Document of The World Bank · 2016-07-16 · document of the world bank report no: icr2722 implementation completion and results report (ida 46700, ida 48400, and ida 50520) on programatic

Document of The World Bank

Report No: ICR2722

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA 46700, IDA 48400, and IDA 50520)

ON

PROGRAMATIC CREDITS

IN THE AMOUNT OF SDR 9.5 MILLION, SDR 6.4 MILLION, AND SDR 7.9 MILLION

(US$ 15 MILLION, US$ 10 MILLION AND US$ 12 MILLION EQUIVALENT)

TO THE

REPLUBLIC OF CAPE VERDE

FOR THE

POVERTY REDUCTION SUPPORT CREDITS 5, 6 and 7 (PRSC-5, PRSC-6, PRSC-7)

June 21, 2013

Poverty Reduction and Economic Management 4 Country Department AFCF1 Africa Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective 00000000)

Currency Unit = CVE CVE 1.00 = US$ 0.013 US$ 1.00 = CVE 74.65

FISCAL YEAR

January 1 – December 31

ABBREVIATIONS AND ACRONYMS

ARAP BSG CPS CVE DPO DNP DSCP ELECTRA EROT ETS FDI GDP GPRSP HR ICRR IMF INE JSAN LDC M&E MTDS MTEF MTFF PD PDO PDM PEFA PEMFAR

Regulatory Agency for Public Acquisitions Budget Support Group Country Partnership Strategy Cape Verdean Escudos (local currency) Development Policy Operation Directorate of National Planning Public Procurement Directory Empresa de Electricidade e Agua (Cape Verde’s national electricity and water utility) Esquema Regional de Ordenamento do Territorio (Island Development Plan) Economic Transformation Strategy Foreign Direct Investment Growth and Poverty Reduction Strategy Paper Gross Domestic Product Human Resources Implementation Completion & Results Report International Monetary Fund Instituto Nacional de Estatisticas (Cape Verde’s national statistics institute) Joint Staff Advisory Note Least Developed Country Monitoring and Evaluation Medium Term Debt Strategy Medium Term Expenditure Framework Medium Germ Fiscal Framework Project Document Program Development Objective Plano de Desenvolvimento Municipal (Municipal Development Plan) Public Expenditure and Financial Accountability Public Expenditure Management and Financial Accountability

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PFM PRSC SDR SIM SOE TA TACV TVET WTO

Review Public Financial Management Poverty Reduction Support Credit Special Drawing Rights Municipal Information System State-Owned Enterprise Technical Assistance Transportes Aereos de Cabo Verde (Cape Verde’s national airline) Technical Vocational Education and Training World Trade Organization

Vice President: Makhtar Diop

Country Director: Vera Songwe

Sector Manager: Miria Pigato

Task Team Leader: Jose Guilherme Reis/ Fernando Blanco

ICR Team Leader: Marek Hanusch

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CAPE VERDE Poverty Reduction Support Credit V -- VII

CONTENTS

A. Basic Information ........................................................................................................... v B. Key Dates ...................................................................................................................... vi C. Ratings Summary .......................................................................................................... vi D. Sector and Theme Codes.............................................................................................. vii E. Bank Staff ...................................................................................................................... ix F. Results Framework Analysis ......................................................................................... ix G. Ratings of Program Performance in ISRs ...................................................................... x H. Restructuring ................................................................................................................ xi 1. Program Context, Development Objectives and Design ................................................ 1 2. Key Factors Affecting Implementation and Outcomes .................................................. 5 3. Assessment of Outcomes .............................................................................................. 10 4. Assessment of Risk to Development Outcome ............................................................. 19 5. Assessment of Bank and Borrower Performance ......................................................... 21 6. Lessons Learned............................................................................................................ 22 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ............... 23 Annex 1 Prior Actions and Triggers Across the Series .................................................... 24 Annex 2. Key Outcome Indicators .................................................................................... 38 Annex 3. Matrix of Indicators ........................................................................................... 39 Annex 4. Bank Lending and Implementation Support/Supervision Processes ................. 44 Annex 5. Beneficiary Survey Results ............................................................................... 45 Annex 6. Stakeholder Workshop Report and Results ....................................................... 45 Annex 7. Summary of Borrower’s ICR and/or Comments on Draft ICR ........................ 46 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ........................... 47 Annex 9. List of Supporting Documents .......................................................................... 48 Annex 10: Map of Cape Verde ......................................................................................... 50

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A. Basic Information

Program 1

Country Cape Verde Program Name Cape Verde - DPL 1/PRSC V

Program ID P113306 L/C/TF Number(s) IDA-46700

ICR Date 06/21/2013 ICR Type Core ICR

Lending Instrument DPL Borrower REPUBLIC OF CAPE VERDE

Original Total Commitment

SDR 9.50M Disbursed Amount SDR 9.50M

Implementing Agency: Ministry of Finance

Cofinanciers and Other External Partners: N/A

Program 2

Country Cape Verde Program Name Cape Verde - DPL 1/PRSC VI








Program 3

Country Cape Verde Program Name CV-DPL 3-PRSC VII








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B. Key Dates Cape Verde - DPL 1/PRSC V - P113306

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 05/13/2009 Effectiveness: 03/18/2010 01/26/2010

Appraisal: 10/15/2009 Restructuring(s):

Approval: 12/17/2009 Mid-term Review:

Closing: 06/30/2010 06/30/2010 Cape Verde - DPL 1/PRSC VI - P121812


Date(s)

Concept Review: 09/07/2010 Effectiveness: 12/22/2010



Closing: 06/30/2011 06/30/2011 CV-DPL 3-PRSC VII - P122669


Date(s)

Concept Review: 07/11/2011 Effectiveness: 07/24/2012



Closing: 12/31/2012 12/31/2012 C. Ratings Summary C.1 Performance Rating by ICR Overall Program Rating

Outcomes Moderately satisfactory

Risk to Development Outcome Moderate

Bank Performance Moderately satisfactory

Borrower Performance Moderately satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Overall Program Rating

Bank Ratings Borrower Ratings Quality at Entry Moderately satisfactory Government: (see overall)

Quality of Supervision: Moderately satisfactory Implementing Agency/Agencies:

(see overall)

Overall Bank Performance

Moderately satisfactory Overall Borrower Performance

Moderately satisfactory

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C.3 Quality at Entry and Implementation Performance Indicators Cape Verde - DPL 1/PRSC V - P113306

Implementation Performance

Indicators QAG Assessments (if

any) Rating:

Potential Problem Program at any time (Yes/No):

No Quality at Entry (QEA) None

Problem Program at any time (Yes/No):

No Quality of Supervision (QSA)

None

DO rating before Closing/Inactive status

Satisfactory

Cape Verde - DPL 1/PRSC VI - P121812



any) Rating:





None



CV-DPL 3-PRSC VII - P122669



any) Rating:





None



D. Sector and Theme Codes Cape Verde - DPL 1/PRSC V - P113306

Original Actual

Sector Code (as % of total Bank financing)

Banking 10 10

Central government administration 50 50

General energy sector 10 10

General industry and trade sector 20 20

Sub-national government administration 10 10

Theme Code (as % of total Bank financing)

Economic statistics, modeling and forecasting 14 14

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Macroeconomic management 14 14

Other Private Sector Development 14 14

Public expenditure, financial management and procurement 29 29

Regulation and competition policy 29 29 Cape Verde - DPL 1/PRSC VI - P121812

Original Actual


Banking 13 13


General energy sector 13 13


Housing finance 4 4


Administrative and civil service reform 13 13

Debt management and fiscal sustainability 12 12

Managing for development results 13 13


Regulation and competition policy 25 25 CV-DPL 3-PRSC VII - P122669

Original Actual


Aviation 10 10



Transmission and Distribution of Electricity 10 10

Vocational training 10 10


Economic statistics, modeling and forecasting 10 10

Education for the knowledge economy 10 10

Infrastructure services for private sector development 20 20


Regulation and competition policy 30 30

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E. Bank Staff Cape Verde - DPL 1/PRSC V - P113306

Positions At ICR At Approval Vice President: Makhtar Diop Obiageli Ezekwesili Country Director: Vera Songwe Habib Fetini Sector Manager: Miria Pigato Iradj Alikhani Task Team Leader: Fernando Andres Blanco Cossio Jose Guilherme Reis ICR Team Leader: Marek Hanusch ICR Primary Author: Marek Hanusch Cape Verde - DPL 2/PRSC VI - P121812

Positions At ICR At Approval Vice President: Makhtar Diop Obiageli Ezekwesili Country Director: Vera Songwe Habib Fetini Sector Manager: Miria Pigato Miria Pigato Task Team Leader: Fernando Andres Blanco Cossio Fernando Andres Blanco Cossio ICR Team Leader: Marek Hanusch ICR Primary Author: Marek Hanusch Cape Verde-DPL 3-PRSC VII - P122669

Positions At ICR At Approval Vice President: Makhtar Diop Makhtar Diop Country Director: Vera Songwe Vera Songwe Sector Manager: Miria Pigato Miria Pigato Task Team Leader: Fernando Andres Blanco Cossio Fernando Andres Blanco Cossio ICR Team Leader: Marek Hanusch ICR Primary Author: Marek Hanusch

F. Results Framework Analysis

Program Development Objectives (from Program Document)

The original program development objective for the overall program was to support policies and institutions aimed at developing a dynamic private sector to be the engine of sustainable growth and poverty reduction. This included a significant emphasis on improved public sector performance. The specific original program development objectives were broadly similar across the series and are summarized in the below. In substance, they only differed in their wording, although the infrastructure component (especially energy and transport) was mentioned more explicitly in PRSC VI and VII.

