Updated: March 7, 2021
The International Monetary Fund(IMF) and Cabo Verde have reached a staff-level agreement on an economic cooperation supported by the Policy Coordination Instrument, IMF said in a statement in Washington DC on Monday.
The preliminary agreement would be submitted for approval by IMF management and Executive Board.
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The agreement for cooperation was reached after an IMF staff team led by Mrs. Malangu Kabedi-Mbuyi visited Praia and Boa Vista December 3–16, 2019.
“Discussions were very constructive, and the IMF team reached staff-level agreement with the authorities on the first PCI review, subject to approval by IMF management and Executive Board. Program performance has been strong. At end-September 2019, all reform targets were achieved and all quantitative targets, but one, were met. The IMF Executive Board meeting on the first PCI review is tentatively scheduled for late February 2020,” Kabedi-Mbuyi said.
She said recent economic and financial developments as well as short-term prospects are positive.
“Economic growth remains strong, supported by robust activity in the industry, construction and tourism sectors, improved performance in the transport sector, and recovery in agriculture output after two years of drought.
“Real Gross Domestic Product (GDP) growth is estimated at 5.7 percent in the first half of 2019 and projected at 5.2 percent for the year. Inflation has remained low, declining to 0.7 percent in October 2019. It is projected at 1 percent at the end of the year.
“The external position strengthened further in 2019 reflecting strong performance in exports of goods and services, notably tourism, and increased remittances, as well as deceleration in imports. Projections for 2019 indicate that the current account deficit would narrow to 2.5 percent of GDP in 2019 (5.3 percent of GDP in 2018), while international reserves would be above 5 months of prospective imports of goods and services,” she said.
According to her, the fiscal position is expected to strengthen further in 2019 and 2020.
“Revenue collection improved compared with last year, however, it was slightly below projections, mainly because of the adverse impact of import deceleration on taxes on international trade, and slow disbursement of grants,” Kabedi-Mbuyi added.
She said “The slow execution of capital outlays kept total expenditures below projections, leading to a much higher primary surplus than anticipated. Revised projections for the year show that the overall deficit would decline from 2.8 percent of GDP in 2018 to about 2 percent of GDP in 2019. For 2020, the overall deficit is budgeted at 1.7 percent of GDP, predicated on the expected continued strong economic growth and implementation of measures aimed at broadening the tax base, increasing tax compliance, improving efficiency in revenue collection agencies, and strengthening capital expenditure management. Fiscal consolidation efforts combined with progress in public enterprises reforms is expected to bring the stock of public debt to some 119 percent of GDP at end-2020”.