## IMF Executive Board Completes the Second Review Under the Policy Coordination Instrument for Cabo Verde

_IMF News, October 26, 2020_

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## Bibliographic details
- Published: October 26, 2020

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### Economic outlook and impact of COVID-19
- The COVID-19 pandemic continues to severely affect the Cabo Verde economy.
- Real GDP is projected to contract by -6.8 percent in 2020 (5.7 percent in 2019).
- Real GDP is projected to expand by 4.5 percent in 2021.
- The contraction is mainly due to the collapse in tourism and transport activities, and a sharp contraction in other sectors.
- There are substantial risks to this outlook because of uncertainties about the duration of the pandemic and the expected recovery in the global economy and tourism flows.

### Policy response and program performance under the PCI
- The Executive Board completed the second review under the Policy Coordination Instrument (PCI) for Cabo Verde on October 26, 2020 (Press Release No. 20/321).
- Cabo Verde has benefited from the PCI since July 15, 2019.
- Main objectives under the PCI:
  - restoring fiscal and debt sustainability;
  - restructuring State-Owned Enterprises (SOEs);
  - enhancing the monetary policy framework and continuing to build reserves;
  - fostering the financial system stability;
  - advancing growth-enhancing structural reforms.
- Measures taken by the authorities since the onset of COVID-19:
  - enhancing the healthcare system;
  - containing the community spread of the disease;
  - protecting the most vulnerable through social protection programs;
  - providing liquidity to the banking system;
  - easing access to credit;
  - facilitating the payment of tax obligations.
- Performance under the PCI has remained positive during the pandemic:
  - All quantitative targets at end-March 2020 were met, except for the target on tax revenue which was narrowly missed because of the economic impact of COVID-19.
  - All reform targets were observed at end-June, except for the streamlining of tax exemptions that was partially met.

### Risks, debt sustainability, and financing
- The shock related to COVID-19 has significantly eroded progress made to place public debt on a sustained downward trajectory.
- Cabo Verde is at high risk of debt distress.
- The authorities agreed with staff that post-pandemic policies and reforms should focus on:
  - supporting economic recovery;
  - enhancing revenue mobilization;
  - containing non-priority spending as well as fiscal risks, particularly from SOEs;
  - continuing to rely on concessional borrowing.

### Executive Board statement (Mr. Zhang, Deputy Managing Director and Acting Chair)
- The near-term outlook is highly uncertain, and there are significant downside risks.
- The authorities have maintained fiscal discipline and reform implementation efforts, and performance under the PCI has remained strong.
- The authorities have increased testing capacity, enhanced health care services, expanded social protection programs, and implemented policy measures to support the corporate sector.
- The authorities have taken actions to execute COVID-related spending in a transparent manner.
- It would be important to refocus on achievement of medium-term fiscal and debt sustainability through fiscal consolidation and continued prudent borrowing policies, relying on highly concessional loans, as the health crisis abates.
- Progress in reforms aimed at increasing efficiency in the public enterprises sector, deepening financial intermediation, and improving the business environment remains critical to support economic recovery and enhance medium-term growth prospects.
- The authorities should continue to focus on completing ongoing reforms in these key areas as the health crisis situation improves.

*Press Release No. 20/321 — IMF Communications Department, October 26, 2020.*

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## References

- [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)
- [The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)
- [Cabo Verde and the IMF](http://www.imf.org/external/country/CPV/index.htm)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [Press Release No. 19/278](https://www.imf.org/en/News/Articles/2019/07/15/pr19278-cabo-verde-imf-executive-board-approves-a-new-policy-coordination-instrument)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2020/10/26/pr20321-cabo-verde-imf-executive-board-completes-2nd-review-under-policy-coordination-instrument_