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Programs Program Development Objectives

DPL 1/PRSC V - P113306

The main development objective of this operation is to support policies and institutions aimed at developing a dynamic private sector to be the engine of sustainable growth and poverty reduction. This will be done by focusing on two main policy areas: good governance and competitiveness and growth. (i) Good governance is interpreted broadly and includes the following issues: fiscal policy, PFM, procurement, M&E, statistics and state modernization. (ii) Competitiveness constitutes the main multi-sector anchor for the proposed operation and includes human capital, trade, tourism, financial services, tax, land management and energy issues.

DPL 2/PRSC VI - P121812

(i) The consolidation of macroeconomic stability and further reinforcement of the effectiveness, transparency and accountability of public sector operations through the continuity of the government’s public sector reform agenda; (ii) the improvement of economic competitiveness through trade liberalization, the strengthening of financial supervision, and the enhancement of the investment climate; and (iii) the upgrading of performance in key infrastructure sectors, in particular energy and air transportation.

DPL 3-PRSC VII - P122669

(i)To reinforce the effectiveness, transparency and accountability of public sector operations through the continuity of the government’s public sector reform agenda; (ii) to improve the business climate through the rationalization of the fiscal incentive system and the streamlining of firm closing procedures; and (iii) to enhance the performance of the public energy utility and national air carrier

Revised Program Development Objectives (as approved by original approving authority)

N/A

(a) PDO Indicator(s) See Annex 3.

(b) Intermediate Outcome Indicator(s)

N/A

G. Ratings of Program Performance in ISRs Cape Verde - DPL 1/PRSC V - P113306

No. Date ISR Archived

DO IP Actual Disbursements

(USD millions) 1 03/03/2010 Satisfactory Satisfactory 15

Cape Verde - DPL 2/PRSC VI - P121812



(USD millions) 1 05/30/2013 Moderately satisfactory Satisfactory 10

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Cape Verde - DPL 3/PRSC VII – P122669



(USD millions) 1 05/30/2013 Moderately satisfactory Moderately satisfactory 12

H. Restructuring (if any) N/A.

1. Program Context, Development Objectives and Design

1.1 Context at Appraisal 1. Cape Verde, a small archipelago in the Atlantic Ocean, has been an African success story. Since it gained independence from Portugal in 1975, it gradually developed strong democratic institutions. In 2009, the beginning of PRSC series V-VII, Cape Verde’s CPIA score was 4.2, one of the highest in Africa. In the years prior to the launch of the series, Cape Verde’s economy expanded rapidly, supported by a set of market-based reforms, dating back to the 1990s, and a commitment to exchange rate stability—and in turn price stability—by pegging the Cape Verdean escudo to the Portuguese escudo and eventually to the Euro. The relationship with European countries proved transformative for Cape Verde, not only because of considerable financial aid, but also in relation to soaring tourist arrivals from Europe and Foreign Direct Investment in support of the thriving tourism sector. To a large extent, Cape Verde’s economic ascent is due to the tourism sector. 1 In the years 2003-2008, growth averaged 7.2 percent annually and Cape Verde’s per capita Gross National Income nearly doubled.2 2. Strong economic performance translated into real progress on human development outcomes. Poverty fell from 49 percent in 1988/89 to 37 percent in 2001/02 and 27 percent in 2007. Other social indicators, relating to water and sanitation, health, and education also advanced. Inequality remained relatively high, 3 however, suggesting that the growth in prosperity was not shared equally across society. Nevertheless, significant progress both in the economic and social realm resulted in Cape Verde’s graduation from the United Nation’s Least Developed Country (LDC) status in 2007.4 3. The Cape Verdean government prepared early for the graduation from Least Developed Country status. In 2003, the authorities presented an Economic Transformation Strategy (ETS) which was intended to set the country on its future growth path. The ETS acknowledged the country’s high external vulnerability as a poor small island state, dependent on international trade and finance—especially on concessional finance which was to expire gradually upon graduation from LDC status. It identified private sector-led growth, especially in services, as the driver of the country’s future development whilst strengthening economic resilience. Although Cape Verde had a vibrant tourism sector, other sectors were underdeveloped which was partly attributed to a weak investment climate. For example, in the 2010 Doing Business ranking (based on 2009 data), Cape Verde only occupied rank 146. Improving competitiveness and fully mobilizing the country’s resources was at the heart of the ETS. To support growth and make utmost use of the concessional financing window, the government embarked on an ambitious public investment program.

1 See Cape Verde’s Country Economic Memorandum of 2013. 2 Based on new GDP numbers, available from the national statistics institute (INE) from 2003-2010. 3 The latest available data for the GINI index was 51, for the year 2002. 4 To this point, Cape Verde is only one of three countries to have graduated from LDC status.

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4. In May 2008, the government of Cape Verde introduced its second Growth and Poverty Reduction Strategy Paper (GPRSP II) which reinforced the priorities laid out in the ETS. The GPRSP II contained five pillars: a) government reform; b) human resources; c) economic competitiveness; d) infrastructure; and e) social cohesion. The first four pillars reflect the core principle of the ETS, acknowledging that an efficient government, high human capital, a favorable investment climate, and supportive infrastructure are key to enabling private enterprise. They would form a basis for the fifth pillar, social cohesion, which would be achieved by sharing the proceeds and opportunities from strong economic growth. The Bank and IMF reviewed the GPRSP II in a Joint Staff Advisory Note (JSAN) dated May, 2008, and commended the strategy as ‘comprehensive’ and ‘covering most of the challenges and areas of action to foster growth and reduce poverty.’ 5. In 2009, the effects of the global financial and economic crisis reached Cape Verde, initially through falling foreign aid, FDI, and tourism arrivals, as European countries were engulfed in the sovereign debt crisis, Europeans could no longer secure long-term financing for their real estate investments, and their appetite for travelling abroad slumped. In the boom years leading up to the crisis, the government had created sufficient fiscal space to initiate stimulus spending, especially by moving forward on its public investment agenda and by cutting business taxes. In 2009, the full extent of the crisis was not yet foreseeable and a relatively quick recovery was expected. However, there was a realistic understanding that with weaker growth and more spending, public debt would rise again and that risks to the economic outlook were considerable. The IMF, generally assessing Cape Verde’s macroeconomic management favorably, extended its Policy Support Instrument by another year. 6. The Bank published a new Country Partnership Strategy (CPS) for Cape Verde in 2009, aligning itself strongly with the pillars of the GPRSP II. The Bank acknowledged the need to improve the conditions for private sector-led growth, especially against the backdrop of the deepening economic crisis. The purpose of the PRSC V-VII series was to assist the government with implementing its strategy to sustainably address economic vulnerabilities in trying times. The PRSC series thus also aligned itself with the pillars of the GPRSP II. Finally, it is important to note that, apart from the policies it supported, the operation created fiscal space for the government to sustain public investment as economic performance weakened.

1.2 Original Program Development Objectives (PDO) and Key Indicators 7. The original program development objective for the overall program was to support policies and institutions aimed at developing a dynamic private sector to be the engine of sustainable growth and poverty reduction. This included a significant emphasis on improved public sector performance. The specific original program development objectives were broadly similar across the series and are summarized in the below. In substance, they only differed in their wording, although the infrastructure component (especially energy and transport) was mentioned more explicitly in PRSC VI and VII. 8. While 39 results indicators were identified over the three operations, there were four key indicators at approval of PRSC V. A list of all key indicators across the series can be found in Appendix 2.

