Faced with statements out of context and with information out of the PAICV, public opinion must be clarified on the methodology for classifying public debt ratings.
Firstly, the country's macroeconomic situation, in addition to the rating agencies, is assessed by the World Bank and the AfDB, plus the review carried out by the IMF, within the scope of Article 4. It should be remembered that, at the moment, the country has a program with the IMF, which implies four reviews per year.
With regard to the rating agencies, and in particular the report referenced by the PAICV, there is a schedule previously articulated and shared with the country. In this case, there are two annual assessments, one at the end of the first semester and another at the end of the second semester.
In terms of the assessment score, after the decrease from B+, in 2013, to B, in 2014, with a stable Outlook, Cape Verde maintained this assessment until the second half of 2019, when it changed from stable to Positive Outlook. It should be noted that, in this assessment, Ficth Ratings stated that “the public debt ratio of the central government of Cape Verde would continue to decline, to less than 100% of GDP by 2025, compared to the estimate of 122% at the end of 2019. Debt reduction over the medium term would be driven by strong nominal GDP growth, reduced payments to public enterprises (SOEs) and improvements in the primary budget balance”.
This classification, however, was revised in April 2020, after the outbreak of the Covid-19 pandemic, in which the Government was forced to intervene with various measures to guarantee the sustainability of companies, as well as families and the guarantee of safety. social protection.
Contrary to what was announced by the PAICV, the stable and affirmed outlook at B-, which has been the classification since April 2020 until today, shows that throughout this period, despite the effects of the pandemic, the country was able to guarantee the sustainability of the public debt trajectory. These ratings demonstrate the stability of Cape Verde's rating, which fell by just one position in 2020, and it is important to note that this decline took place at a time of deep global crisis, in which the global economy suffered from the consequences of the Covid-19 pandemic, and virtually all countries saw a downgrade in their ratings.
Despite this scenario, the December 2022 report by Fitch Ratings highlights the downward trend of the public debt-to-GDP ratio, with the final data for 2022 presenting a much better performance than projected, both by the Government and by the rating agency itself. rating. That is, it is expected that the downward trajectory of the debt will continue, and reach a ratio of 120.5% of GDP in 2024 and close to 100% of GDP in 2026.
The country has been able to fulfill its obligations to its intentional partners, despite the high level of debt service, as a result of past indebtedness. Despite this, Cape Verde's partners continue to trust and invest in the country, as can be seen from the increase in the investment portfolio of practically all partners, who have invested in transforming the economy with investments in productive and structuring projects, of which we highlight :
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? Financing of the Technological Park and Data Center of Praia and Mindelo
? Requalification of the Port of Maio
? Requalification of the Port of Palmeira
? Mindelo Cruise Terminal
? Palmarejo Desalination Plant
? Dezalinizadora da Boa Vista
? Transport Project, with the construction of several roads in Santiago, Santo Antão and Brava.
? Tourism Resilience Project, with the upgrading of Cidade Velha, Tarrafal Bay, Santo Antão, Espargos/Santa Maria road, etc.
? Health Project, with the construction of several health centers
? Increase in the Capacity of the Sal Electric Power Plant
? Three Watersheds in Santiago, Santo Antão and Boa Vista
? Sanitation of Porto Novo and Peripheral Neighborhoods of Praia
? Transformation of the agricultural sector
? Human Capital Project, with investment in the education sector, professional training, social protection and Social Housing.
This demonstrates that the debt contracted by the country has been invested in productive and key sectors for promoting economic growth and job creation, with direct impacts on the economy and on the lives of Cape Verdean families.
With no need to restructure the public debt, the country signed a reform implementation program with the IMF, focusing on stabilizing the macro fiscal framework, resulting in increased economic growth and fiscal consolidation, with a reduction in the deficit and public debt. , thus increasing the country's credibility with our international partners.
Finally, it should be noted that the granting of guarantees to public and private entities is a tool used worldwide to support the dynamism of the economy, which can lead to potential losses for the State, as guarantor, leading to the materialization of its liabilities contingents.
Aware of the risks associated with this economic policy instrument, the Government approved Decree-Law No. 42/2018, of June 29, which provides for the creation of a guarantee reserve fund to be fed by charging a fixed guarantee commission through Dispatch nº 96/2022, of July 14, being in line with the best international practices and constituting a mechanism for recovering potential losses and mitigating this risk.
Furthermore, the Government has a feasible privatization agenda, which, in addition to boosting companies, improving their performance and contribution to national income, will also allow the State to reduce the fiscal risks of these companies, as well as the reduction of the public debt.
Cape Verde has an ambitious agenda of reforms to improve the productivity of the economy and, consequently, increase economic growth, which will reduce poverty and increase social equality. We will continue to invest responsibly, ensuring the sustainability of public finances and responding to the country's structural needs, promoting our economy internationally.
Source: Government of the Republic of Cape Verde