resilience and Sustainability Facility for Cabo Verde

IMF News, June 25, 2024

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Canonical URL: IMF Executive Board Completes Fourth Review of the Arrangement Under the Extended Credit Facility and First Review of the Arrangement Under the Resilience and Sustainability Facility for Cabo Verde

Completed the fourth review of the 36-month Extended Credit Facility (ECF) arrangement approved on June 15, 2022.
Completion of the ECF review allows authorities to draw the equivalent of SDR 4.5 million (about US$5.94 million).
Total disbursement under the ECF after this review: SDR 36.02 million (152 percent of quota or about US$ 48.17 million).
Completed the first review under the 18-month Resilience and Sustainability Facility (RSF) arrangement approved on December 11, 2023.
Completion of the RSF review allows authorities to draw the equivalent of SDR 5.264 million (22.22 percent of quota or about US$6.94 million).
Executive Board decision was taken on a lapse-of-time basis.
Approved authorities’ request for modification of the end-June and end-December 2024 performance criteria under the ECF arrangement.
Approved authorities’ request to rephase the availability dates under the RSF arrangement.

Real GDP growth in 2023: 5.1 percent.
Public debt-to-GDP ratio: continuing on a downward path (reflecting high growth and a record 2023 primary fiscal surplus).
Inflation in 2023: low (textual description).
International reserves: maintained at a prudent level to protect the peg.
Financial sector: remains resilient; data for end-December 2023 suggests the financial system is liquid, profitable, and well capitalized.
Near-term growth projection: real GDP growth of 4.7 percent in 2024 as export growth (especially services) normalizes following the return to the pre-pandemic levels of visitor arrivals.
Medium-term projection: economy projected to converge to potential growth of 4.5 percent by 2028.
Inflation forecast: 2 percent in 2024 and over the medium-term, broadly in line with Euro area inflation.
Overall near-term outlook: favorable but moderated from recent highs; some downside risks remain.

All quantitative performance criteria (QPCs) for end-December 2023: met.
Non-quantitative continuous performance criteria (PCs): met.
Indicative targets (ITs) for end-September 2023: met.
Indicative target on social spending for end-December 2023: missed because of weaker-than-expected spending growth in health and education programs and delays in external grants.
Structural Benchmarks (SB) for end-December 2023: met.
Reform Measures (RMs) for the first review under the RSF arrangement: completed on time.

Monetary policy: current monetary tightening appropriate to narrow the differential with the ECB policy rate—an important measure to protect the peg.
Monetary and financial policy frameworks: authorities are improving these frameworks.
RSF-supported reforms: focus on the energy-water nexus to facilitate private sector development, build appropriate infrastructure, reduce costs, and manage the energy transition.
Social policy: targeted social policies and spending geared towards poverty reduction and compensating the most vulnerable for the costs of transition.
State-owned enterprise (SOE) reforms: key to improve financial performance and reduce fiscal risks.
Competitiveness-enhancing measures: improving inter-island connectivity is critical for competitiveness.
Overall reform objective: foster productivity, diversification, and climate resilience.

ECF draw this review: SDR 4.5 million (about US$5.94 million).
ECF total disbursement: SDR 36.02 million (152 percent of quota or about US$ 48.17 million).
RSF draw this review: SDR 5.264 million (about US$6.94 million).
ECF arrangement length: 36-months.
RSF arrangement length: 18-months.
ECF approval date: June 15, 2022.
RSF approval date: December 11, 2023.
Real GDP growth 2023: 5.1 percent.
Real GDP growth projection 2024: 4.7 percent.
Potential growth by 2028: 4.5 percent.
Inflation forecast 2024 and medium-term: 2 percent.
Executive Board action: lapse-of-time procedure invoked.

Press Release No. 24/238, June 25, 2024.