IMF Executive Board Completes First Review Under the Extended Credit Facility for Cabo Verde
IMF News, January 17, 2023
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- IMF Executive Board Completes First Review Under the Extended Credit Facility for Cabo Verde
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- Published: January 17, 2023
Review outcome and disbursement
- The Executive Board completed the first review under the 36-month Extended Credit Facility (ECF) approved on June 15, 2022.
- Completion of the review allows authorities to draw the equivalent of SDR 11.26 million (47.50 percent of quota or about US$ 15.19 million).
- Total disbursement after the review: SDR 22.52 million (95 percent of quota or about US$ 30.18 million).
- The Executive Board’s decision was taken on a lapse-of-time basis.
Economic performance in 2022 and near-term outlook
- Real GDP growth is currently estimated at 10.5 percent in 2022.
- Real GDP growth is projected to moderate to 4.4 percent in 2023.
- Inflation: 8.5 percent year-on-year at end October 2022.
- Authorities stepped up support to the vulnerable through well targeted subsidies on basic food items and electricity, which are expected to continue through the first half of 2023.
- Inflation is forecast to decline in 2023 but remain above its recent five-year historical average.
Fiscal position, debt, and medium-term fiscal outlook
- The debt burden is estimated to have declined to 128.1 percent of GDP by end-2022.
- Economic growth contributed to a reduction in the debt-to-GDP ratio.
- Authorities decided to save the projected revenue overperformance in 2022 to further advance the program’s fiscal consolidation and debt reduction objectives.
- The 2023 fiscal plan would result in a slightly improved primary fiscal balance compared to the program and includes prudent contingencies to safeguard against revenue shortfalls.
- Over the medium-term:
- Fiscal consolidation will be aided by continued revenue mobilization and spending measures.
- The primary fiscal balance is expected to shift into surplus by 2026.
Program implementation and performance metrics
- All end-June 2022 Performance Criteria (PCs) and Indicative Targets (ITs) were met.
- The Structural Benchmarks (SBs) for end-June 2022 and end-September 2022 were also met.
- All end-September 2022 ITs were met.
Risks and policy priorities
- Noted risks to the outlook:
- Softening of economic prospects in key tourist markets.
- Persistently elevated rates of inflation and its impact on the most vulnerable.
- Resurgence of COVID-19 and lockdowns.
- Fiscal risks from SOEs.
- Climate-related shocks presenting medium- and long-term risks.
- Authorities’ stated priorities:
- Preserve fiscal and debt sustainability.
- Provide support to the vulnerable and support the economic recovery.
- Advance revenue mobilization, particularly through the digitalization of services.
- Implement reforms to reduce fiscal risks from SOEs.
- Monetary and financial policy to remain focused on protecting the peg and safeguarding financial sector stability.
- Accelerate implementation of climate-change mitigation and adaptation measures.
IMF Press Release No. 23/05, January 17, 2023.