World Bank-Cape Verde Partnership

A man sorts fishing nets in Santa Maria, Cape Verde. The World Bank's partnership strategy with Cape Verde focuses on enhancing the West African country's macrofiscal stability for sustained growth, as well as improving competitiveness and strengthening the private sector. Photo by: IDS.photos / CC BY-SA Cape Verde has made considerable progress in economic development with gross domestic product growth rates averaging 7.1 percent from 2005 to 2008. However, the country lost its momentum following the 2009 recession, and GDP growth has been modest since. While GDP growth levels are still far from what they were in the past decade, the overall outlook for the West African country remains positive. Poverty incidence dropped from 37 percent to 27 percent between 2002 and 2010, with extreme poverty declining from 21 percent to just 12 percent over the same period thanks in large part to the booming tourism sector. The challenge will be to replicate past successes in socio-economic development in the face of less-favorable global economic conditions. The government of Cape Verde is well aware of this and aims to ensure sustained, inclusive growth through its third Growth and Poverty Reduction Strategy Paper, which lays out its short and medium-term plans for macroeconomic management as well as structural reforms that are targeted toward increasing the country’s productivity. The World Bank supports Cape Verde’s efforts to achieve sustainable and inclusive growth, and has designed its 2015-2017 country partnership strategy to assist in the implementation of the government’s GPRSP. Funding levels and priorities The bank’s active portfolio in Cape Verde amounts to $83 million, with the International Development Association financing $29.5 million and the International Bank for Reconstruction and Development contributing $53.5 million. Listed below are ongoing World Bank programs in Cape Verde alongside their corresponding budget allocations. Under the 2015-2017 partnership agreement, IDA will provide an additional $49.5 million. Cape Verde will also have access to IBRD resources, the amount of which will be determined based on country performance, availability of IBRD resources, demand from other borrowers and the global economic climate. The partnership strategy focuses on enhancing Cape Verde’s macrofiscal stability for sustained growth, as well as improving competitiveness and strengthening the private sector. These entail developing the country’s main drivers of economy such as tourism, agriculture and fisheries, and improving the overall investment climate. The agricultural sector is seen as key to further reducing poverty incidence and will receive greater focus during this partnership period, while linkages between agriculture, fisheries and tourism will be reinforced. In doing so, the World Bank hopes to assist the government in reaching its target of reducing the poverty rate to 20 percent by 2016. Capacity building, technical assistance and sectoral support will also be provided to core ministries alongside program implementation. Below is a breakdown of IDA contributions for 2015-2017 and the projects they will finance. Devex analysis The World Bank maintains a huge presence in sub-Saharan Africa, with commitments reaching $15.7 billion for fiscal 2015 alone. In Cape Verde, the bank has approved 38 projects over several years of partnership amounting to $416 million, of which $379 million has already been disbursed. While Cape Verde is in relatively good shape — it is well on its way to reaching middle-income status and achieving its Millennium Development Goals — implementation of this partnership strategy is not without risk. The bank notes that there is substantial risk associated with the lack of global economic stability, particularly in the eurozone, to which the country’s economy is closely tied. The World Bank will work with the International Monetary Fund in developing risk mitigation measures and will maintain flexibility in its financial instruments to be able to adjust to shifting conditions in and out of the country. The bank’s International Finance Corp. and Multilateral Investment Guarantee Agency will also play a crucial role in providing incentives to encourage private sector participation — a key element in implementing this partnership strategy. Another risk lies in the upcoming 2016 elections. The bank anticipates that since 2015 is a pre-election year, any ambitious reforms are less likely to gain attention from the government. As a countermeasure, the World Bank will implement communication strategies alongside key programs, particularly those for poverty reduction. These communication activities will bring together representatives from the private sector, state-owned enterprises, civil society and other relevant stakeholders. The World Bank remains committed to the West African country and will continue to engage it through its aid programming. However, as Cape Verde transitioned out of the United Nations’ list of least-developed countries back in 2007, it will have to adjust to its diminishing access to the bank’s concessional financing. According to Vera Songwe, World Bank Country Director for Cape Verde, the bank has adjusted its strategy to ease the transition by focusing on policy reforms and knowledge services complemented by specific investments in job creation, especially for women and youth, and the key sectors mentioned above. Contact Tel: (221-33) 859-4140 Email: