Statement from the Budget Support Group (24–30 June 2025)

A mission by the Budget Support Group (GAO), co-chaired in 2025 by the Government of Cape Verde and the African Development Bank Group, took place in the city of Praia from 24 to 30 June.

The GAO aims to provide financial support and technical assistance to the State Budget, through grants and loans, in line with the Government’s national development priorities. The GAO comprises Luxembourg, Portugal, Spain, the European Union, the African Development Bank Group and the World Bank Group.

During the mission, discussions centred on issues relating to macroeconomic stability, the budgetary and debt situation, public finance management, public administration reform, employment and employability, poverty reduction and social protection, health, security, gender equality, climate action, the energy transition, the blue economy, digital and transport connectivity, and national statistical data.

The GAO Partners would like to express their gratitude to the Government of Cape Verde, in particular the Ministry of Finance, representatives of the sectoral ministries, the Bank of Cape Verde, the Court of Auditors and the National Assembly’s Specialised Committee on Finance and the Budget, as well as other public bodies, for their participation and involvement in this review.

The partners noted economic growth of 7.3% in 2024, reflecting the strong performance of the tourism sector. Growth is expected to stabilise in the medium term, in line with the economy’s potential, underpinned by private consumption and a recovery in investment. However, uncertainties remain, including downside risks associated with geopolitical tensions, possible rises in energy prices and a potential slowdown in growth among key economic partners. To strengthen the economy’s resilience to external shocks, the GAO reiterates the need to accelerate economic diversification.

The GAO acknowledges the fiscal consolidation efforts in 2024, as evidenced by a moderate deficit, a positive primary balance and an increase in tax revenue. The partners also welcome the improvement in the public investment execution rate, which is essential for the timely implementation of the Strategic Plan for Sustainable Development (PEDS II).

In view of the high level of debt servicing, the GAO commends the authorities on the sustained reduction in the public debt-to-GDP ratio and encourages them to strengthen debt management tools. Similarly, the Partners encourage the authorities to step up their efforts to rationalise tax incentives, thereby broadening the tax base and helping to strengthen fiscal space.

With regard to the reform agenda for the state-owned enterprise sector, the Partners were informed of the completion of the privatisation process for CAIXA and the progress made on the CV Handling operation, which is due to be completed in the fourth quarter of 2025. The partners encouraged the Government to maintain the pace of the necessary reforms and to strengthen the management of the state-owned enterprise sector, and expressed concerns regarding the budgetary risks these pose.

The GAO acknowledges the progress made in e-governance reforms and human resources management. The Partners commend the Government’s efforts in implementing the transparency portal, the one-stop shop for citizens and businesses, and the e-tourism information system. The Group welcomes the recent reforms in public administration, notably the new Framework Law on Public Employment and the 2nd Programme for the Regularisation of Precarious Employment in Public Administration (PRVPAP), which represents an important step in combating precarious employment in the public sector.

The GAO acknowledges the Government’s efforts to launch the Public Expenditure Accountability and Financial Management (PEFA) in October 2025, which will cover the accounts for the financial years 2021 to 2024 and will include the PEFA Supplementary Framework for the Assessment of Gender-Sensitive Public Finance Management.

With regard to public finance oversight mechanisms, the Partners welcome the progress made, in particular the strengthening of the capacity of the Inspectorate-General of Finance (IGF) and the improvement in the efficiency of the Court of Auditors’ case clearance rate. Nevertheless, the Partners reiterate the importance of continuing to strengthen the capacity of both institutions, in order to ensure their full and effective functioning.

The GAO recognises the country’s strong track record in promoting gender equality, underpinned by political commitment at the highest level and its consistent performance in both African and global gender indices. Despite these achievements, there is still room for progress across all dimensions and indicators of gender equality, as many women continue to face systemic challenges. These range from barriers to entering and remaining in the labour market, through to limited access to resources, restrictions on the formalisation and expansion of their businesses, and difficulties in diversifying their economic activities.

The Partners discussed the 2023 Household Expenditure and Income Survey (IDRF) and noted INE’s efforts to address the challenges identified.  However, the Group expressed its concern about issues relating to the data and the delay in publication, which undermine policy-making, transparency and accountability.

Poverty reduction and social protection policies received the Partners’ full attention, bearing in mind the timeframe for the completion of the National Strategy for the Eradication of Extreme Poverty (ENEPE 2022–2026). In the 2025 State Budget, several lines of expenditure earmarked for social benefits were increased. However, the sustainability of the strategy depends as much on the resources allocated as on the operational mechanisms in place. The Group emphasises the need to step up efforts at both central and local government levels. The sharp increase in tourism levies in 2024 could provide additional resources for the ‘Mais’ Fund, enabling the continued provision of the Social Inclusion Income for vulnerable families, as well as meeting the ENEPE’s 2025 target for social inclusion transfers, adjusted for inflation.

