IMF approves political support instrument for Cape Verde

27 September 2006

Washington, USA, 27 Sept – The International Monetary Fund (IMF) announced that it had approved a Political Support Instrument (PSI) of the Cape Verdean government in the area of structural reforms and stability of the economy.

The PSI for Cape Verde, which from now on will be reviewed twice a year, was drawn up to “strengthen the sustainability of growth and development, maintaining a stable macroeconomic climate and to move ahead with structural reforms,” the IMF said in a statement issued Monday at the end of the day.

Over the next three years special attention will be paid to reducing tax risk and creating mechanisms to protect the Cape Verdean economy against external shocks.

By joining the PSI, a voluntary instrument, Cape Verde will stop receiving direct financial help from the IMF, as it has thus far, and will now only receive advice, monitoring and support for implementing its measures.

The IMF said it considered there had been, “strengthening of performance,” of the archipelago’s economy over the last few years and that in 2006 it remains good despite the country “feeling the delayed impact of oil price rises on international markets,” it said.

In the last few years, the IMF said, “international reserves have increased, adding credibility to the exchange rate against the euro, the tax position improved and, in clear move ahead of the past, fiscal contention was maintained during the recent elections.”

The priorities are now to “safeguard the exchange rate, manage fiscal risks and pressures, strengthen management of the public sector,” and there was also concordance with the government that “special emphasis needed to be given to development of human capital, improving the business climate, supporting the development of the financial sector and ensure an adequate power supply.”

The IMF advised Cape Verde to reduce public debt, in terms of percentage of GDP, improve the prioritization of expenses and the rationalization of tax exemptions to “create room to manage potential pressures.” (macauhub)