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Programs Program Development Objectives

PRSC V The main development objective of this operation is to support policies and institutions aimed at developing a dynamic private sector to be the engine of sustainable growth and poverty reduction. This will be done by focusing on two main policy areas: good governance and competitiveness and growth. (i) Good governance is interpreted broadly and includes the following issues: fiscal policy, PFM, procurement, M&E, statistics and state modernization. (ii) Competitiveness constitutes the main multi-sector anchor for the proposed operation and includes human capital, trade, tourism, financial services, tax, land management and energy issues.

PRSC VI (i) The consolidation of macroeconomic stability and further reinforcement of the effectiveness, transparency and accountability of public sector operations through the continuity of the government’s public sector reform agenda; (ii) the improvement of economic competitiveness through trade liberalization, the strengthening of financial supervision, and the enhancement of the investment climate; and (iii) the upgrading of performance in key infrastructure sectors, in particular energy and air transportation.

PRSC VII (i)To reinforce the effectiveness, transparency and accountability of public sector operations through the continuity of the government’s public sector reform agenda; (ii) to improve the business climate through the rationalization of the fiscal incentive system and the streamlining of firm closing procedures; and (iii) to enhance the performance of the public energy utility and national air carrier

1.3 Revised PDO and Key Indicators, and Reasons/Justification 9. The program development objectives defined at the beginning of the series remained unchanged. However their wording changed slightly, refining the choice of language from previous PDs. Key indicators changed considerably across the series and steadily increased over the course of the series, from 4 for PRSC V, 5 for PRSV VI and 8 for PRSC VII (see Appendix 2). In fact, not a single key indicator carried across all three components of the PRSC series. Reform of ELECTRA, the national utility, is the only area that key indicators, in different forms, focused on. These discrepancies are due to several factors. In some cases, it became evident that data on indicators would not be easily available (e.g. procurement reform and non-complying sole-source contracts). In other areas, progress on legislative reform was delayed and results would not be visible during the course of the series (e.g. financial reform and capital adequacy ratios). Finally, during the course of the series, priorities shifted, in particular toward the losses of TACV, the national airline, and to the need to foster private sector-led growth against the backdrop of an economic crisis; this was reflected in the choice of key indicators.

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1.4 Original Policy Areas Supported by the Program: 10. Altogether, PRSC V through PRSC VII supported four main policy areas namely (i) good governance; (ii) human capital enhancement; (iii) competitiveness; and (iv) infrastructure. PRSC VI-VII explicitly had all the four main policy areas while PRSC V only highlighted (i) good governance; and (ii) competitiveness and growth. However, human capital enhancement, and infrastructure were embedded as pillars, often with benchmark indicators, in the program supported by PRSC V. Reforms in the pillar on social cohesion included in PRSC V were dropped. PRSC V had included this area to align itself with the government’s GPRSP II. However, as the government increasingly considered this area as cross-cutting, the series was already wide-ranging, and this component was rather weak, the team for PRSC VI and VII decided to abandon it. 11. Good governance: This area addressed issues related to fiscal policy, public financial management, procurement, state modernization, and statistical development and monitoring and evaluation (M&E) capacity. At the inception of the series, Cape Verde had made considerable progress on fiscal consolidation but the government lagged behind on the clearance of arrears and other contingent liabilities. A Public Expenditure and Financial Accountability (PEFA) exercise conducted in 2008 had also revealed major shortcomings in external and internal auditing among others. The state procurement system did not have the necessary legal framework and institutional capacity resulting in a lack of transparency and efficiency. With regards to state modernization, the issues pertained to ineffective state structures including civil service regulations, and the concentration of responsibilities and resources at the central level thus hindering service delivery. The lack of timely and reliable statistical information and the underdeveloped M&E system also begged for the establishment of a national statistical system and the implementation of a national M&E system. 12. Human capital enhancement: The program mainly focused on vocational training, matching workforce skills to employer demand. In fact, Cape Verde enjoyed a relative quality of human capital but the high rate of both unemployment and unfilled jobs indicated a mismatch between labor supply and demand requirements. As primary and secondary education coverage had increased significantly in the years preceding the first PRSC, actions to strengthen vocational training were much needed. 13. Competitiveness: The competitiveness agenda of the program tackled trade openness, tax policy, the financial sector and business climate improvements. Cape Verde became member of the WTO in 2008; however, the country’s legislation governing trade was not fully compatible with WTO rules (especially with respect to the customs code, investment code, intellectual property rights, and the ecological tax of 2003). To benefit from WTO membership, it was important to streamline national legislation accordingly. Additionally, private sector activities were hampered by a complex tax system, high tax rates for corporations and investments, and a distortive system of tax incentives. As for the financial sector, existing legislation did not provide adequate authority to the Central Bank to perform its supervisory role, and different regulations for onshore and offshore banking threatened the stability of the system. Lastly, the business environment suffered from ineffective and excessive regulations including high credit-recovery risks and financing costs.

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14. Infrastructure: The emphasis was on capacity and efficiency improvements in public utilities in energy and transportation (air) sectors. In terms of land management, a lack of island-based and municipal planning had led to the growth of slums around major cities and the legislative framework governing land use and the definition of property rights was weak. In energy, the state owned enterprise ELECTRA was experiencing chronic financial problems due to underinvestment, which had also resulted in an unreliable supply of energy. The transport sector faced poor operational and commercial performance resulting in the deterioration of TACV’s financial situation. 15. Strengthen Social Cohesion: The initial aim of the series was to improve the targeting of social protection programs in the third year. This pillar was dropped in PRSC VI and VII, as mentioned above.

1.5 Revised Policy Areas 16. The policy areas did not change in substance over the course of implementation of the series although social inclusion was initially envisaged for PRSC VII and then dropped.

1.6 Other significant changes 17. PRSC VII was originally planned for calendar year 2011 which is fiscal year 2011 for the Cape Verdean government. However, due to concerns over the macroeconomic framework, it was delayed until early 2012.

2. Key Factors Affecting Implementation and Outcomes

2.1 Program Performance 18. The PRSC series played an important role in supporting the government’s policy agenda. As the government embarked on an ambitious economic transformation program, including a heavy public investment component, fiscal deficits were expected to be large. As Cape Verde does not have access to international markets and domestic borrowing is limited to about 20 percent of GDP (in order to maintain the exchange rate peg with the euro), the country had to rely on budget support to close financial gaps. The World Bank’s DPO instrument was an important source of funding for the government.5 In addition, the DPO series provided a useful tool for interaction with the government, supporting the implementation of ‘soft’ policies, to complement ‘hard’ infrastructure investment, especially with respect to institutional reform and capacity building. The operation consisted of three programmatic components, with tranches of $15 million (PRSC V), $10 million (PRSC VI) and $12 million (PRSC VII).

5 However, in terms of volume, the African Development Bank and the European Union account for a greater portion of total budget support.

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19. Some of the triggers envisioned in PRSC V were redefined in PRSC VI and VII (see Appendix 1). In most cases, changes were refinements of the wording of previously envisaged triggers as the team made a strong effort to spell out precisely the conditions for meeting a prior action. More substantive changes can be summarized as follows: 1) streamlining similar indicators (e.g. the investment code and tax code which were interrelated); 2) adding new actions as new priorities emerged (e.g. the Medium-Term Debt Management System, MTDS, against a worsening fiscal situation); 3) dropping actions due to faster implementation than expected (e.g. application of IFRS accounting in the financial sector); 4) dropping actions due to slower implementation than expected (e.g. an action on PEMFAR, an assessment which was not organized by the development partners until the series had closed). 20. Although policy actions were adjusted over the course of the series, overall there was a strong consistency of the general policy areas, especially with respect to: government arrears and debt management, audit, procurement, supervision of municipalities, statistics, financial stability, and the functioning of State Owned Enterprises SOEs (electricity and later aviation). The table below lists the prior actions for each PRSC series. All prior actions were met (a pre-condition for disbursement).

PRSC-V List of prior actions from Legal Agreement/Program Document

Policy area 1: Promote Good Governance Completed the implementation of the second phase of the 2005 plan for the clearance of public arrears as evidenced by the reduction of outstanding public arrears to 16 percent of the original stock. Submitted to its National Assembly the audited: (a) State General Accounts for the year 2006; and (b) accounts of key municipalities and embassies. Approved, through its Council of Ministers the regulations of the new Public Procurement Law. Completed the implementation of SIM in 11 of the Recipient’s municipalities. Approved, through its National Assembly, the Statistical Law.

