Budget Support Group recommends to Cape Verdean gov’t more spending control

15 November 2013

The Budget Support Group (BSG) for Cape Verde has positively assessed the country’s macroeconomic management, World Bank regional director Vera Songwe said on Thursday in Praia, besides mentioning several recommendations, especially more spending control.

At the end of a nine-day evaluation mission which primarily focused on the high public debt and budget deficit, Songwe said that despite progress, there was a “deterioration of the macroeconomic situation” in Cape Verde.

As “worrisome” aspects, the BSG headed by the World Bank indicated the slowdown in economic activity, higher public indebtedness due to the sharp drop in revenue and acceleration of the Public Investment Programme, taking into account the fiscal deficit of 14 percent and public debt at 98 percent of GDP.

Given that the island country’s short term economic growth will continue to be marked by uncertainty and the deteriorating global macroeconomic situation, Songwe said the BSG recommended that the direction of macroeconomic adjustment should be maintained by consolidating fiscal adjustment efforts to ensure that indebtedness can be sustained.

“Such measures should be accompanied by an acceleration of the agenda for structural reforms to allow the private sector to play a more active role in the country’s economic growth,” she said, while recalling the need to reform Cape Verde’s flagship airline TACV, which has a strong negative impact on tax revenue.

The 2014 state budget envisages spending amounting to 404 million euros and revenue of 322 million euros, with the deficit reaching 82 million euros (7.4 percent, the same as 2013). Offers of support include 15 million euros from the African Development Bank, 8.8 million euros from the European Union, and from Portugal. Other support from Spain and the World Bank, among others, is under analysis. (macauhub)