Cabo Verde expects to see economic growth accelerate and debt burden fall in 2020

2 December 2019

Cabo Verde’s 2020 State Budget (OE), approved on 29 November, forecasts an acceleration of economic growth and a continuation of the fall in the country’s high debt burden, one of the main weaknesses of the Cape Verdean economy.

The State Budget Basic Law, accessed by Macauhub through Legis-PALOP+TL, states that the domestically-funded budget deficit may not exceed 3% of Gross Domestic Product (GDP) at market prices.

As for the limits on state indebtedness, the document said, short- and medium-term public domestic and external debt cannot exceed 60% of GDP at market prices and long-term global public debt cannot exceed 80% of GDP at market prices.

“When the ratio of government debt to GDP exceeds these benchmarks, the government is obliged to reduce the amount of excess debt,” says the law provided by the Legis-PALOP+TL database.

The State Budget is guided by the targets of the Medium Term Expenditure Framework (QDMP) and the National Planning and Strategy Document (DPEN) and is based on the results of previous years, taking into account the outlook for future years.

At the end of the debate on the State Budget, in the National Assembly, the Prime Minister, Ulisses Correia e Silva, highlighted the country’s current pace of economic growth, which he estimated at five times more than in 2016.

The government expects economic growth in the range of 4.8% to 5.8% by 2020 and a reduction in the weight of public debt to 118.5% of GDP, down by 1.5 percentage points from this year (120%), and the unemployment rate should fall from the current 12% to 11.4%.

The 2020 General State Budget outlines expenditure of 73 billion escudos (US$729.3 million), or 2 billion escudos (US$20 million) more than the current state budget.

The downward trend in public debt was also highlighted at the conclusion of the recent mission of the Cabo Verde Budget Support Group (GAO) from 18 to 22 November, from 127% of GDP in 2017 to 124% in 2018.

According to the GAO, the decline in government debt relative to GDP is due to the combined effect of fiscal restraint, accelerating growth and favourable exchange rate changes.

However, in the appraisal of the visit, the GAO warned that “the risk of excessive foreign debt remains high” and pointed to the need for “an increase in revenues and containment of the increase in public spending,” while safeguarding social spending. (Macauhub)