POVERTY REDUCTION SUPPORT CREDIT IV

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The Fourth Poverty Reduction Support Credit (PRSC-4) supports the implementation of Cape Verde's first Growth and Poverty Reduction Strategy (GPRSP-I). This one-tranche operation is a transitory one between the first and the second PRSC series, which will be based on the GPRSP-II finalized by the Government at end of May 2008. The policy dialogue and the results-based framework under PRSC-4 focus on the following pillars of the GPRSP-I: (i) promote good governance; (ii) develop human capital; and (iii) improve the effectiveness and sustainability of the social protection system. Specifically, PRSC-4 supports selected measures that aim to: (a) improve public expenditure management, reform and modernize the public administration, strengthen decentralization and municipal management capacity, and strengthen monitoring and evaluation systems; (b) improve quality and efficiency of basic health; and (c) modernize and rationalize social protection services, with a focus on improving the normative and operational framework for social protection services at the municipal level. The main risks associated with PRSC-4 are: (i) limited capacity in some ministries to pursue the reform agenda; (ii) decline in external concessional support at a faster pace than expected; (iii) fiscal risks (including accumulation of contingent liabilities and non-discretionary expenditure programs that could cause fiscal slippages and stall implementation of the more sensitive policy reforms); and (iv) continued increase in fuel and food prices could delay further poverty reduction, especially in rural areas, given that most of the food and all oil has to be imported.