From the Executive Board

• Pages: 76

Page 76

Cape Verde: Stand-By

The IMF approved a 14-month Stand-By credit for Cape Verde equivalent to SDR 2.1 million (about $2.8 million) to support the government's 1998 economic program. The authorities have indicated their intention not to draw on the credit.

1998/99 Program

The macroeconomic program envisages real GDP growth of 4 percent in 1998, compared with 3 percent in 1997, and an average inflation rate of 3.5 percent in 1998, compared with 8.9 percent in 1997. The external current account balance, excluding transfers, is targeted at a deficit of 15.7 percent of GDP in 1998, compared with a deficit of 16.4 percent in 1997. The most important element of the program is a tightening of fiscal policy to reduce the overall fiscal deficit to 8.7 percent of GDP in 1998 from 15.1 percent in 1997.

The authorities of Cape Verde intend to maintain a pegged exchange rate, and thus monetary policy will be geared to balancing the private sector's credit needs against the reserve accumulation targets of the program. Structural Reforms Structural reforms entail an acceleration of the privatization program, as well as legislative and regulatory reform aimed at creating a favorable environment for private sector development.

Exports, particularly of services, are the key to sustainable growth in Cape Verde and are expected to continue to grow rapidly. In addition, the government intends to further liberalize the trade regime...