The World Bank in Cabo Verde

Located 500 km off the west coast of Africa, Cabo Verde is a ten-island archipelago, nine of which are inhabited. With a population of about 491,233 (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 thanks 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 but is currently challenged by the impacts of COVID-19 and the Ukraine crisis. Estimates based on economic growth suggest that poverty rates, measured by the $5.5-a-day poverty line (2011 PPP), declined by six 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 left-wing African Party for the Independence of Cabo Verde (PAICV), which headed colonial liberation, governed for two 15-year periods (1975-1991 and 2001-2016). 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

Economic activity expanded 7% in 2021, magnified by base effects after a contraction of 14.8% in 2020. On the supply side, manufacturing and construction led growth, while private and public consumption led on the demand side. Inflation rose from 0.6% in 2020 to 1.9% in 2021, due to higher international oil and food prices.  

The fiscal deficit remained high at 7.3% of GDP in 2021. Public debt increased slightly to 143% of GDP, driven by sustained current expenditures.

The war in Ukraine and the ongoing drought are exacerbating food and energy-driven inflation in 2022, threatening growth. Real GDP growth is projected at 4% in 2022 (2.9% in per capita terms), versus 7% in 2021, which is aggravating food insecurity. The Ukraine crisis will weigh on growth, mainly through inflation and its impact on private consumption and economic activity. Inflationary pressures will peak in 2022, with headline inflation expected to reach 7.5%.

Over the medium term, private consumption, investment in tourism, and the blue economy should support growth. The outlook is subject to substantial downside risks stemming from climate shocks, new COVID-19 variants, and increased global uncertainty due to the Ukraine war.

The fiscal deficit is projected to reach 9% of GDP in 2022, driven by increased current expenditures due to the response package to mitigate the impact of the Ukraine war. The public debt-to-GDP ratio is expected to improve from 147.7% in 2022 to 141.1% by 2024. 

Last Updated: Oct 07, 2022

The World Bank’s engagement in Cabo Verde is currently guided by its FY20-25 Country Partnership Framework (CPF). The CPF focuses on (i) accelerating human capital for inclusive, service-led growth; and (ii) strengthening the environment for a more diversified economy.

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

The remaining $87 million (40%) of the portfolio is devoted to Human Development (Health, Education and Social Inclusion) and digital transformation. The current portfolio includes 11 national projects, along with a $15 million regional project.

New and pipeline projects in Cabo Verde reflect a shift towards larger, more multi-sectoral programs that focus on a green, resilient recovery where the private sector will play an important role. The program also supports transformational reforms to increase private investment that can mitigate the impact of both the pandemic and challenges related to climate change, while supporting economic diversification to increase resilience to external shocks.

Last Updated: Oct 07, 2022

Under the CPF’s human capital Focus Area (“accelerating human capital for inclusive, services-led growth”), the portfolio has prioritized preparing the workforce for an economy based on the provision of high-quality services, while promoting social protection and productive inclusion.

• The Education and Skills Project (P164294) has supported implementation of key reforms in basic education, and enabled participation of nearly 2,000 youths in labor market-relevant training. It also awarded scholarships to more than 1,190 individuals - predominately women - from the poorest households to participate in tourism and ICT-related courses.
• The Social Inclusion Project (P165267) has supported improved coordination, coherence, and coverage of the social protection sector through a systems approach. It helped establish a unified social registry across all municipalities, with over 310,000 registered individuals, and a social program (RSI) providing regular cash transfers for 4,500 households - 84% headed by women - in the poorest quintile.

Under the CPF’s macroeconomic and private sector development Focus Area (“strengthening the environment for a more diversified economy”), the WB portfolio has supported improvements to fiscal and macroeconomic resilience, promoted enabling conditions for private sector-led growth, and worked to improve the competitiveness of tourism, the main economic sector.

• The recently closed Competitiveness for Tourism Development Project (P146666) has promoted private sector development through support to the organization of three Investment Forums. It contributed to the signing of investment conventions for projects worth over $270 million, developed tourism master plans for seven islands, and created the Tourism Institute of Cabo Verde to improve regulation and promotion of the tourism sector.
• The Disaster Risk Management Development Policy Financing (DPF) with CAT-DDO (P160628) has contributed to macroeconomic resilience through a disaster risk management reform program and mainstreamed disaster risk and climate change considerations across sectors. The now-closed DPF has also increased the country’s financial capacity to manage impacts associated with disaster and climate-related shocks, through the creation of a National Emergency Fund. The Fund provided immediate liquidity in the face of the COVID-19 pandemic, with all of its resources being channeled to finance the government’s response efforts.
• Under its SME advisory services program, the IFC supported enabling conditions for MSMEs, through development of a new strategic plan (2018-2022) for the Banco Caboverdiano de Negocios (BCN), with MSMEs as a key segment, and helped develop a new SME credit policy and supporting tools for BCN.

Going beyond the CPF, the World Bank was a key partner in the COVID-19 response. The response took an integrated approach, targeting large-scale vaccination, emergency support to the most vulnerable households, and facilitating reopening of international tourism, the country’s largest economic sector. Approximately $21 million was activated for the acquisition and deployment of COVID-19 vaccines, while additional financings allowed existing projects to be leveraged to support the crisis response.

Cabo Verde was the first country to receive direct World Bank support to vaccine rollout. By August 28, 2022, 325,863 individuals, or 98.5% of the eligible adult population, had received a first dose; 280,228 (86%) had received a second dose; and 118,964 (36.5%) had received a booster. The vaccination of adolescents between ages 11 and 17 began in December 2021, and vaccination of children between ages 5 and 11 is planned. Cabo Verde is the 4th most vaccinated country in Sub-Saharan Africa. In parallel, the WB supported the development of Nha Card, the digital vaccination certificate that is fully accepted for travel in Europe. Together, these initiatives facilitated the full reopening of the country to international tourism in December 2020, significantly earlier than many regional neighbors, and enabling an early start to economic recovery.

At the same time, the Social Inclusion Project was restructured and supplemented with an Additional Financing of $10 million to redirect resources to the COVID-19 response. The project-supported social registry and cash transfer program were used to target emergency cash transfers to the most vulnerable households. By December 2021, 21,048 households, 80% of which are headed by women, or around 48% of the poorest households, were being supported through emergency cash transfers. 

Last Updated: Oct 07, 2022

Most bilateral and multilateral development agencies have a presence in Cabo Verde. Its major multilateral partners are the European Union, the African Development Bank, the United Nations, the World Bank, and the International Monetary Fund. Progress has been made to streamline development assistance and coordination through the Budget Support Donor Group (GAO) mechanism, which includes active participation of Luxembourg, Portugal, Spain, the European Union, the African Development Bank, and the World Bank.

Last Updated: Oct 07, 2022