Cabo Verde Seeks IMF Extension for Support Programs

The government of Cabo Verde has announced that it will request a three-month technical extension from the International Monetary Fund (IMF) to conclude two support programs. The extension, from January to March, aims to allow the government to work with the IMF team to deliver outstanding documents and complete the programs. This was announced by Maria José Lopes, Secretary of State for Finance, at a press conference in Praia.

The two programs, the Extended Credit Facility (ECF) and the Resilience and Sustainability Facility (RSF), are complex and involve multiple ministries and institutions. Lopes cited the delayed accounts of the state-owned aviation company, Transportes Aéreos de Cabo Verde (TACV), as an example of the challenges. The company's accounts for 2023, 2024, and 2025 have not been approved or audited, which is hindering the conclusion of the programs.

The RSF program also requires reforms in the water and energy sectors, including a study on effective and cost prices. Lopes acknowledged that the process is time-consuming but expressed confidence that the conditions will be in place by March for an agreement to be reached. Martin Schindler, head of the IMF mission, noted that there were many issues to address and data to process, advocating for a careful review.

Despite the challenges, Schindler reported that Cabo Verde's economy remains resilient, with robust growth, controlled inflation, and a solid external position. He welcomed the government's budget target for 2027, which includes a primary surplus of 0.9% of GDP. However, he cautioned that ambitious revenue projections and increased current spending could limit the budget margin needed to respond to future shocks.

The IMF mission, which began on October 28, aimed to conduct the eighth and ninth reviews of the ECF and the fourth and fifth reviews of the RSF. The ECF, approved in June 2022, provides €60 million in financing, while the RSF, approved in late 2023, offers €29 million. The final disbursements depend on the completion of the reviews and approval by the IMF Executive Council.

Lopes and Schindler emphasized the importance of collaboration between the government and the IMF to address the outstanding issues. The government is working to strengthen public finances, reduce debt, and improve financial management. The IMF support programs aim to help Cabo Verde achieve these goals and promote economic resilience.

The extension request is a sign of the government's commitment to completing the programs and achieving the desired outcomes. The IMF's support is crucial for Cabo Verde's economic development, and the government is working closely with the IMF to ensure the successful conclusion of the programs.

Key points

• The government of Cabo Verde has requested a three-month extension from the IMF to conclude two support programs.
• The programs aim to strengthen public finances, reduce debt, and promote economic resilience in Cabo Verde.
• The IMF has welcomed the government's budget target for 2027, but cautioned about potential risks to the budget margin.