An International Monetary Fund (IMF) team, led by Justin Tyson, concluded discussions with Cabo Verdean authorities regarding the fifth review under the Extended Credit Facility (ECF) and the second review under the Resilience and Sustainability Financing (RSF) arrangement. These meetings took place from November 18 to 26, 2024. The current ECF access stands at 190 percent of quota, equivalent to approximately US$63.3 million, while RSF access is at 100 percent of quota, roughly US$31.69 million.
Justin Tyson stated that an agreement was reached on the necessary policies for completing both reviews. "The IMF’s Executive Board will discuss these requests in the coming weeks," he said. Upon approval, disbursements of SDR 4.50 million and SDR 2.632 million are expected for the ECF and RSF reviews respectively.
Cabo Verde's economy is reportedly experiencing strong growth due to a resurgence in tourism and robust export performance. However, investment remains sluggish because of slow government capital budget execution. The macroeconomic outlook for 2024 is positive with projected growth at six percent and low inflation levels.
"Performance under the ECF continues to be good," noted Tyson, highlighting that all quantitative performance criteria were met except for gross international reserves (GIR). GIR still cover five months of imports as required by Banco de Cabo Verde (BCV).
The economic outlook appears favorable with projected growth gradually converging to about 4.8 percent by 2029 and inflation remaining below two percent in 2024. Fiscal conditions are expected to tighten due to lower expenditures and higher revenues than planned.
The BCV's decision to raise its policy rate by 25 basis points on November 7 was welcomed by the mission as a measure to protect reserves.
Despite a favorable macroeconomic outlook, risks remain due to external vulnerabilities such as global economic slowdowns or supply chain disruptions impacting tourism and growth. Financial stability risks include large sovereign exposures and high non-performing loans among others.
Tyson expressed gratitude towards Cabo Verdean authorities for their hospitality and openness during discussions: "The IMF team congratulates them for these achievements and looks forward to continuing close engagement in support of Cabo Verde's economic reforms."