IMF warns Cape Verde of expected economic slowdown in 2013

29 November 2012

The cape Verdean government should pay attention to the economic slowdown expected for 2013, which may run into 2014, as well as to the dangers of “large investments” set out for the next few years, the head of an International Monetary Fund (IMF) mission, Sukhwinder Singh, said in Praia Wednesday.

At the end of a working meeting with the specialised Finance and Budget commission of the Cape Verdean parliament, Singh also said, “it is not advisable,” for the Cape Verdean government to wait until 2016 to increase taxation, noting that the country should not make any “big investments” over the next few years, but rather focus on “wide-ranging reforms, consolidation of investments and increasing liquidity,” of the banks.

According to Portuguese news agency Lusa, what is at stake is the Public Investment Programme (PIP), worth around 234 million euros, or 14 percent of Gross Domestic Product (GDP), as well as a lack of liquidity in Cape Verdean retail banks, which has made access to credit by local companies more difficult.

Singh thus suggested that Cape Verde should focus on fiscal, administrative, economic, and political reforms and on public companies which, he said, bring “big problems,” to the Cape Verdean economy.

In relation to the 2013 State Budget, which was approved Tuesday night by a majority-vote in Cape Verde’s parliament, Singh said he agreed with the document, without giving further details.

The budget proposal, the final vote on which will take place between 10 and 14 December, points to a budget deficit of 7.4 percent of GDP (9.8 percent this year), with debt expected to hit 90 percent of GDP, made up of 70 percent foreign debt and domestic debt of around 20 percent (10 percent more than forecast for 2012). (macauhub)