Policy Area 2: Support Competitiveness and Growth Approved through its Council of Ministers, the reduction in corporate tax rates for businesses. Completed the initial phase of implementation of the Recipient’s action plan which will adjust the Recipient’s procedures and legislation on trade to those of WTO rules as evidenced by: i) approval of the Ecological Tax bill by the Council of Ministers; and ii) approval by Council of Ministers of the draft-law for the customs code consistent with the WTO agreement. Approved, through: (a) its Council of Ministers, the Cadastre Decree- Law; and (b) its Prime Minister Office, the appointment of a task force empowered to implement it. Reduced exposure of off-shore banking as shown by the closure of a noncompliant offshore institution. Approval by Council of Ministers of a medium term development strategy for the electricity sector.

PRSC-VI List of prior actions from Legal Agreement/Program Document

Policy Are1: Good GovernanceThe complete clearance of the government arrears assumed in 2005 except the arrears with the municipal chambers which will be offset off with the debts owed by these municipal governments with the government. The completion of the audit of the state accounts for 2007 by the Court of Accounts to the National Assembly, including audits of the accounts of 13 municipalities, 5 embassies and 3 institutes, and the government’s submission by the Council of Ministers to National Assembly of the state accounts for 2008

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and 2009. The full operationalization of the Public Procurement Directorate (DSCP) according to: (a) the adoption of the decree by the Council of Ministers establishing it and defining its role; and (b) the issuance of its action plan for 2010 by the General Directorate of Patrimony and Public Procurement (DGPCP). The enhancement of the government’s human resources management system as demonstrated by the adoption by the Council of Ministers of the related decree allowing for the mobile placement of civil servants. Progress on the institutionalization and implementation of the M&E system as evidenced by: (a) the adoption of the resolution by the Council of Ministers creating the Implementation Committee for the National M&E System (Commissão de Operacionalização do Sistema de Seguimento e Avaliação, COSiSA); (b) the completion of the platform linking the M&E system to the INE; (c) the inclusion in the Integrated Financial Management System for the government budget of the M&E indicators for the government programs in education, health, agriculture and infrastructure; and (d) the issuance by the Ministry of Finance of the Scope of Vision of the M&E government system.

Policy Area 2: Competitiveness Adoption of the draft banking law by the Central Bank board and its submission to the Council of Ministers, thereby strengthening the Central Bank’s supervisory authority and unifying the legislation regarding onshore and offshore banking activities. Improvements in the business climate as evidenced by: (a) submission of the draft bankruptcy law by the Business Development and Innovation Agency (ADEI) to the Council of Ministers; and (b) the switch from ad-valorem to fixed rates for real estate and commercial registration duties.

Policy Area 3: InfrastructureImprovements in the organizational structure of ELECTRA and measures to improve its operational and commercial performance as evidenced by: (a) the adoption by ELECTRA Board of a comprehensive investment plan, including financing and implementation schedule; (b) the adoption by the Council of Ministers of the institutional restructuring program for ELECTRA including a roadmap for its implementation and the creation and registration of the two new subsidiaries; (c) the adoption by ELECTRA board of a set of measures to improve commercial and operational performance (billing, use of fuel oil and transmission losses); (d) the issuance by ELECTRA Board of a time-bound action plan to restructure the arrears with its providers and initial actions inviting the creditors to negotiate the rescheduling of these arrears. Improvement in TACV’s operational, financial and commercial management as evidenced by: (a) the presentation of its annual balances for 2007, 2008 and 2009 (including audited balances for 2007); (b) the complete clearance of arrears with its private suppliers, and the proper execution of its debt rescheduling agreement with ASA including adherence to the agreed debt service schedule; (c) the establishment of an integrated accounting and receipt collection system; and (d) adoption of a set of appropriate measures by the Board of TACV to reduce costs and improve the operational performance such as personnel rationalization measures, the suspension of several costly employee benefits including free airfare allowances for family members and a new sales and distribution policy to increase revenues.

PRSC VII List of prior actions from Legal Agreement/Program Document

Policy Area 1: Good Governance The issuance of the Medium-Term Debt Strategy (MTDS) for 2012-15 by the Ministry of Finance. Submission of the State General Accounts of 2010 by the government to the Parliament and the adoption of the new budget classification system;

Further strengthening of the government’s procurement system as demonstrated by: the complete staffing of the ARAP management directorate, the establishment of the ARAP Consultative Council and its Conflict

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Resolution Committee, and the recruitment of all necessary staff for the ARAP auditing and policy departments The satisfactory implementation of the Statistical Agenda as evidenced by the approval of the relevant INE statutes and the national system of statistics and the passage of all necessary complementary legislation.

Policy Area 2: Human Capital Enhancement

The satisfactory implementation of the TVET Action Plan for 2010 as evidenced by: (a) the adoption of a new decree defining the statutes and mandate for the Employment and Professional Training Institute and the restructuring of the Employment Centers; (b) the establishment of an operational Coordinating Unit for the National System of Qualifications; (c) the adoption of new operating procedures by the TSF; and (d) the accreditation of four additional centers for vocational training in 2011.

Policy Area 3: Competitiveness: Trade, Taxation and Business Climate

The adoption of the new Investment Code by the Council of Ministers (approval of regulations on fiscal incentives was excluded from the prior action) The adoption of the new Intellectual Property Law by the Council of Ministers The adoption by the Council of Ministers of the Rehabilitation of Firms and Bankruptcy Law and the submission of the draft Bankruptcy Law for public consultation

Policy Area 4: Infrastructure

Further improvements in ELECTRA’s performance as evidenced by: (a) the adoption of the action plan for the second phase of its institutional restructuring; (b) the design of a comprehensive, realistic and time-bound approach to the financial restructuring of ELECTRA including recapitalization, the restructuring of short-term debt and establishment of financing mechanisms for public lighting; (c) the adoption of a new regulatory tariff-adjustment model compatible with ELECTRA’s institutional restructuring; and (d) the signature of a results-based management contract between ELECTRA and the General Directorate of the Treasury. Further improvements in TACV’s operational, financial and commercial management as evidenced by: (a) the presentation of the audited annual accounts for, 2008, 2009 and 2010; (b) the maintenance of zero arrears in the balance for 2010; and (c) the acquisition of an integrated accounting system for the timely preparation of budget reports. 2.2 Major Factors Affecting Implementation: 21. Economic factors. The economic crisis of 2009 cast a shadow over the period of PRSC V-VII. The crisis had both positive and negative effects on implementation. Among the positive impacts was the greater urgency for the government to proceed with its reforms, which sustained momentum. As the global fiscal situation worsened, ODA slowed, and the authorities tried to sustain their ambitious public investment program, the underlying weaknesses in SOEs became an increasing liability. This provided the incentive to tackle deep structural problems in SOEs. Similarly, pressing ahead with measures to improve Public Financial Management received greater urgency as the government was aware that it needed a better-performing administration for efficient revenue collection and fiscal policies in a deteriorating economic environment. In fact, as a negative impact, the high deficits in a weak economic environment in 2011 resulted in a delay of PRSC VII, initially planned to be approved by the Board in December 2011. Only once a detailed assessment of the macroeconomic framework was completed toward the end of the IMF’s second review of the PSI could the operation proceed.

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22. On the other hand, there were also negative effects. The economic downturn was coupled with a simultaneous surge in global food and fuel prices, reducing household disposable income. This made reforms that resulted in price increases particularly difficult. A case in point is ELECTRA which has struggled for many years to enforce tariffs or pass on input prices to consumers, resulting in considerable accumulation of arrears. In a climate of high fuel prices, political economy considerations weighed strongly as people, especially the poor, were particularly vulnerable to higher prices. 23. In addition, the deteriorating macro-economic situation delayed PRSC VII. In October 2011, the ROC did not authorize the team to negotiate, citing macro-concerns. The team conducted a mission following the meeting and to assess the situation in more detail. Eventually, it was agreed in January 2012 that the macroeconomic situation had improved sufficiently and the amount of the operation would be increased by 2m USD in order to assist the country with its international reserves which had reached low levels due to the government’s expansionary fiscal policy under a pegged exchange rate and weak aid and FDI flows. This delay resulted in negotiations in January 2012 (however, negotiations could only begin in May for additional, political reasons as explained below). 24. Political factors. General elections were held in 2011 and thus during the first two operations in the series they raised concerns that the government might relinquish or weaken its reform agenda in its bid for re-election. Eventually, for the first time in Cape Verde’s history, the prime minister and the president were from opposing parties. Generally, the political system coped well with this new reality. However, the elections did distract the government from its reform effort and, after the election, there have been some delays but no less commitment to reform. The President has intervened at times. For example, the President submitted the investment code to the parliament instead of promulgating it directly, as originally envisaged in the prior action. This contributed to an additional delay of 4 months for the approval of PRSC VII, but may have had the benefit of enhancing ownership and hence the sustainability of this reform. 25. Donor coordination. A final factor, a positive influence on implementation, was the fact that donor activity was strongly coordinated. Partly this happened through the Planning Department in the Ministry of Finance which was the sole focal point for all donors (rather than several focal points in line ministries). In addition, the joint Budget Support Group, bringing all donors together has streamlined the donor efforts in supporting the government.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization: 26. The monitoring and evaluation framework for the PRSC V-VII series was overseen by the country’s GPRSP II Steering Committee chaired by the Minister of Finance. Under the umbrella of the Ministry of Finance all ministries involved in supporting GPRSP II objectives participated in the design, implementation and monitoring of the donors’ joint Budget Support Matrix. The performance matrix for the PRSC V-VII series was a subset of the Budget Support Matrix and the ministries were therefore involved in the design, implementation and monitoring. The General Directorate for Planning, (Direcção Nacional de Planejamento), DNP, at the

10

Ministry of Finance was responsible for the overall implementation of the proposed operation and for reporting on its progress. 27. Design. The World Bank team has worked in close collaboration with the government and its budget support partners to ensure the adequate monitoring and evaluation of the series. Unfortunately, most indicators were not aligned with the system of indicators of the GPRSP II. Most of the indicator data had to be supplied directly by the authorities (e.g. the DNP, the boards of TACV and ELECTRA). For some of the indicators in PRSC V baseline data could not easily be obtained (e.g. number of non-complying sole source contracts); in other areas, the definitions of the units were not clear (e.g. amount of ELECTRA arrears toward its suppliers: the value was ‘100’ but the units were not indicated). During PRSC VI and VII the quality of the indicators improved with regards to data collection. 28. M&E Implementation: The Bank provided support to strengthen the government’s statistical capacity and the effectiveness of its M&E system. In particular, the Bank monitored the availability of household survey data on the national data website and the use of indicators to track the performance of public investment projects and programs in the M&E system. However, despite endeavors to improve the national M&E system, statistical capacity remained relatively weak, in particular in the national statistics agency, INE. TACV did not have income statements available in the early phase of the operation and ELECTRA has not been forthcoming with recent information. Thus, the scope for adequate M&E implementation was somewhat limited. 29. M&E Utilization: Data for many of the indicators were difficult to obtain and the Bank teams did not make good use of ISRs. A brief ISR was only prepared for PRSC V but not for the following two operations. However, within the framework of the biannual budget support group missions and other missions, the evaluations of the bank team and other donors supported the policy dialogue with the authorities which contributed to progress on reforms (e.g. in transport and energy).

2.4 Expected Next Phase/Follow-up Operation: 30. It is planned that PRSC V-VII will be followed in 2013 by a US10 million equivalent operation. PRSC VIII will be the first in a programmatic series of three annual operations designed to support the implementation of the Cape Verdean government’s Third Growth and Poverty Reduction Strategy Paper (GPRSPII) covering the period 2012-2016. Consistent with the objectives of GPRSP III, the PRSC series will support policies and institutional reforms aimed at: (i) bolstering the country’s resilience to external shocks; (ii) increasing the productivity of key economic sectors; and (iii) enhancing human capital to improve overall competitiveness and reduce poverty.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation Objectives: High Design: Moderate Implementation: Substantial

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31. Objectives. The objectives of the DPO series were highly relevant at the time of its inception and throughout its duration until completion. The government’s ETS and GPRSP II and the Bank’s CPS acknowledged the need for Cape Verde to build the conditions for growth as a middle income economy, following the country’s graduation from LDC status. Unleashing the potential for private sector-led growth required overall macroeconomic stability, a favorable investment climate, and supportive infrastructure. The need to reduce SOE losses and foster growth —and enhance the capacity to deal with fiscal shortfalls—became even more pronounced as the economic crisis of 2009 unfolded. The emphasis on these areas in the DPO was thus appropriate. 32. Design. The different operations within the series demonstrated a high degree of continuity as all policy areas that were supported with prior actions in PRSC V were also supported in PRSC VI-VII (although triggers and indicators changed as explained above). 33. On the other hand, sufficient flexibility was given to maintain a meaningful policy interaction with the government. For example, during the preparation of PRSC VI, adjustments were made to ‘take into account exogenous factors not under the control of the government, or capacity constraints that have affected the speed of the program implementation.’ This means that, as explained above, triggers were adjusted relatively frequently. 34. Prior actions were generally well designed and in most cases attributable to the government. An exception is a prior action of PRSC VII requiring the maintenance of zero arrears at TACV in the balance of the previous year—this action was not entirely under the control of the authorities (e.g. exogenous shocks could increase costs, rendering full repayment of arrears impossible). It should also be noted that prior actions in PRSC VI and VII were broken down into several sub-actions, thus effectively multiplying the prior action matrix somewhat beyond what is generally expected. 35. Indicators were linked relatively well to specific actions. However, the quality of indicators was weak for several reasons: 1) Indicator data would be difficult or impossible to obtain (e.g. TACV indicators in the absence of operational internal accounts); 2) indicators and prior actions were virtually identical (e.g. the reduction of business taxes); 3) some indicators were not directly attributable to prior actions (e.g. ‘imports + exports as a percentage of GDP’ to measure the effect of the customs and investment code—during an economic crisis); 4) the indicators did not allow for a sufficient time lag for reforms to show effects (e.g. the effect on capital adequacy ratios from the drafting of a law on financial regulation—parliament still has not passed this law). There was also a shortage of baseline data. 36. Implementation. At the implementation stage, the Cape Verdean authorities received assistance from the Bank and other donors in joint projects. The Bank pooled resources across departments, working on energy, transport, and the investment climate. Several analytical studies supported the program, in transport, the business climate, PFM, and others. TA was given, amongst others, in the areas of debt management, procurement, audits, energy, and the investment climate. In addition, less formalized policy dialogue between the Bank and the

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authorities had considerable impact, most notably with regards to restructuring at TACV, the national airline.

3.2 Achievement of Program Development Objectives Rating: Moderately satisfactory Sub-ratings: Promote good governance: satisfactory Competitiveness: moderately satisfactory Infrastructure: moderately unsatisfactory Human capital enhancement: moderately unsatisfactory Social cohesion: satisfactory 37. The overall program development objective of PRSC V-VII was to foster private sector-led growth. At the macro-level it focused on supporting a stable economic environment by strengthening the effectiveness and responsiveness of the government. At the micro-level, the private sector was to be stimulated by improving the investment climate and addressing infrastructure-related obstacles to doing business, such as energy and transportation. 38. Gauging the effect of the DPO series on private-sector growth is difficult. To a large extent, growth in Cape Verde mirrors growth in Europe, as close links exist through trade (especially tourism), FDI, remittances, and migrant deposits. It is impossible to establish a counterfactual to assess whether the DPO series moderated the internationally-driven drag on growth. Looking at the developments in individual indicators tracked by the series, however, provides a flavor of the positive contributions of the operations to supporting private sector-growth. Promote Good Governance (satisfactory)

Key outcome indicators PRSP Policy Area

Results Framework Base-line 2009

2010 2011 Latest Available*

Target* Evalu-ation

Macro-economic Stability

Remaining government arrears (% of total arrears assumed in 2005)

15 0 0 0 S

PFM: External Controls

Number of years to submit the General Accounts of the State to the Court of Accounts

3 1 <1 <1 S

Procure-ment

% of non complying sole source contracts.

9.6 9.6 (2011)

0 (2011)

U

Number of audits prepared by ARAP

0 3 >10 >10 S

% of project and program for which indicators are tracked by the M&E system.

NA 80 0 100 100 S

*2012 unless stated otherwise See Appendix 3 for all indicators.

