Cape Verdian economy withstands global economic downturn

The Cape Verdian economy "adequately withstood" the global economic downturn of 2009, thanks to a safe economic management and robus tfoundations that led to "strong" growth rates, according to the report of the International Monetary Fund (IMF) released in December last year.

In analysing Cape Verde's economic development by the yardstick approved in July 2006 and extended by one year in June last year, the IMF said the global financial crisis had little impact on the Cape Verdian financial sector and that despite a slight drop, "the international reserves are still adequate".

According to the IMF deputy chairman, Murilo Portugal, Cape Verde, in addition to a sustainable growth, recorded one of the lowest inflation rates and a drop in the country's internal debt.

For the IMF, Cape Verde has presently room to manoeuvre, which enables the country to gradually reduce interest rates and be involved in the development of the domestic financial market.

The Bank of Cape Verde (BCV) decided in 2009 to reduce the base rate for the cen tral Bank to 1% from 4 January 2010.

According to sources close to BCV board of directors, this reduction aims to strengthen the efficiency of the monetary policy and to make the market more dynamic in a bid to guarantee stability for the country's exchange.

"For such decision, the evolution of the international rates of interest had also to be taken into consideration, particularly in the euro zone."

The African Development Bank (AfDB) said last year Cape Verde was an example as far as good governance was concerned and thanks to which it enjoyed benefits, particularly through the successful programme for poverty alleviation and the achievement of the Millennium Development Goals (MDGs).

"Cape Verde is one AfDB member countries which can be said that since 1996, it records significant economic and social progress," AfDB said, adding that the poverty rate dropped from 37% between 2001 and 2002 to 27% in 2007, and that the country was "on the way to achieve the UN MDGs in 2015, one of the few countries in Africa to achieve it".

AfDB said Cape Verde's major factors for development were the obvious view to economic transformation strategy, good governance and a normal functioning for the democratic institutions, as well as macroeconomic stability, strong growth, safe and rational use of resources.

In the report issued at the close of the annual Assembly held from 10-14 May last year in Dakar, the Senegalese capital, AfDB also recognized that the Cape Verdian economy recorded a slowdown last year, dropping from 6.1% in 2008 to 3.6% at the end of the year.

However, AfDB confirms the expectations of the Cape Verdian government saying the country's economy should spring up again from 2010 as well as record a growth rate of 54 to 5%.

In 2009, Cape Verde was regarded by the US research institution, Heritage Foundation and Wall Street Journal as the first country in West Africa and the seventh in sub-Saharan Africa to carry out a true liberal economy.

On the international scale, Cape Verde is 77th by obtaining last year 61.3% , more than 3.4% compared to previous ranking.

The standards used by the two organizations to devise index in the 157 countries focused on freedoms in business, trade, tax system, monetary and financial liberty and job, the respect of the right to ownership and fight against corruption.

In all these standards, Cape Verde obtained good marks and comes right after Italy which is 76th, and before Macedonia, Greece, Poland, Montenegro, Egypt, Tunisia, Morocco, Brazil, Algeria, Croatia and Moldova.

Last year, Cape Verde still received huge supports from bilateral partners such as Portugal (500 million euros), Luxemburg (51 million euros) and the European Union (51 million euros).

The government announced, nearly at the end of 2009, that Cape Verde was the only country in the world selected to be granted a second financing agreement from the Millennium Challenge Account (MCA) programme of the US government.

That new decision made by the MCA administration has taken into consideration the progress made by Cape Verde in the financing of the first share (US$110m) and which enabled the country to achieve several projects in the domain of infrastructure (roads, bridges, harbours), modernization of agriculture and training of human resources.

All this puts one in a position to believe that this second planned financing share, that would be estimated at US$300 or US$400 million will be a huge contribution to Cape Verde's development process.

Praia - Pana 05/01/2010

By Carvalho Santos, PANA Correspondent