IMF Executive Board Completes Third Review Under the Policy Coordination Instrument for Cabo Verde
IMF News, March 26, 2021
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- IMF Executive Board Completes Third Review Under the Policy Coordination Instrument for Cabo Verde
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- Published: March 26, 2021
Pandemic impact and near-term priorities
- Economic activity is estimated to have contracted by 14 percent in 2020.
- Addressing the health crisis will remain a priority while policy actions will also aim to support the projected recovery.
- The authorities’ COVID-19 response plan received financial support from Cabo Verde’s development partners, including the IMF through the Rapid Credit Facility totaling SDR 23.70 million (about US$32.3 million, 100 percent of quota).
- The economic outlook remains challenging and uncertain; significant downside risks include the evolution of the pandemic and its global ramifications.
Program status and performance under the PCI
- The Policy Coordination Instrument (PCI) for Cabo Verde was approved on July 15, 2019.
- The Executive Board completed the third and final review under the PCI; the Executive Board’s decision was taken without a formal meeting.
- Performance under the PCI remained satisfactory throughout the program period despite challenges generated by the COVID-19 pandemic.
- All quantitative targets for end-September 2020 and non-quantitative continuous targets were met.
- All, but two reform targets (RT) set under the PCI were observed; most were completed ahead of schedule. There has been important progress on the two remaining RTs, expected to be completed this year.
Fiscal framework and debt sustainability
- Execution of the 2021 budget will seek to strike a balance between accommodating pressing health and development needs and supporting medium-term debt sustainability as Cabo Verde remains at a high risk of debt distress.
- The fiscal framework underpinning the 2021 budget addresses the lingering effects of the pandemic while setting the stage for the resumption of a declining path for public debt, after the surge caused by the economic impact of the pandemic.
Key projections and macroeconomic indicators (selected)
- Real GDP (annual percent change): 2018: 4.5; 2019: 5.7; 2020: -6.8; 2021: -14.0; 2022: 5.8; 2023: 6.0; 2024: 6.1; 2025: 6.2; 2026: (table continues).
- GDP deflator (annual percent change): 2018: 1.5; 2019: 0.6; 2020: 1.1; 2021: 0.9; 2022: 1.2; 2023: 1.4; 2024: 1.6; 2025: 1.8; 2026: 1.9.
- Exports of goods and services (change in percent of broad money, 12 months earlier): 2018: 15.9; 2019: 10.0; 2020: -47.3; 2021: -48.9; 2022: 25.9; 2023: 33.8; 2024: 18.6; 2025: 11.0; 2026: 11.8.
- Of which: tourism (annual percent change): 2018: 8.6; 2019: -65.7; 2020: -64.3; 2021: 32.5; 2022: 36.4; 2023: 28.1; 2024: 16.5; 2025: 17.4; 2026: 9.3.
- Imports of goods and services (annual percent change): 2018: 8.7; 2019: 2.0; 2020: -21.5; 2021: -23.7; 2022: 5.1; 2023: 11.2; 2024: 7.6; 2025: 5.5; 2026: 6.4.
- Broad money (M2) (annual percent change): 2018: 8.4; 2019: -5.2; 2020: 3.1; 2021: 5.6; 2022: 6.9; 2023: 6.5; 2024: 5.9.
- Domestic savings (percent of GDP): 2018: 31.3; 2019: 37.1; 2020: 28.0; 2021: 22.7; 2022: 33.0; 2023: 27.7; 2024: 35.9; 2025: 37.7; 2026: 38.2.
- National investment (percent of GDP): 2018: 36.5; 2019: 37.5; 2020: 42.2; 2021: 40.1; 2022: 40.6; 2023: 41.0; 2024: 38.7.
- External current account (including official transfers) (percent of GDP): 2018: -0.4; 2019: -14.2; 2020: -13.8; 2021: -9.2; 2022: -10.6; 2023: -6.4; 2024: -4.7.
- Gross international reserves (months of prospective imports of goods and services): 2018: 7.4; 2019: -5.4; 2020: -0.7; 2021: 0.0; (table lists additional entries).
- Revenue (percent of GDP): 2018: 28.2; 2019: 29.4; 2020: 29.2; 2021: 25.8; 2022: 29.7; 2023: 30.9; 2024: 30.8; 2025: 31.0; 2026: 31.1.
- Tax and nontax revenue (percent of GDP): 2018: 26.8; 2019: 26.2; 2020: 24.5; 2021: 22.8; 2022: 25.6; 2023: 27.5; 2024: 28.8; 2025: 29.6; 2026: 29.8.
- Expenditure (percent of GDP): 2018: 31.2; 2019: 38.8; 2020: 35.8; 2021: 37.6; 2022: 34.6; 2023: 31.7.
- Overall balance (incl. grants) (percent of GDP): 2018: -1.8; 2019: -8.9; 2020: -3.6; 2021: -1.7.
- Total nominal government debt (percent of GDP): 2018: 124.7; 2019: 125.0; 2020: 137.5; 2021: 140.9; 2022: 134.8; 2023: 138.7; 2024: 132.0; 2025: 124.2; 2026: 115.8.
- External government debt (percent of GDP): 2018: 91.4; 2019: 97.0; 2020: 97.6; 2021: 93.8; 2022: 97.3; 2023: 93.0; 2024: 86.8; 2025: 80.8; 2026: 75.1.
- Domestic government debt (percent of GDP): 2018: 33.3; 2019: 33.5; 2020: 40.5; 2021: 43.4; 2022: 41.4; 2023: 39.1; 2024: 37.4; 2025: 35.0; 2026: 32.3.
- Present value of PPG external debt (percent of GDP, risk threshold: 55%): 2018: 60.6; 2019: 60.8; 2020: 69.2; 2021: 74.2; 2022: 65.8; 2023: 70.8; 2024: 67.4; 2025: 63.3; 2026: 59.2.
- Present value of total debt (percent of GDP, benchmark: 70%): 2018: 96.0; 2019: 94.3; 2020: 107.7; 2021: 113.0; 2022: 106.5; 2023: 111.6; 2024: 106.4; 2025: 100.6; 2026: 94.2.
Structural and policy priorities to support recovery
- Address the health crisis and continue policy and social protection measures to support the most vulnerable.
- Execute the 2021 budget to balance health and development needs with medium-term debt sustainability.
- Support recovery through: a firm global economic rebound; resumption and increase of tourism and capital flows to Cabo Verde; execution of large externally-financed infrastructure projects delayed by the pandemic; decisive implementation of structural reforms, notably to restructure State-Owned enterprises and to facilitate access to finance particularly for small and medium-sized enterprises; and policies to support macroeconomic stability.
Source: IMF Press Release No. 21/89, March 26, 2021.