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39. The above table focuses on the key indicators. All other indicators and ratings can be found in Appendix 3. 40. In the area of ‘good governance’, considerable progress was made with regards to macroeconomic stability, public financial management (PFM), procurement, and state modernization. The emphasis on strengthening the fiscal capabilities of the government was crucial as the economic crisis unfolded and it was strongly aligned with the GPRSP II. 41. The operation supported the government in developing structural tools with which to improve its fiscal capabilities, including a Medium Term Expenditure Framework (MTEF), a Medium Term Fiscal Framework (MTFF) (not actions in the series but part of the accompanying policy dialogue) and, later, a Medium Term Debt Strategy (MTDS) (a prior action of PRSC VII). These tools enabled the government to improve the quality of its accounts, witnessed by a full settlement of unfinanced liabilities: arrears. In addition, the MTDS supported the government in choosing optimal debt management policies and maintaining their commitment with the IMF to keep domestic debt below 25 percent of GDP. 42. In order to strengthen incentives for financial discipline, the DPO series also supported other PFM measures, with a particular emphasis on enhancing audits by Cape Verde’s independent Court of Auditors. Prior actions supported the restructuring of the Court as well as timely submission of audits to it and over the period of the DPO series the length of time of submission of General Accounts of the State accounts to the Court fell (although the number of audits prepared by the court did not achieve its target). Improvements in the Court of Accounts were acknowledged by a Public Expenditure Management and Financial Accountability Review (PEMFAR) of 2012 and testify to a strengthening of external accountability mechanisms for financial discipline within government. 43. In addition to external control, the government also aimed at improving its internal workings, amongst others by increasing the central government’s oversight of municipalities through a Municipal Information System (SIM), rationalizing ministries,6 and by improving the functioning of the civil service through HR reform. Government/ state modernization was a key focus of the GPRSP II and the DPO supported these priorities with related prior actions in these areas. The HR reform was centered on a new career system which the government eventually estimated to be too costly (especially in a time of falling revenue) and thus put on hold—although it did improve the mobility of civil servants across departments, thus enhancing the internal flexibility of government. All other reforms went ahead. The most noteworthy achievement appears to be the inclusion of all Cape Verdean municipalities in the SIM resulting in a significant increase in timely municipal accounts. Contingent liabilities are a risk to fiscal sustainability in Cape Verde, and the SIM was an important step toward containing them.

6 All ministries were to have a directorate providing planning and budgetary oversight (the Direcção Geral de Planejamento, Orçamento e Gestão, DGPOG).

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44. The DPO series also supported reforms which were aimed at raising the efficiency of government, which was particularly sensible against the backdrop of increasingly scarce public resources. Prior actions focused on procurement, regarding the legal underpinnings of the national procurement system as well as the operationalization of the Public Procurement Directory (DSCP) and the Regulatory Agency for Public Acquisitions (ARAP). Targets on for procurement indicators were met with respect to staffing and the number of procurement audits. The target was missed with respect to noncomplying sole-source contracts, the only key indicator to miss its target under this pillar. 45. Finally, in the area of ‘good governance’, the DPO series also supported improvements in monitoring and evaluation (M&E). In this area progress is not fully convincing. Although all prior actions were met which focused on developing and strengthening Cape Verde’s M&E system the results are weak. For one, the national statistics institute (INE) remains inadequately equipped to monitor economic performance (e.g. INE does not produce timely GDP data). In addition, only 73 percent of the government’s own GPRSP II indicators were monitored. Weak statistical capacity in Cape Verde is a considerable impediment to the government’s ability to design effective policies. 46. Overall, the reforms supported by the DPO have had an impact on the government’s ability to carry out prudent policies, by providing it with planning and implementation tools as well as internal and external institutional strengthening. The government’s ability to pursue effective fiscal policies is a prerequisite for it to facilitate an environment in which the private sector can thrive. In this light, the area ‘good governance’ generally contributed to the development objective satisfactorily in spite of shortcomings with regards to M&E and sole-source contracts. Especially by regional standards, Cape Verde’s governance system has made impressive strides forward. Competitiveness (moderately satisfactory) Key Outcome indicators

PRSP Policy Area

Results Framework Baseline2009

2010 2011 Latest Available*

Target* Evaluation

Financial Sector

Weighted average (by assets) of capital adequacy ratio (Basel 1) of the entire system in %.

10.7 10.3 13.4 >12 S

Business Climate

Average number of years to close a business.

NA NA NA NA ≤2 Not rated

Recovery rate by claimants (creditors, employees, govt.) from insolvent firms (cents per dollar owed)

NA NA NA NA 40.0 Not rated

*2012 unless stated otherwise See Appendix 3 for all indicators.

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47. The area ‘competitiveness’ is arguably the one most closely related to private sector-led growth. Results in this area are mixed for different reasons. Overall, most indicators suggest that targets were achieved, where data is available (assessments of all indicators can be found in Appendix), but two of the three key indicators cannot be rated. In a number of cases attribution is not clear. While performance on all available indicators was good, due to attribution issues the assessment for this policy area is only moderately satisfactory. 48. The most successful policy in this cluster relates to a reduction in corporate tax, which was supported by a prior action in PRSC V and implemented in 2010. This move reduced the financial burden for companies, making it more attractive for investors. In particular the implementation in 2010 seemed sensible as stimulus for an economy emerging from the 2009 recession. Similarly useful were streamlining procedures with respect to business registration and closing supported by the DPO series. These included the operationalization of the one-stop shop (the House of Citizens), a bankruptcy law, and the switch from ad-valorem to fixed rates for real estate and commercial registration duties. As a result, the number of days to open a business and the cost of property registration more than halved. The new bankruptcy laws have created a more favorable environment for closing a business (which by backward induction makes it more favorable to take the risk of starting a business). They are difficult to measure in the case of Cape Verde because no insolvent Cape Verdean firms met the criteria for inclusion in the Doing Business surveys which track indicators like time to close a business and recovery rates. Given the reforms, Cape Verde climbed from 142nd in 2010 to 121st place in 2013 in the Doing Business rankings. There is statistical evidence demonstrating that the Doing Business rankings and their individual components are correlated with stronger economic growth.7 49. Attribution is not clear with respect to policy actions supporting trade/FDI and financial sector stability. Cape Verde became of member of the World Trade Organization (WTO) in 2007. In accordance with WTO rules the country had to adopt compatible pieces of legislation. These included a customs code, an investment code, and an ecological tax, all three supported by prior actions by the DPO series. The indicators measuring the impact of these reforms are a trade openness indicator (imports + exports as a percentage of GDP) and FDI as a percentage of GDP. Attribution is difficult to establish for the following reasons. 1) The main dynamics in the indicators result from the economic crisis and both trade and FDI were suppressed due to weak economic activity in Europe, thus obscuring the effect of domestic legislation on these variables. 2) While FDI missed its target consistently, in December 2012 FDI contracts were signed for over 600 million euros. This amounts to 36 percent of GDP.8 The new investment code, which rationalizes tax incentives for foreign investors—coming into effect in January 2013—may have played a major, but unanticipated role. It appears likely that planned projects were anticipated in order benefit from the old tax incentive system. The longer-term effect on FDI is uncertain. 50. With regards to financial sector stability, the indicator measuring the impact of the DPO’s prior action is the capital adequacy ratio. This ratio has increased and even exceeded its target

7 E.g. Djankov et al. (2006) ‘Regulation and Growth’ Economics Letters 92(3)395-401; Hanusch (2012) ‘The Doing Business Indicators, Economic Growth, and Regulatory Reform’ Policy Research Working Paper 6176. 8 This is based on data provided by the IMF which are currently under revision by INE.

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value. However, while the law aimed at enhancing the supervisory capacity of the central bank was adopted by the central bank board and referred to the council of ministers it has not yet been approved by parliament. Higher solvency in the banking sector is thus unlikely to have been a consequence of reforms supported by the DPO series. It is important to note that the prior action only focused on drafting a law, adopting it by the board of the central bank and submitting it to the council of ministers—however, as noted above, this indicator did not account for the time lag that could be expected between the submission of the law to the council of ministers and the passing by parliament. Infrastructure (moderately unsatisfactory) Key Outcome indicators PRSP Policy

Area Results Framework Base

- line2009

2010

2011

Latest Available*

Target* Evalu-ation

Energy Debt service coverage ratio of ELECTRA.

0.75 1 1.1 Not rated

Technical and non technical losses as % of MGW generation.

