WASHINGTON, November 17, 2022 – Cabo Verde will be better able to address the impact of the war in Ukraine and increase resilience to future shocks, particularly climate-related shocks, with a US$52.5 million Development Policy Financing (DPF) approved by the World Bank Board of Executive Directors on November 17. The operation comprises a direct budget support of US$42.5 million and a Catastrophe-Deferred Drawdown Option (Cat DDO) of US$10 million, which can be rapidly disbursed to respond to a natural catastrophe, including climate-related and public health-related shocks. The program’s objective is to support the Government of Cabo Verde in strengthening the foundations for a climate-resilient and equitable private sector-led recovery.
“As Cabo Verde is recovering from multiple crises – the COVID-19 pandemic, five consecutive years of drought, and the crisis in Ukraine – and leveraging the moment to embark on an ambitious reform agenda, this operation supports policy action to lay the foundations for economic recovery by reducing fiscal risks and improving debt transparency, strengthening the resilience of poor and vulnerable households to climate-related shocks, and enabling a climate resilient and sustainable private sector-led recovery,” says Eneida Fernandes, World Bank Resident Representative for Cabo Verde.
This operation, the second in a series of two, builds on the first DPF, and is aligned with the Government’s Strategic Plan for Sustainable Development (PEDSII) 2022-2026.
The reforms that will be addressed under the DPF include measures to strengthen SOE risk management, increase the frequency and quality of debt reporting, and strengthen the fiscal risks associated with disasters and climate-related shocks. The DPF will also help strengthen the social protection system by supporting the continued use of safety nets and improving the usability of the social registry and the adaptability of financing mechanisms to respond to covariate shocks by expanding the eligibility criteria of the National Emergency Fund to respond to droughts and incorporating lessons learned from the early response to COVID-19. It also promotes socially and environmentally responsible investment by supporting reforms in the electricity sector to attract private investment, promoting harmonized, streamlined, and more predictable regulations for a resilient climate-resilient tourism sector, and developing the regulatory framework of aquaculture.
Together, the program of reforms supported by the operation is expected to have positive effects on poverty, positive social and environmental impact, and increase the economy’s resilience to external shocks.