In 2022, Cabo Verde’s economy improved, but global economic challenges required the Government to take expansionary fiscal measures to support the country’s most vulnerable social groups. The ongoing War in Ukraine exacerbated global supply constraints, particularly for food and energy commodities, of which Cabo Verde is a net importer.
As a result, the country experienced an average inflation rate of 7.9%, and 15.7% inflation on food products and non-alcoholic beverages, negatively affecting the real income of Cabo Verdean families, especially vulnerable ones who spend a higher share of their income on essential goods. To alleviate the economic burden on vulnerable families, the Government implemented a mix of direct and indirect transfers rather than adjusting salaries. The Government also expanded social protection and subsidized energy and food prices.
Together, these fiscal measures corresponded to 12.2% of the annual public budget. However, in 2023, the Government will face the challenge of balancing fiscal consolidation and a possible tighter monetary policy while still providing adequate support for the most vulnerable and ensuring overall progress towards the SDGs, as well as the national priority of eradicating extreme poverty by 2026.
Achieving this will require creating more fiscal space through internal reforms, such as expanding the social protection system by implementing a contributory system and cracking down on tax evasion, as well as seeking external support, such as debt restructuring and additional Official Development Assistance (ODA).
Figure 1: GDP growth 2015-2022 (percentage change)
Source: INE - Quarterly National Accounts – 4th quarter 2022 (published in March 2023)
Figure 2: Consumer Price Index (CPI) – January 2020 – December 2022 (12 months average)
Source: INE - Consumer Price Index – consulted online January 2023
Figure 3: Total public spending in social sectors 2020-2022 (millions of CVE).
Source: Ministry of Finance – State Budget (2023)
Figure 4: Public debt in Cabo Verde (Q1 2017-Q2 2022).
Source: Ministry of Finance/General Directorate of the Treasury/Public Debt Statistical Bulletins (2019-2022)
