The World Bank in Cabo Verde

Located 500 Kms off the west coast of Africa, Cabo Verde is a ten-island archipelago, nine of which are inhabited. With a population of about 483,628 (2021 Census), only 10% of its territory is classified as arable land and mineral resources are limited.

The fragmentation of its territory creates significant connectivity issues, as well as challenges for service delivery, including energy, water, education, and health. 

Cabo Verde has witnessed significant economic progress since 1990, driven in large part by the rapid development of tourism (25% of GDP), coupled with considerable social development due to strong social policies since the 1970s.

Until 2019, Cabo Verde could be considered one of the champions among Sub-Saharan African countries in terms of poverty reduction. Poverty projections based on economic growth suggest that poverty rates, measured by the $5.5 a day (2011PPP) poverty line, declined by 6 percentage points between 2015 and 2019, from 41 % to 35 %.

Political Context

Cabo Verde is considered an example of democracy in Africa, much for its political stability. Electoral processes have been held regularly, with peaceful alternation of power between the two major parties. The African Party for the Independence of Cabo Verde (PAICV) responsible for colonial liberation, of leftist ideology, governed for two 15-year periods. The Movement for Democracy (MpD), a liberal and right-wing party was re-elected for a five-year term in the legislative elections of April 2021 with Ulisses Correia e Silva reappointed as Prime-Minister. The Independent and Democratic Cabo Verdean Union (UCID) represents the third political force in the country.

The PAICV-supported candidate, José Maria Neves, was elected president on October 17, 2021, and took office on November 9, 2021.

Cabo Verde conducted three peaceful elections, with electronically transmitted results, between October 2020 and October 2021.

Economic Overview

Prior to the COVID-19 global economic crisis, Cabo Verde experienced robust economic growth driven by a thriving tourism sector and strong structural reforms, but the crisis brought the economy to a standstill in 2020. The COVID shock negatively impacted the country through the tourism sector, which represents 25 % of GDP and drives around 40 % of overall economic activity; and through the reduction of FDI, a critical source of external finances and a key driver of growth. As a result, the economy contracted 14.8 % in 2020.   

Real GDP is estimated to have increased by 7 % in 2021, reflecting a gradual recovery of the tourism sector as well as a ‘base effect’.

On the demand side, private consumption, and investment-led economic growth measures, supported by the gradual reopening of the economy, and the progressive resumption of FDI projects helped the recovery.

On the supply side, commerce and construction sectors boosted economic growth. The overall fiscal deficit stood at 8.8 % of GDP, and public debt increased to 155.3 % of GDP in 2021, with the need to resort to additional external concessional loans to finance the public investment program and issuance of treasury bonds in the domestic market.

The economy will likely grow at a slower pace in 2022, reflecting the impact of the Ukraine crisis. Real GDP growth is projected at 4.0 % in 2022, but above potential (4,5 %) in 2023 and 2024, with real GDP per capita expected to return to the 2019 level in the latter year.   

Last Updated: Apr 29, 2022

World Bank Group Engagement in Cabo Verde

The World Bank's portfolio grew strongly from $82.5 million in 2015 to $223 million in 2022. The sector focus of the portfolio is dominated by the transport sector with a net commitment amount of $46 million (21 %) but is balanced by the Finance and Competitiveness sector with a net commitment amount of $30 million (13 %), followed by Governance, with a net $30 million (13 %) commitment and Macro-Economic, Trade and Investment, with a net commitment of $30 million (13 %). 

The remaining $87 million (40 %) commitment is devoted to Human Development (Health, Education and Social Inclusion) and Digital transformation. The current portfolio is composed of 11 national projects for a total $223 million commitment along with one regional project for a $15 million amount.

IFC, the private sector arm of the World Bank Group, had aggregated commitments of $1.4 million composed of a senior loan of $1.2 million, complemented by a $0.2 million SME advisory services program to BCN.

