PRAIA (Cape Verde): An International Monetary Fund (IMF) mission led by Ms. Valerie Cerra visited Cape Verde during May 13-25 to conduct discussions on the eighth and final review under the Policy Support Instrument (PSI). The current PSI was approved by the IMF Executive Board in July 2006, originally for three years, and extended by one year in June 2009. The mission met with Finance Minister Cristina Duarte, Central Bank Governor Carlos Burgo, other government officials, and representatives of the private sector. At the conclusion of the visit, Ms. Cerra made the following statement:

"Cape Verde's economic and policy performance remains strong, and it has weathered the global crisis relatively well thanks to prudent macroeconomic management and sizable fiscal and reserve buffers built up in recent years. After a moderation of growth in 2009, growth should pick up in 2010 and beyond, led by tourism and investment-related sectors. Inflation should remain low, consistent with the peg to the euro."

"The fiscal policy response to the global downturn in 2009 was appropriate. The mission supports the government's efforts to protect the poor and vulnerable through social spending and to temporarily accelerate its investment program from 2009 as counter-cyclical stimulus to the slowdown. Looking ahead, the main challenge will be to efficiently implement the program of public investment to boost long-term growth while safeguarding the sustainability of debt. The exchange rate peg remains an appropriate monetary anchor. In light of the buildup in foreign reserves so far this year, the mission sees scope for a further gradual lowering of the policy rate to reduce the spread over the Euro Interbank Offered Rate, the benchmark rate of the euro money market."

"All quantitative performance criteria established for end-December 2009 have been met and progress has been made on the remaining structural benchmarks for the PSI. The authorities expect that the indicative targets for end-June 2010 will also be met. IMF staff will continue its close dialogue with the Cape Verde government with a view to completing the eighth review and returning in a few months to discuss a new PSI arrangement. The mission would like to thank the authorities and citizens of Cape Verde for their excellent cooperation and warm hospitality."