History Last updated March 2008 
Cape Verde is a small archipelago of ten islands located off the coast of Senegal. About one-tenth of the country's surface is arable. While the islands are home to about 500,000 Cape Verdeans, twice as many live abroad and many maintain close ties with their homeland. Since becoming independent from Portugal in 1975, Cape Verde has achieved a strong development performance record, with sustained gains in health, education, and economic growth. Economic/political context Cape Verde 's growth performance since the late 1980s has raised it to the ranks of lower middle income countries, with a GNI per capita of US$2,130 in 2006. GDP growth stood at 10.8 percent in 2006, bolstered by strong public and private investment (with significant foreign direct investment) largely in infrastructure development and tourism. In 2006, tourism receipts amounted to around 19 percent of GDP. Growth rates in 2007 are projected at 7 percent. Inflation pressures are moderate and supply driven. In 2006, inflation reached 5.4 percent, largely reflecting supply shocks. Inflation over the medium term is expected to stabilize around 2-3 percent consistent with the currency peg. Monetary policy continues to be consistent with the goal of strengthening the sustainability of the exchange rate peg to the euro by steadily building up reserves. Fiscal policy is consistent with macroeconomic stability and debt sustainability. The fiscal deficit, including grants, averaged 3.8 percent of GDP during the period 2002-2006. In 2007, the deficit is expected to stand at 4.6 percent of GDP. Thanks to this growth trend, poverty has declined from 37 to 29 percent between 2001 and 2006 and the human development index has improved from 0.59 in 1990 to 0.72 in 2006 (world ranking of 106). Adult literacy rates are high (approximately 79 percent in 2006, 97 among the youth), and life expectancy at birth (69) is the third highest in Africa. Notwithstanding the country’s economic successes, its small size and geography make it vulnerable to exogenous shocks and the country is highly dependent on foreign aid and remittances. Cape Verde ’s economic and social progress has been accompanied by political openness. Since the adoption of a multi-party system in 1991, there have been four national elections and two orderly changes in government. A free press further supports the building of an open society. The last legislative and presidential elections were held in January and February 2006, respectively, and the Partido Africano da Independência de Cabo Verde (PAICV) won both elections. President Pedro Pires was reelected for a five-year term. The reelected Prime Minister, José Maria Neves, and his appointed Council of Ministers took office in March 2006. Development picture/donor coordination Cape Verde 's major bilateral donors are Portugal, the USA, Luxembourg, the Netherlands, and Austria. The European Union, Africa Development Bank, United Nations, the World Bank and the IMF are the major multilateral partners. In December 2004, a UN resolution announced that Cape Verde would graduate to middle income status in January 2008. The government subsequently set up a government and donor support group to help ensure a smooth transition to middle income status. In June 2007, the group adopted a declaration of support for “a long term international effort to support Cape Verde’s socioeconomic transformation agenda through increasing market access, facilitating new forms of financing, and providing continued support for poverty reduction programs and to reduce Cape Verde’s vulnerabilities.” A Budget Support Group (BSG) was created in 2005, and included the World Bank, the European Union, and the Dutch cooperation. The coordinated approach used by the BSG to align and harmonize their support for poverty reduction around the Growth and Poverty reduction and Strategy Paper, has played a catalytic role in bringing in new partners. As a result, BSG was expanded in 2007 to a total of six partners, as the African Development Bank, Austria, and Spain cooperation joined the group. The BSG expanded further when the Portuguese Cooperation announced in December 2007 that they will join too. During the last three years, around 25 percent of foreign aid was in the form of budget support. The World Bank Group’s role As of March 2008, the World Bank had approved 22 projects for Cape Verde amounting to US$255.9 million equivalent, of which about US$247 million equivalent had been disbursed. Nineteen projects have been closed, and the current portfolio of three projects represents about US$43.5 million equivalent, with an undisbursed balance of about US$10.2 million. These three credits are for projects in (a) HIV/AIDS, (b) Growth and Competitiveness, and (c) Road Sector Support. Overall, Cape Verde's portfolio performance is the best in the Africa Region. The Bank’s Country Assistance Strategy for 2005-08 is aligned with Cape Verde’s Growth and Poverty Reduction Strategy Paper (GPRS). Under this CAS, the Bank has introduced a series of Poverty Reduction Support Credits to support the GPRS, notably to strengthen public financial management, decentralization, judicial services, social services, and social safety nets. Two PRSC credits were approved in 2005 and 2006. A Third Poverty Reduction Support Credit of US$10 million equivalent was approved by the Board of Executive Directors on March 27, 2007. Analytical work has included a Public Expenditure Review update, an Investment Climate Assessment, an Infrastructure diagnostic, and a Fisheries Sector Review. The Bank is currently preparing a full Public Expenditure Review (FY08), and a Rural Development Assessment and a Poverty Assessment to be completed in FY09. A new CAS is being prepared to be presented to the Bank’s Board in FY08, which would be built on the Government’s 2nd GPRS, also under preparation. As of June 2007, the International Finance Corporation (IFC) has a portfolio in Cape Verde of around US$4.8 million, mainly a loan to Caixa Econômica de Cabo Verde (CECV), the second largest bank in Cape Verde. The Government has selected IFC through PEP-Africa (Public Enterprise Partnership) to finalize the design and to implement the PSD/competitiveness component of the Millennium Challenge Corporation (MCC) program. The program is expected to open opportunities for increased investments in Cape Verde and would consist in designing a strategy to stimulate SME competitiveness and growth in tourism, transport services, and the financial sector. IFC is considering access to finance projects to complement the MCC initiative. The Multilateral Investment Guarantee Agency’s portfolio in Cape Verde does not support any investments in the country at present. Cape Verde is not a WBI focus country and is not an active participant in WBI programs. Contacts Mr. Madani M. Tall
Country Director (based in Dakar, Senegal)
Tel: (221) 33 849-50-11
Fax: (221) 33 849 50 27
E-MAIL: Mtall@worldbank.org Ms. Joelle Dehasse
Acting Country Program Coordinator/Senior Operations Officer
Tel: (202) 458-5437
Fax: (202) 473-5450
E-mail: jdehasse@worldbank.org
Ms. Manuela Francisco
Country Economist
Tel: (202) 473-8209
Fax: (202) 473-8136
E-mail: mfrancisco@worldbank.org Ms. Barbara Weber
Senior Operations Officer
Tel: (202) 473-7893
Fax: (202) 473-5450
E-mail: bweber@worldbank.org |
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