Cape Verde - DPL 1/PRSC VI

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The objective of the Sixth Poverty Reduction Support Credit Program (PRSC VI) for Cape Verde is to support the policy reforms and institutional development necessary to foster sustained economic growth. The Government of Cape Verde (GOCV) has made considerable progress in achieving its reform objectives under both the current and previous PRSC series and has completed all PRSC benchmarks. Additionally, the government has met all assessment criteria for the final review of its International Monetary Fund (IMF) Policy Support Instrument (PSI). Cape Verde has built a solid reputation for good governance and responsible fiscal policy: it ranks first in the Country Policy and Institutional Assessment (CPIA) for the Africa Region (Low Income Countries). From 2000 to 2008 the Cape Verdean economy enjoyed an average annual real Gross Domestic Product (GDP) growth rate of 6.5 percent. In 2007 Cape Verde graduated to Middle-Income Country (MIC) status. According to the analysis that underpins the proposed PRSC VI; fiscal deficits are expected to remain high through 2012. These are largely the joint result of adverse external conditions and the temporary acceleration of public investment which reflects the strategy to take advantage of the five-year window under which the government can still tap concessional sources of financing, following Cape Verde's graduation to MIC status. As the global economy, and the Euro Zone in particular, recovers from its current recession, the Cape Verdean economy should return to a robust growth path, and, in this context, the government's long-term macroeconomic stance remains adequate. The current PRSC VI will enable the government to maintain fiscal sustainability and continue its investment program without curtailing social services or accumulating an unsustainable debt burden.