An International Monetary Fund (IMF) mission, led by Sukhwinder Singh, visited Cape Verde from May 31 to June 7, to assess recent economic developments, the economic outlook, and reform progress. The mission met with Prime Minister José Maria Neves, Minister of Finance Cristina Duarte, Central Bank Governor Carlos de Burgo, other government ministers and officials, development partners, and representatives of the private sector. The mission would like to thank the authorities for their excellent cooperation and hospitality.
At the conclusion of the staff visit, Mr. Singh made the following statement:
"Against the background of a very difficult external environment in the euro zone, the mission's overall assessment is that economic growth has been slow over recent years. Growth is likely to continue to be modest in 2013. There is considerable uncertainty as the lack of actual real GDP data since 2010 poses serious challenges for monitoring and analyzing economic developments and for formulating policy responses. Strengthening of the national accounts statistics should be a priority. Foreign exchange reserves have risen through the first quarter of 2013 and inflation has remained low. Revenues shortfalls and higher execution rates of externally funded public investment resulted in a larger than expected fiscal deficit in 2012. Spending is being adjusted in 2013, but macroeconomic policy in the short term should lean towards being supportive of demand if weakness persists.
"Over the medium term, the mission and the authorities agreed that the focus should remain on improving the fiscal position to reduce elevated debt levels and further build foreign exchange reserves to insure against external shocks. Continued reform of tax administration is critical and progress is being made. In the monetary and financial area, credit growth has slowed sharply reflecting slowing demand and rising non-performing loans. The Central Bank has responded effectively by taking regulatory measures to strengthen the health of the banking system.
"The mission emphasized two important areas which are critical for achieving both growth and macroeconomic stability objectives, where the government has signalled strong reform commitment. First, a robust effort to strengthen the economy's productivity and competitiveness through reforms to the business environment, in areas such as the labor market. Second, major reforms in the management of infrastructure so as to maximize its productivity. This should include measures to strengthen the operational and financial performance of public enterprises.
"The next IMF surveillance visit is expected in the last quarter of this year to conduct the 2013 Article IV Consultation.