At the National Social Security Institute (INPS), the rise in local authorities’ debt has had a negative impact on its asset portfolio. The GAO recommends constructive engagement by all stakeholders to reverse this trend.

The Partners welcome the progress made in employment and employability, as evidenced by the key indicators, whilst recognising the persistent structural challenges in the labour market, particularly the high rates of youth inactivity. Continued progress in funding and access to Technical and Vocational Education and Training (TVET), as well as the expansion of Pro-Empresa’s entrepreneurship support programmes, remain essential for aligning skills development with the needs and demands of the labour market.

The Partners welcome the Government’s commitment to strengthening the public health system and making progress towards universal health coverage. The Group acknowledges the progress made with regard to healthcare professionals in the public system, including the regularisation of their employment status and the implementation of the Careers, Roles and Remuneration Plan (PCFR). However, the GAO recommends strengthening planning, procurement and budget execution processes to improve the sector’s performance and ensure the sustained quality of services.

The GAO noted progress in the justice sector with regard to the digitisation of public services, the modernisation of judicial systems, measures to improve conditions in the prison system, and social reintegration policies. The Partners recognise the importance of accelerating the implementation of reforms, in particular the National Plan for the Reduction of Judicial Backlogs (PNRP), thereby contributing to a more efficient justice system and a more dynamic business environment.

In the field of defence, progress has been noted in the implementation of projects that strengthen maritime security and the presence and operations within jurisdictional waters, notably the Multinational Maritime Coordination Centre for Zone G and the refit of the patrol vessel (NP GUARDIÃO). The Partners welcome the attention given to the sustainability of naval and air capabilities and encourage the Government to ensure that the State Budget includes the necessary funding to implement the plans set out, thereby enabling a programme for the maintenance of assets and operational capabilities.

In terms of internal security, crime rates continue to fall. Community policing programmes continue to contribute to crime prevention efforts. In this context, it is considered a priority to maintain the involvement of social, educational, local and judicial institutions, promoting joint efforts to tackle the underlying causes of crime.

The GAO recognises Cape Verde’s ongoing progress in climate governance, monitoring and resource mobilisation, including efforts to establish clear technical tools. Furthermore, it highlights the need to better integrate local authorities and civil society into climate action and national reporting. The GAO emphasises the urgency of putting in place a mechanism for coordinated access to climate finance, in order to activate available funds and ensure the predictable mobilisation and allocation of climate resources.

The GAO Partners commend the Government’s ongoing commitment to the energy transition, highlighting progress in the spin-off and privatisation of Electra, as well as investments in renewable energy generation and storage, including the Santiago Pumped Storage Project. The Group noted delays in expanding access to the social electricity tariff, which could jeopardise the PEDS II target of reaching 90% of households in Groups 1 and 2 registered in the Single Social Register. The Group emphasises the need to strengthen the human resources and capacity of public service providers in the energy sector, including the National Electricity System Operator (ONSEC), to ensure that the state’s regulatory, supervisory and policy-making functions are carried out effectively.

With regard to the Blue Economy, the GAO Partners urge the Government of Cape Verde to expand Marine Protected Areas and adopt effective and participatory management plans, in line with the commitments made at the United Nations Ocean Conference 2025, held in Nice. In view of the rapid transformation of the Blue Economy sector, the partners call for the analysis of the Marine Satellite Account to be carried out more swiftly to support evidence-based public policies, and encourage the Government to clarify the regulatory frameworks for marine tourism through coordinated cross-sectoral action, which could be effectively supported by the Blue Economy Steering Committee.

GAO’s partners also call for the consolidation and expansion of existing gender strategies and tools in the fisheries and Blue Economy sectors, in order to ensure equal opportunities for women in accessing benefits, whilst safeguarding their rights and dignity.

The Group congratulates the Government of Cape Verde on the recent opening of the Cape Verde Technology Park on the islands of Santiago and São Vicente, which represents a significant step towards digital connectivity. However, the GAO emphasises the importance of mobilising private capital to complement public investment, share risks and ensure financial sustainability – a crucial factor for the successful implementation of the digital economy strategy.

With regard to connectivity in the transport sector, the Partners took note of the ongoing efforts to improve connectivity across the archipelago. In this regard, they were informed that Linhas Aéreas de Cabo Verde (LACV) is due to be certified by September 2025, an important step towards its operationalisation. The partners urge the Government to establish a clear regulatory framework for the sector, align the Public Service Obligations strategy with fiscal sustainability, and promote greater intermodality and competition, ensuring reliable, inclusive and financially sustainable transport services.

The GAO Partners reiterate their ongoing support for Cape Verde and thank all the organisations for their commitment to a constructive and fruitful dialogue.

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