Overview

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Context
Strategy
Results
Partners

Located 500 kilometers off the west coast of Africa, Cabo Verde is an archipelago of 10 islands of which nine are inhabited. The country has an estimated population of 520,500. Only 10% of its territory is classified as arable land, and the country possesses limited mineral resources.
Political Context
Politics in Cabo Verde have been largely consensus-oriented, and since its independence from Portugal in 1975, Cabo Verde has not experienced a single coup d’état. Elections are considered free and fair, and parties in power alternate regularly. The current government has been in office since the presidential and parliamentary elections of 2016, which led to a change with the victory of the opposition Movimento para Democracia (MpD) after 15 years of government under the Partido Africano da Independência de Cabo Verde (PAICV). These two parties dominate Cabo Verde’s political scene and are both fairly centrist. There is also a third party, the União Caboverdiana Independente e Democrática (UCID), which slightly increased its share of votes.

Economic Overview
The country’s small population spread across a large water area constitutes a major constraint to growth and development. It limits economies of scale, and creates significant connectivity issues, as well as challenges for service delivery (energy, water, education, etc.).
Despite the challenges associated with being a small island economy, Cabo Verde witnessed spectacular social and economic progress between 1990 and 2008, driven mainly by the rapid development of inclusive tourist resorts. During this period, its gross national income (GNI) per capita grew six-fold to US$3200, and it was the only non-extractive economy in Sub-Saharan Africa to reach middle income status in a short time.
Consolidating its achievements as a middle-income country and further strengthening the conditions for poverty reduction and boosting shared prosperity will be key challenges. With its small open economy, the country is vulnerable to the vagaries of global economic developments. Given the fixed exchange rate with the Euro, it will be vital for the country to rebuild fiscal buffers to absorb future shocks. Diversification within and beyond the tourism sector, and more flexible labor markets can help to absorb shocks.
Medium-term outlook
Growth is projected to approximate 4% over the medium-term, as foreign direct investment (FDI) continues to recover and inflation expectation remain subdued. The tourism sector is expected to strengthen reflecting a firming of economic conditions in Europe—which provides most of the country’s tourism receipts (47% of total exports of goods and services)—complemented by recent efforts by the government to improve the competitiveness of the sector. The ongoing construction of several hotels across the archipelago should help to create jobs and further stimulate economic growth. Leading indicators also suggests that domestic demand should strengthen reflecting efforts to bolster credit to the private sector.
Social Context
Based on the national poverty line, poverty levels were reduced considerably from 58% in 2001 to 35% in 2015. Extreme poverty - defined as those below the national food poverty line (PPP US$2.9 per person in 2015), dropped from 30% to 10% during this period. The increase was largely driven by fast growth in tourist-related activities, while increasing remittances and investment in rural infrastructure also played a key role.

Last Updated: Apr 19, 2018
World Bank Group Engagement in Cabo Verde
World Bank Group (WBG) commitments in Cabo Verde total $119.50 million ($53.5 million from International Bank for Reconstruction and Development (IBRD) and $66 million from IDA), of which 58% of the total amount has been already disbursed as of February 2018. The current portfolio comprises of four active projects covering transportation sector reform, electricity sector reform (IBRD), tourism sector development and Access to finance for Micro, Small, Medium-Sized Enterprises.
In recent years, analytical work in Cabo Verde has included Fraud and terrorism Risk Assessment to Help improve the effectiveness of Cabo Verde to detect illicit financial flows, investigating and prosecuting financial crime such as corruption, tax evasion, and fraud, an education technical assistance, a public expenditure review, a support to the preparation of national statistical development strategy (NSDS) for 2018-2022, and a support to the Scale Up for the Social Protection System in the country.
The World Bank is preparing a Systemic Country Diagnostic prior to elaborate the new Country Partnership Framework (CPF).
International Finance Corporation (IFC):
The International Finance Corporation (IFC), still operating under the joint Country Partnership Strategy for FY14-17 (CPS), is focused on (i) supporting public private partnerships (PPPs) and the private infrastructure provisions related to transport and renewable energy, in collaboration with the World Bank; (ii) bringing part of the financing to private sponsors under PPPs (as subject to IFC’s investment rules); (iii) identifying selective investments in the financial markets and tourism sectors to increase access to financing for small and medium enterprises (SMEs); and (iv) joining forces with the World Bank to provide support in trade, licensing, and investments.

Last Updated: Apr 19, 2018
Development of the Transportation Sector
On June 30, 2013, the Road Sector Support Project (RSSP) closed satisfactorily with significant achievements at the institutional level. Specific reforms such as the creation of the Road Institute and of the Road Fund, supported by credit in the road sector, proved efficient and sustainable. Despite some cost overruns, the works financed under the RSSP were completed satisfactorily, and thanks to the strengthened capacity of the Road Institute, cost overturns became virtually non-existent for the last contracts financed under the credit.
An additional credit, the Transport Sector Reform project was approved in June 2013 and is supporting the scaling up of performance based road maintenance on an ever larger section of the national network. The project will combine the rehabilitation of key road sections and routine maintenance into four-year contracts. It will also support the Ministry of Infrastructure in the implementation of key reforms in the transport sector to promote the involvement of the private sector in the management of airports and harbors, and the delivery of sea transport services. The credit also supports a Road Safety Action Plan along with additional measures that further consolidate the country's road maintenance policy.
Public Financial Management
Four Poverty Reduction Support Credits (PRSC IV-VII) were implemented over the course of the FY09-12 CPS period. Under PRSC IV, the government made progress in promoting good governance and improved outcomes in the health and education sectors for greater human capital development. PRSC V supported policies and institutional reforms conducive to private sector development and improving competitiveness in the service sector. It also promoted good governance through public expenditure management, supported civil service reforms, and encouraged a stronger statistics, monitoring, and evaluation system. PRSC VI and VII focused on good governance, competitiveness and growth. PRSC VIII, which disbursed in May 2014, is the first budget support operation of another series of three, and continues to focus on these themes. The most recent PRSC IX which became effective in September 2015 focuses on rebuilding fiscal space and strengthening Cabo Verde’s competitiveness.

Last Updated: Apr 19, 2018
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 19, 2018