The World Bank’s Board of Executive Directors approved $10 million in International Development Association (IDA) funding to scale-up and expand the activities to strengthen State-Owned Enterprises (SOEs) related fiscal management in Cabo Verde.
This additional financing to the $20 million SOE Project effective on October 2018 will support the Government SOE restructuring and privatization agenda, promote Foreign Direct Investment in the SOE sector and encourage reform in the housing sector.
According to Eneida Fernandes, World Bank Resident Representative in Cabo Verde, said:“ The crisis negatively impacted the financial performance of an already weak SOE sector. It is crucial to deepen support to the sector to reduce fiscal risks and maintain debt sustainability that is significantly challenged and support post-pandemic economic recovery by enhancing competitiveness and improving service delivery. The 23 SOEs in Cabo Verde are mandated to provide essential public services, including economically strategic areas such as transport, electricity, housing, and financial services”.
The State-Owned Enterprises related Fiscal Management Project supported the privatization of the National Cabo Verde Airlines (CVA – previously TACV) and initiated the strengthening of the capacity of the Ministry of Finance in fiscal risk monitoring of the SOE sector.
World Bank Task Team Leader, Enagnon Ernest Eric Adda indicated: “More broadly, there is a need to further strengthen the Cabo Verdean Government’s capacity to effectively monitor the sector, provide high quality after care services to private investors and address critical issues emerging across the SOE portfolio including housing sector. While the authorities have introduced legislative and institutional changes to strengthen the role of the Government in SOE management, several significant deficiencies remain. These include continued gaps in capacity to identify and properly manage the sector fiscal risks and to improve services delivery.”
The 2020-2025 Country Partnership Framework for Cabo Verde recognizes the importance of strengthening the country’s fiscal management. The CPF included support for the adoption of a strong program of fiscal consolidation to curb increasing indebtedness.
Significant indebtedness of the SOE sector has also become a significant source of fiscal risks, thereby exacerbating medium-term vulnerabilities. Accordingly, accelerating and deepening the process of fiscal risk management requires urgent reforms in the SOE sector supported by institutional strengthening on macroeconomic management and SOE oversight.