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Ambassade du Luxembourg au Cabo Verde > Actualités > Press Release Budget Support Group - November 14 – 18, 2022 >

Press Release Budget Support Group - November 14 – 18, 2022

Published Tuesday November 22 2022

A mission of the Budget Support Group (BSG) took place in Cabo Verde from November 14th to 18th, 2022. The BSG aims at providing financing support and technical assistance to the national budget through grants and loans in support of Government’s national development priorities. The Government and BSG partners discussed topics related to macroeconomic stability, fiscal situation, public finance management, employment and employability, poverty reduction and social protection, energy transition, security, health, public administration reforms, and blue economy.
The BSG is composed of Luxembourg, Portugal, Spain, the European Union, the African Development Bank Group, and the World Bank Group. The BSG wishes to express its gratitude to the Government of Cabo Verde, especially the Ministry of Finance and Business Development, representatives from line ministries, the Central Bank, the Court of Auditors, and Parliament's Specialized Commission on Finance and Budget, for their constructive contributions to this review.
During their last review in June 2022 the impact of the Russian war in Ukraine received the attention of BSG partners, particularly concerning its effects on food security. Partners welcomed the authorities’ quick response to alleviate inflationary pressures to protect the most vulnerable and, therefore increased their support.
In this review, BSG partners welcome the upward revision of the GDP growth projections for 2022, from 4.5 percent to at least 8 percent, driven by the gradual normalization of tourism flows. However, uncertainty regarding global developments remains high. Downside risks over the medium term are the Russian war in Ukraine, new variants of the COVID-19 virus, and the high exposure of Cabo Verde to other external shocks, including those related to climate change. A further escalation and prolongation of the Russian war in Ukraine could lead to a global deceleration and higher inflationary pressures, demanding continued state support to mitigate its impact on energy prices and food security. BSG partners reiterate the importance of adopting better-targeted mechanisms to make sure that measures mitigating inflationary pressures in food and energy are aimed at the most vulnerable segments of the population.
Fiscal consolidation is critical to ensure the sustainability of public accounts and to decrease the debt to GDP ratio. Enhancing domestic revenue mobilization is critical in this process. In this regard, BSG partners encourage the Government to review and streamline fiscal incentives, to make sure that the trade-off between forgone fiscal revenue and investment attraction is carefully considered. The BSG welcomes the resumption of the restructuration process of several State-Owned Enterprises (SOEs), including the concession of ASA, and reiterates the need to continue improving SOE oversight, reduce fiscal risks, increase debt transparency, and limit financial support to the SOE sector.
Authorities presented to BSG partners an overview of the preliminary version of the Plano Estratégico de Desenvolvimento Sustentável 2022-26 (PEDS II). The BSG encourages the Government to prepare a medium-term fiscal framework that includes the financing needs to support this ambitious development agenda.
The Partners note the -progress in the governments state modernization agenda through the promotion of e-governance, digitalization and public administration reforms. The BSG underscores the importance of finalizing the Open Data Policy and the E-governance Action Plan this year. The Group further commends the approval of the Access to Information and Public Employment laws in parliament earlier this year, these legislations are expected to accelerate open governance and a more effective human resource management system. The BSG urges the government to expedite the approval of the diploma for the e-procurement platform in order to make e-procurement fully operational.
The BSG partners congratulate the Government for keeping the ambitious goal of eradicating extreme poverty by 2026. Positive measures include the increase in coverage of the single social register (CSU), the roll out of productive inclusion and the elaboration of the national plan to increase school enrolment of adolescent girls of CSU group 1. The approval of the diploma that creates the Social Fund is a crucial step to guarantee domestic resources for extreme poverty eradication.
BSG partners also commend the Government for its efforts in drafting an extreme poverty eradication strategy to set out the measures foreseen to attain the eradication of extreme poverty by 2026. In a context of significant economic growth and a high extreme poverty, primarily affecting children and women headed households, the BSG notes with concern a significant reduction in budget allocation for RSI, reducing by 75 percent the number of beneficiaries foreseen in the 2023 draft budget compared to 2022.
Partners welcome the priority allocation for the planned Social Fund revenues for the eradication of extreme poverty to RSI, which may still be insufficient to achieve the same degree of RSI coverage as in 2022. However, partners took note of the planned increase in the allocation for social pensions in the 2023 State budget.
The BSG partners welcome the Government’s continued commitment to improve employability, especially that of youth not currently in employment, education, or training. The Group commends authorities’ decision to establish the Fund for Employment and Training as a sustainable and centralized funding entity for vocational training, which represents an important step towards ensuring qualified labor for the national economy’s needs. Partners encourage Government to accelerate the sector’s reform, further optimizing existing structures and capacities in order to ensure a more efficient and inclusive offer of employment and employability services.
The BSG commends the Government's ambition to achieve a target of over 50 percent renewable energy by 2030, critical to reduce energy costs and increase resilience to external shocks, thus becoming a driver of growth in the Green Economy. The phased implementation and financing of the Electricity Sector Master Plan 2018-2040, with the support of partners and the private sector, should remain a priority. Partners urge the Government to accelerate the utilities sector reforms and the privatization process of Electra. The BSG notes the progress made in the implementation of the regulatory reform of micro-production activities that enabled an increase in the penetration of Renewable Energy. The Partners invite the Government to increase efforts, together with the relevant stakeholders, to consistently reduce the high level of electricity losses, which reached around 25 percent in September 2022. In addition, the BSG encourages the Government to improve the implementation of the social electricity tariff to increase the coverage of beneficiaries registered in the Cadastro Social Unico.

BSG Partners commend the Government for the Justice reform and for the progress already achieved in order to reduce the backlog of court caseload, to fight the slow pace of justice and to improve courts' organization and management. Challenges include strengthening the institutional capacity, updating the legal framework and modernizing infrastructures. Partners also acknowledge the Government measures to promote a more humane and socially reintegrating prison system.
Concerning the increasing crime rates, the BSG notes the efforts of Government to implement operational security measures towards preventing and combating crime.
The partners recognize the Government's intention to shortly operationalize the Multinational Maritime Coordination Centre for Zone G, as defined in the Yaoundé Code of Conduct.
BSG partners commend the Government for prioritizing the public health service, aiming to achieve Universal Health Coverage and welcome the sector’s planned budget increase of 25% for 2023, mainly for infrastructural projects. As the Public Health System is modernized and expanded, the Group reiterates the importance of taking into account the growing needs, both of human and financial resources as well as qualified staff training, stemming from planned and ongoing investments.

BSG partners recognize the blue economy sector as key for sustainable development. The BSG encourages the Government to establish a functional Blue Economy Steering Committee and streamline interactions with partners. Partners highlight the need of launching the Blue Economy satellite account not only with data related to the fisheries but also statistic of the tourism, maritime transports, amongst other relevant information. BSG partners invite the Government to present an investment plan for maritime logistic infrastructures, and urges it to develop an action plan linked with the National Investment Plan for Blue Economy (PINEA).

BSG partners reiterate their continued support to the Government and people of Cabo Verde and thank the Government and other stakeholders for their commitment to a constructive and fruitful dialogue.

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