28 26.1 27 28.7 <25 U

Transport (air transport

company)

Direct operating costs, excluding fuel, per passenger seat-kilometer (CVE)

7.67 NA 7.91 7.91 (2011) 2.85 (2011)

U

Unit revenues as measured by passenger seat-kilometer (CVE)

606 720 783 783 (2011) 779 (2011)

S

*2012 unless stated otherwise See Appendix 3 for all indicators. 51. In the area of infrastructure the DPO series focused on supporting reform in land management, the energy sector, and aviation. Progress on land management was moderately unsatisfactory. The government had initially moved with great resolve on this issue, passing a Cadaster Law (supported by a prior action in PRSC V) and beginning to operationalize it. However, both in terms of approved (‘homologated’) regional plans for territorial organization (EROT) and approved municipal development plans (PDMs) outputs were delivered more slowly than expected. 52. Of the indicators available, satisfactory and unsatisfactory indicators are holding the balance (Appendix 3). However, looking at the key indicators, an overall rating of moderately unsatisfactory is appropriate for this component. In spite of this rating it is important to acknowledge progress toward improving the SOEs ELECTRA (the national utility) and TACV (the national airline) against considerable constraints. These two companies represent two of the largest Cape Verdean SOEs yet they have been dysfunctional and loss-making. The Bank heavily focused on supporting the government in reforming these companies as they were considered key to removing key binding constraints in infrastructure (energy and transport) and to

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improving fiscal sustainability (by reducing contingent liabilities for the central government). The Bank pooled its resources, focusing on ELECTRA and SOEs through PRSC V-VII but also investment lending operations and TA. 53. During a recent mission (April 8-12, 2013), the ICRR team learned that reforms are finally beginning to yield results.9 In ELECTRA, the key sources of financial weakness of the company were that 1) cost recovery was hampered as input prices could not be passed on to consumers through tariff adjustments, 2) commercial losses were high due to high non-payment rates, and 3) energy theft was widespread. In 2013, ELECTRA successfully managed to start applying tariff adjustments (the board is now setting tariffs every three months) and started to collect fees for public lighting, thus entering a more sustainable path of cost recovery. In addition, changes in the legal environment of November 2012 enabled ELECTRA to suspend electricity accounts of defaulting customers sooner, thus reducing energy loss. According to information gathered during the Bank’s last budget support mission of May 2013, ELECTRA’s deficit has decreased by 20 percent between 2012 and 2011 and revenue for the first quarter of 2013 was up by 18 percent. 54. In addition, the generation of renewable energy has been increasing gradually (exceeding the DPO targets) and a new plant, Palmarejo Plant on the island of Santiago, started operating in March 2013, thus raising capacity for electricity generation. These developments have resulted in a reduction of electricity blackouts by more than 50 percent over the previous year. Reform of the energy sector was challenging, especially where it increased costs for consumers in the midst of an economic downturn. Although ELECTRA is likely to require another capitalization by the central government, the fact that the reforms are now bearing fruit is putting the company on a more sustainable trajectory. 55. With regards to TACV, reforms have also been progressing, although somewhat more modestly than in ELECTRA—especially in the early years of the PRSC series progress was almost nil. A new board of directors was appointed in 2012 and has since re-ignited the reform agenda. Initially, the reform agenda started with what can be termed ‘housekeeping activities’, including the systematic compilation of company data and the production of financial statements. In the short time the new board has been in place, considerable progress was made in a number of other areas: non-profitable routes have been eliminated, a fuel policy is in place, tickets can be purchased online, and delays have been considerably reduced. The board is also undertaking steps toward a partial privatization, unbundling TACV’s ground and maintenance services; it is renegotiating co-share agreements, exploring new partnership agreements, and devising plans to improve its HR policy (including excessive staff benefits) and the rationalization of the fleet. In 2012, TACV still required a capitalization by the central government of an amount equivalent to 1.4 percent of GDP. However, this is largely the legacy of highly unfavorable financing terms for leased planes, entered into by the previous board. Unit revenues as measured by passenger-seat kilometer, one of the indicators of the series for which data are available, have been increasing, suggesting that the company is becoming less unprofitable. TACV, too, appears to enter a more

9 The results are reflected in a macroeconomic assessment prepared after the mission.

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sustainable trajectory (although the final judgment is still out, depending on sustained commitment to reform). Human Capital Enhancement (moderately unsatisfactory) 56. PRSC VII included a prior action on ‘human capital enhancements.’ 10 Generally, progress in this area was moderately unsatisfactory. The accreditation of training institutions progressed slowly but eventually met its target. However, many fewer students than expected were trained and training is the main output of the TVET component. Largely, these shortfalls are due to insufficient funding, especially as some of the projects in Technical Vocational Education and Training (TVET) unsustainably relied on donor funding. Social Cohesion (satisfactory) 57. Although no prior action of the DPO series supported the area ‘social cohesion’, the series tracked relevant indicators, thus monitoring the government’s commitment to implementing this element of its GPRSP II. Reports on social cohesion were published, as targeted in the indicator matrix. As this is the only indicator and it was met, this area is rated satisfactory.11

3.3 Justification of Overall Outcome Rating Rating: Moderately satisfactory 58. The overall rating of ‘moderately satisfactory’ is based on the continuing relevance of the key development objective of private sector-led growth at present, the moderately satisfactory design and implementation of the series, as well as the significant progress made in a number of areas supporting the objective. Progress on promoting good governance has been satisfactory. Strengthening the administrative capacity and transparency of the government is crucial for a country whose reliance on donors is diminishing and which faces a high debt burden it will have to manage. Similarly, reforms at improving the investment climate, at the micro-level, have been successful—although attribution of the outcomes is at times difficult, resulting in a rating of moderately satisfactory. At both levels, reforms have contributed to improving the environment for doing business. The limited actions in the area of human capital were not successful in increasing the number of students. 59. Arguably the biggest risks were taken in the area of infrastructure where inertia and political economy constraints (such as raising tariffs) rendered success uncertain. Jointly, due to underperformance of ELECTRA and TACV with respect to the set targets (despite considerable progress in terms of reforms and cautious signs that the reforms are yielding returns) and the less impressive progress on land management this area was rated moderately unsatisfactory.

10 Although the Bank included one prior action in this area, other members of the Budget Support Group took the lead in this area. 11 This pillar was only included in PRSC V.

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3.4 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development N/A. (b) Institutional Change/Strengthening 60. The impact on institutions of the PRSC V-VII series was considerable. In fact, institutional strengthening was at the core of the operation. Some of the key results include a stronger Court of Auditors, stronger procurement systems, more efficiently organized and supervised ministries and municipalities, a stronger land management system, more functional SOEs in energy and aviation, and a one-stop shop for businesses. Several new laws are in place, supported by the DPO series, including the customs and investment codes and the Cadaster Law, all supported by prior actions. Finally, the series was accompanied by training provided through TA and workshops, especially in the PFM area, which has built capacity within the administration. (c) Other Unintended Outcomes and Impacts None.

3.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops None.

4. Assessment of Risk to Development Outcome Rating: Moderate 61. Many of the reforms the DPO series supported are institutional. Especially laws and new institutions are unlikely to be easily reversed. Many of the achievements of the DPO series may be ‘locked in’ for the near future. The government of Cape Verde also has a reputation for good policy management and, as a solid democracy with an intact social contract, policy improvements are likely to be shielded in the future. However, a number of risks exist to sustaining the development outcome, both externally and internally. 62. Macroeconomic risks. Cape Verde’s economic performance is highly dependent on Europe’s economic performance. As the crisis in the Eurozone still has not abated, risks to growth in Cape Verde remain elevated. Low growth is not only troublesome for business; it also threatens the sustainability of the country’s high public debt burden. INE, the national statistics institute is currently revising its GDP figures and data are only available up to 2010. Proxies for GDP (such as growth in income tax revenue and growth in the Eurozone) in 2011 and 2012 suggest that the economy has entered a lower growth path meaning that debt sustainability analyses have been optimistic. Future financing is uncertain as donors are winding down concessional financial support and Cape Verde does not yet have access to international bond

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markets. Weak growth implies that amortizing and rolling over the public debt will become more challenging, threatening economic stability—in particular against the backdrop of a high public debt burden, above 80 percent of GDP. A high fiscal deficit in 2013 (11% of GDP) means that the debt will continue to grow in the short term and upward pressure on interest rates will remain. This is arguably the greatest threat to sustaining the development objective of private sector-led growth.12 The new MTDS will help the government in designing appropriate debt management policies, but fiscal consolidation will be critical. 63. Political risks. Reforms have advanced considerably over the course of the DPO series. However, especially with respect to SOEs, the results are only now becoming visible and will need further political resolve to make the reforms sustainable. ELECTRA will need continuing political backing to sustain its new culture of cost recovery—even if this results in unpopular, higher tariffs. TACV has to continue its ambitious agenda, including progress on partial privatization. These reforms are difficult and require strong and enduring political backing—although the Ministry of Infrastructure has signaled strong support for reform of TACV. In other areas, laws that are still at a draft stage have to be passed by parliament and operationalized. This applies in particular to the basic financial law, providing the central bank with stronger supervisory power. Experience suggests that the law will eventually be passed. However, given the macroeconomic risks, it will be important to pass it soon for it to help support private sector-led growth effectively. 64. Regional stability. The West African region is politically fragile. In particular the narcotics trade in Guinea-Bissau and other countries is undermining stability in the region. So far Cape Verde has remained relatively isolated from such developments on the continent, although the Cape Verdean authorities were involved in high-level international arrests in relation to illegal drugs. There is a low risk that the destabilizing forces from the continent may undermine the stability that Cape Verde has been enjoying.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 65. Quality at entry was moderately satisfactory. The design of the PRSC V-VII series is aligned with government development objectives entrenched in its GPRSP II. Also the reform program underpinning each series is rooted in consultations with other aid agencies, several Bank analytical pieces of work (appendix 9) as well as lessons learned from previous PRSCs. The program development objectives and prior actions/ triggers of the PRSC series were adequate, specific and time-sensitive as well as well aligned with the Bank’s Country Partnership Strategy.

