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Cabo Verde’s Financial Stability Report Highlights Solid Macroeconomic Environment

Praia, Cape Verde - The Banco de Cabo Verde has released its Financial Stability Report for 2019, providing insights into the country’s macroeconomic and financial environment. The report highlights a solid macroeconomic performance, with a stable fiscal position and a favorable outlook for public debt sustainability.

Fiscal Performance

The government’s total revenue increased to 41% of GDP in 2019, while total expenses rose to 31%. The purchase of non-financial assets remained low, at around 5% of GDP. The implicit interest rate on external debt remained stable, while the effective interest rate decreased slightly.

Public Debt Sustainability

Fitch Ratings maintained its B rating for Cape Verde’s sovereign debt, with a positive outlook for the long-term foreign currency rating and local currency rating. Although the International Monetary Fund (IMF) still indicates a high risk of debt distress, Fitch’s review was influenced by more favorable prospects for the country’s macroeconomic environment and public finance sustainability.

Monetary Policy

The monetary policy stance remained accommodative in 2019, with contained inflationary pressures and pressure on the balance of payments. The reference rate, deposit facility rate, and marginal lending facility rate remained unchanged at 1.0%, 0.10%, and 3.0% respectively. The monetary authority reduced the marginal lending facility rate from 4.5% to 3.0% in June 2019 to narrow the corridor between standing facility rates.

Key Indicators

Total revenue: 41% of GDP (2019)
Total expenses: 31% of GDP (2019)
Purchase of non-financial assets: 5% of GDP (2019)
Implicit interest rate on external debt: stable
Effective interest rate: decreased slightly
Public debt sustainability: high risk of debt distress, according to IMF Country Report No. 19/255

Overall, the report highlights a solid macroeconomic environment in Cape Verde, with a stable fiscal position and favorable outlook for public debt sustainability. The monetary policy stance remains accommodative, and key indicators show a contained increase in inflation and improvement in the balance of payments.

Source: Banco de Cabo Verde - Financial Stability Report 2019