IMF recommends budget containment to Cape Verdean government

1 February 2012

Washington, United States, 1 Feb – The Cape Verdean should exercise budgetary “containment” over the next few months in order to overcome the effects of the rise in price of raw materials and the Euro Zone crisis, the International Monetary Fund (IMF) warned Monday.

The warning was given by Nemat Shafik, the assistant director of the IMF, who headed up a meeting of the IMF board of directors in Washington, at which the second and final review of the performance of the Cape Verdean economy was carried out under the terms of the Policy Support Instrument (PSI) for the archipelago.

“Given the persistent global economic uncertainty, containment policies will be necessary over the next few months to safeguard indexation of the exchanging rate and to establish absorbers for potential shocks,” said Shafik in a statement issues by the IMF after the meeting.

The government, Shafik said would have to increase internal revenues, contain spending and act, “cautiously with regard to capital expenditure,” depending “as much as possible” on financing at subsidised rates.

According to the IMF, the recent measures put in place by the Cape Verdean central bank and increased capital requirements for retail banks would help to contain inflation and increase foreign reserves.

The latest projections from the World Bank for Cape Verde point to growth of 5.8 percent in 2011, 6.4 percent this year and 6.6 percent next year. (macauhub)