Cape Verde’s budgetary situation is still feeling the effect of a drop in revenues and rise in expenditure, according to the Monetary Policy Report of the Bank of Cape Verde, cited by Cape Verdean weekly newspaper A Semana.

The report, which was published this week, said that the budget deficit had reached 7.6 percent of gross domestic product (GDP), a year-on-year increase of 1.8 percentage points, driven by a rise in investment expenditure (+19.5 percent) and reduced revenues – a drop of 72 percent in donations and 2.4 percent less in tax revenues.

The central bank said that the downward trend in revenues is explained by a drop and delay in budgetary aid payments within a global context of economic and financial crisis and by reduced VAT revenues (8 percent less).

Interest on public debt rose 30.4 percent as a result of issuing new bonds to finance the budget, as well as the execution rate of projects financed by foreign debt and the appreciation of the US dollar, which is the currency in which over 50 percent of Cape Verde’s foreign debt is denominated.

As a result of a rise in public sector financing needs, public debt rose 12.6 percentage points to 90.5 percent of the gross domestic product (GDP) projected for 2012. (macauhub)