IMF approves evaluation and disbursement to Cape Verde, emphasizes resilience

The International Monetary Fund (IMF) has approved the second evaluation of Cape Verde’s assistance plan and authorized an additional six million dollars disbursement.

The IMF praised Cape Verde’s strong performance, highlighting its economic recovery and growth of 17.7% in 2022.

However, the IMF also warned about the country’s vulnerability to external shocks and climate-related disruptions, emphasizing the need for sustained progress to safeguard economic stability, build resilience, and promote inclusive growth.

The approved evaluation represents Cape Verde’s third tranche of financial support under the 36-month Extended Credit Facility (ECF) program.

With this disbursement, the IMF granted 36.23 million dollars to Cape Verde as part of the program, with total financial support of 60 million dollars.

While acknowledging Cape Verde’s strong economic recovery, the IMF noted the cascading effects of Russia’s war against Ukraine, contributing to increased inflation due to rising food, fuel, and transport costs.

The IMF highlighted several risks to Cape Verde’s economic outlook, including potential lower external demand from major tourism markets, weak implementation of reforms in state-owned enterprises, and climate change shocks.

The IMF urged Cape Verde to maintain progress in domestic revenue mobilization, simplify tax exemptions, enhance the effectiveness of public investment projects, improve debt management, and reform public enterprises to reduce fiscal risks.

The country was also encouraged to continue its ambitious structural reform agenda, addressing challenges posed by climate change, reducing business costs, strengthening social safety nets, and accelerating public enterprise reforms.

Cape Verde is recovering from the significant impact of the COVID-19 pandemic, which caused a deep economic and financial crisis due to the decline in tourism demand.

The country experienced a historic recession in 2020 but has since shown positive growth, driven by the recovery of tourism demand.

The IMF forecasts 4.4% GDP growth and 5.2% inflation for Cape Verde in 2023.

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