The World Bank responded to the crisis through several operations. Financing of Cabo Verde's Disaster Risk Management Development Policy with the CAT-DDO [Catastrophe Deferred Drawdown Option] (P160628) triggered, at the beginning of the pandemic, the total sum of $10 million. Several programs have been developed, including a portfolio of approximately $21 million focused on health support, a $10 million contribution to the credit line program via access to Finance project (P163015), and $10 million in additional Social Inclusion Project Funding (P165267). 

Last Updated: Apr 29, 2022

The World Bank COVID-19 response includes a portfolio of approx. $21 million, with the first operation approved on April 2, 2020. Two additional financing projects were approved in 2021, totaling $15 million, both focusing on the acquisition and deployment of COVID-19 vaccines.

The early and extensive vaccine rollout – the first WB support of its kind in Africa – together with support to the development of a digital health certificate which is fully accepted in Europe, facilitated the relaunch of international commercial flights by October 2020, and the full reopening of tourism in December 2020.

As of April 3, 2022, approximately 1.05 million doses have been delivered. The expanded supply, sufficient to vaccinate 522,920 people, allowed the Government to review its initial immunization target of 70 % of the adult population by December 2021 up to 85 %. So far 696,212 doses have been administered, representing 66.6 % of available doses.

The Social Inclusion Project supports a systems approach to increase the efficiency and effectiveness of the social protection larger sector. Main results achieved to date are:

• Social registry establishment that led to 300,000 individuals’ registration and helped improve coordination, coherence and coverage of social protection measures across the country.
• Regular cash transfers to approx. 4,145 households, mainly female-headed and emergency cash transfers to a total of 21,048 households as a response to COVID-19, reaching around 135,000 beneficiaries (with unconditional cash transfers), of which 71,028 are female beneficiaries.
• By July 2021, 62 % of the country’s poor were being supported through the regular and the emergency cash transfers, with approximately 80 % of recipient households headed by women.  

The objective of the Competitiveness for Tourism Development Project is to enable investment into and diversification of the tourism sector. Approved in October 2016, it closed on January 31, 2022. The following results have been achieved:

• Support to 125 MSMEs (56 % owned or managed by women) in getting Quality Seal or ISO/HACCP or Safe & Clean Certification.
• Support to three Investment Forums to catalyze private investments, contributing to the signing of investment conventions for projects worth over $270 million.
• Development of a quality label for small accommodations.
• Creation and development of the Tourism Institute of Cabo Verde.
• Development of tourism master plans on seven islands and Land Use Plans in six tourism zones.
• Development of a post COVID-19 tourism marketing plan.
• ●     Support early COVID-19 response with the roll-out of a health and safety certification program for tourism businesses, training courses for tour guides, professionals, and taxi drivers.

The Cape Verde Disaster Risk Management Development Policy Financing with CAT DDO, a World Bank DRM development policy financing operation with a Catastrophic Deferred Drawdown Option (Cat DDO) is designed to provide Cabo Verde with immediate liquidity in the event of a disaster caused by natural hazards and to support a comprehensive DRM reform program. The project was approved on June 5, 2019 and will close on June 31, 2022.

The $10 million Cat DDO was funded through a $5 million IBRD loan and a $5 million IDA credit. In addition, between 2017 and 2022, five trust funds were mobilized through the GFDRR for over $1 million. Between 2018 and 2022, under Cat DDO, the Bank supported the design and implementation of a comprehensive set of policy reforms aimed at increasing resilience to climate-related disasters and shocks.

The combination of financing and policy advice provided by the World Bank has been instrumental in (i) mainstreaming disaster risk and climate change considerations across sectors, (ii) improving risk-informed land planning systems, and (iii) increasing financial capacity to manage impacts associated with disasters and climate-related shocks. 

Last Updated: Apr 29, 2022

Cabo Verde's main bilateral donors are China, Luxembourg, Portugal, Spain, and the United States. Its major multilateral partners are the European Union, the African Development Bank, the United Nations, the World Bank, and the International Monetary Fund. Cabo Verde also receives smaller commitments from Japan, Kuwait, Saudi Arabia, and Angola. Cabo Verde is strengthening South-South cooperation, especially with Brazil and China, to take advantage of its privileged strategic position for transatlantic trade.

Last Updated: Apr 29, 2022