WASHINGTON, December 18, 2014– The World Bank Group’s Board of Executive Directors today discussed the new Country Partnership Strategy (2015-17) to support the Republic of Cabo Verde implement its development agenda, agreeing to provide up to 49.5 million of IDA resources over the next three years to help end extreme poverty and boost shared prosperity.
Cabo Verde will also have access to IBRD resources during the CPS period. IBRD lending limits will depend on country performance, IBRD's lending capacity, demand by other borrowers and global economic developments. IFC will pursue private sector investments in agribusiness, financial institutions, infrastructure, and tourism, and offer advisory support to the government in structuring effective public-private partnerships.
Between 2000 and 2007, Cabo Verde’s strong growth (6 percent annually) driven by a steadily growing tourism sector and accelerated capital accumulation, translated into considerable poverty reduction and boosted shared prosperity. Achievement of all the Millennium Development Goals (MDGs) by 2015 is now within reach for Cabo Verde. As a small island open economy, Cabo Verde is vulnerable to external shocks. Since 2008, Cabo Verde has been severely affected by the global financial crisis and the impact of the European sovereign debt crisis on markets. The Government, through its Third Growth and Poverty Reduction Strategy Paper (GPRSP III), recognizes that capital accumulation alone cannot sustain high growth rates indefinitely, and that it must diversify its sources of growth.
Against this background, the proposed WBG CPS will focus on two interdependent programs, namely: (i) enhancing macro-fiscal stability in order to lay the foundation for sustained growth and poverty reduction; and (ii) improving competitiveness and private sector development. In the new strategy the three Bank Group institutions—the World Bank, the IFC, and the Multilateral Investment Guarantee Agency (MIGA)—will work together to help improve the environment for private sector development and catalyze new investments to boost productivity, incomes and jobs.
“Building on the remarkable progress achieved by Cabo Verde in reducing poverty, our support is intended to support the country as it transitions to a private sector led growth path. It will also assist it as it prepares for its transition to non-concessional financing. The new strategy supports this transition, focusing on policy reforms and knowledge services complemented by specific investments in job creating, especially for women and youth, and poverty reducing sectors such as tourism, fisheries, and agriculture,” said Vera Songwe, The World Bank Country Director for Cabo Verde.
The overall program will include financial, knowledge, advisory and partnership activities. Financing under the strategy will come in the form of World Bank loans to the government, private-sector financing from IFC, and investment insurance from MIGA.
“IFC can help Cape Verde build a more dynamic private sector through investments in critical sectors and by helping structure important infrastructure transactions,” said Saran Kebet-Koulibaly, IFC Director for West and Central Africa. “There are opportunities to work with the government and across the World Bank Group to improve the business environment and help build capacity for smaller businesses to grow.”
IFC will focus operations on private sector initiatives specifically in tourism by exploring financing for hotel operators as well as possible support to improve the linkage between tourism and agriculture. It will also support the efforts to attract investments in transport and solar energy. The use of MIGA guarantees will offer reassurance to foreign investors and will complement government efforts to create public private partnerships specifically in transport and energy.
“MIGA’s guarantees can help crowd in private sector investment in infrastructure projects that improve the business climate, reduce production costs, and improve productivity,” said Ravi Vish, Director of Economics and Policy. “We have extensive experience in supporting public-private partnerships and stand ready to support these transactions in Cabo Verde.”
Since 1978, the World Bank has approved 38 projects in Cabo Verde which amount to about $416 million, $379 million of which has already been disbursed. Cabo Verde has borrowed US$363 million for 37 IDA credits and US$53 million for 1 IBRD loan.