12 See the debt sustainability analysis in the 2013 Country Economic Memorandum for Cape Verde.

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66. The ‘moderate’ in the assessment is mainly due to the weakness of the indicators. As explained above, there were several weaknesses, including data coverage, attribution, realism, amongst others. These were the main shortcomings in the design of the operation. (b) Quality of Supervision Rating: Moderately Satisfactory 67. The PRSC series ensured sustained policy dialogue in the country by supporting broader structural reforms in public financial management and other key sectors such as transport and energy. The strong commitment of the Bank’s task team backed by management support facilitated the supervision phase of the operations. The supervision of the PRSCs was through the donor budget support group’s biannual missions which focused on the monitoring of triggers and brought together experts from the country’s priority sectors. The missions were central to the evaluation of progress on the joint matrix, facilitated coordination and built consensus among donors. Thus, the Bank’s team was able to make informed decisions on the choice of prior actions and indicators during the preparation of subsequent operations. Indeed, the quality of the results matrix evidently improved in the last operation in the series. 68. The M&E arrangements of the PRSCs series drew largely on the M&E system of the DNP. The secretariat of the Budget Support Group (BSG) also produced standardized aide-memoires under the reporting requirements of the BSG framework. Moreover, as an active member of the BSG, the Bank played a key role in the harmonization of the aid architecture thereby strengthening the effectiveness of budget support operations in the country. The ‘moderate’ in the assessment is due to the lack/ low quality of ISRs, which are an important monitoring tool. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 69. Apart from the assessments above, it should be noted that the increase of the financing volume under PRSC VII was appropriate and responded well to the country’s increasing vulnerability as international reserves fell. Jointly with the ratings for ensuring quality and entry and quality of supervision, this results in an overall rating of moderately satisfactory. 5.2 Borrower Performance (a) Government Performance Rating: See overall borrower performance. (b) Implementing Agency or Agencies Performance Rating: See overall borrower performance (government and implementing agency are equivalent)

22

(c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 70. Overall borrower performance is rated moderately satisfactory. Under the lead of the Ministry of Finance, the government participated in the design, implementation and monitoring of the PRSC series. In particular, the DNP at the Ministry of Finance was responsible for the overall implementation of the operations and for reporting on progress. Thus the Bank had a readily available and committed interlocutor from the government’s side. The government’s development strategy, GPRSP II, was rooted in a number of important strategic documents, including the current administrative Government Program, the Great Options of the Plan and the Economic Transformation Strategy (ETS) adopted in 2003. The good substance of the GPRSP II therefore provided a strong starting point for the preparation the PRSC V-VII. Furthermore, the government demonstrated ownership and strong commitment by formulating and approving policies establishing the adequate policy environment for the success of the PRSC operations. However, progress was slow in certain areas, most notably the passing of the basic financial law, which is critical in a time of economic crisis. Also weaknesses in macroeconomic management led to a delay in the approval of PRSCVII to the following fiscal year. Concerns over the levels of the fiscal deficit and the national debt remained in 2013. This results in a rating of moderately satisfactory. 6. Lessons Learned 71. Quality of indicators. One key lesson that can be learned from this PRSC series is the importance of the need for good indicators to evaluate the success of the operation. Indicator data have to be available and attributable to government actions—and indicators should not simply restate prior actions. One particular problem with development policy lending is that institutional reform takes time to show effects. Thus, finding indicators that capture results shortly after the completion of the operation is challenging. However, efforts should be made to identify attributable consequence of these actions. Investing more time and effort in designing strong PRSP indicators with the government would help improve the quality of indicators. 72. M&E systems. The operation has also shown the need for strong M&E systems. Even if indicators are attributable but data are not available, necessary, evidence-based fine-tuning during the operation as well as a thorough and fair evaluation upon completion of the series is impossible. Investing in country M&E capacity, where requires, is crucial. 73. Donor harmonization. Another lesson is that donor harmonization can be achieved without surrendering flexibility for individual institutions’ development assessments. In Cape Verde, the Budget Support Group had a common donor matrix, bundling clout in policy areas considered key by all development partners (e.g. PFM reform). In other areas, donors maintained flexibility and could focus on their specific areas of expertise (e.g. the Portuguese focusing on housing and the Bank on SOEs). Within the Bank, this approach has found recognition and can be recommended to other country units.

23

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/Implementing agencies 74. The government, represented by the DNP, provided comments on the ICRR and PRSC V-VII more broadly; the comments can be found in Appendix 7. In summary, the government highlighted the importance of the PRSC series in providing financing in a difficult macroeconomic environment in the aftermath of the global financial crisis allowing the government to focus on its ambitious investment program. 75. Apart from the financing element, the government expressed appreciation for the role the Bank played in the BSG which formed the primary outlet for policy dialogue between the government and development partners. 76. Finally, the government partially attributes progress on some key reforms to the policies supported by PRSC V-VII and associated analytical work and technical assistance. These areas are: 1) Public Finance Management, including tools for debt management, tax policy and administration, and SOE control; 2) State modernization, especially procurement; 3) Competitiveness, highlighting the investment code and tax benefits code; 4) improvements in SOE performance. In line with the assessment of this ICRR, the government acknowledges that reforms under the infrastructure pillar were the most cumbersome but vital to improve financial soundness of the SOEs and the public finances in general. (b) Cofinanciers N/A. (c) Other partners and stakeholders N/A.

24

Annex 1: Prior actions and triggers across the series PRSC V PRSC VI PRSC VII Notes

PRSP Policy Area

Program Objectives

Actions for PRSC V

Actions for PRSC VI

Actions for PRSC VII

PRSC V PRSC VI PRSC VII PRSC V PRSC VI PRSC VII

2009 2010 2011 2009 2010 2011 2009 2010 2011

Good Governance

Macroeconomic Stability

Reduce and control Government liabilities including contingent ones.

Reduction of outstanding public arrears (as measured in 2005) to 16% of original stock.

Reduction of arrears to zero.

Completed the implementation of the second phase of the 2005 plan for the clearance of public arrears as evidenced by the reduction of outstanding public arrears to 16 percent of the original stock.

The complete clearance of the government arrears assumed in 2005 except the arrears with the municipal chambers which will be setting off with the debts owed by these municipal governments with the government.

1. The issuance of the Action Plan for the enhancement of the government’s Debt Management System and the Medium-Term Debt Strategy (MTDS) for 2012-15 by the Ministry of Finance.

Completed the implementation of the second phase of the 2005 plan for the clearance of public arrears as evidenced by the reduction of outstanding public arrears to 16 percent of the original stock.

The complete clearance of the government arrears assumed in 2005 except the arrears with the municipal chambers which will be setting off with the debts owed by these municipal governments with the government.

The issuance of the Medium-Term Debt Strategy (MTDS) for 2012-15 by the Ministry of Finance and Planning.

No major changes. Added new trigger on MTDS in PRSC VI.

Completion of time-bound action plan to clear arrears of ELECTRA to suppliers within 4 years maximum.

Satisfactory implementation of the plan to clear arrears of ELECTRA.

Relegated to energy under infrastructure (with improved wording)

25


Improve timeliness of audits of State accounts by Tribunal das Contas and enhance quality of audits

Audit of: (i) State General Accounts for 2006 and (ii) accounts of key municipalities and embassies submitted to Parliament.

Audit of: (i) 2007 and 2008 State Accounts and (ii) accounts of new municipalities, embassies and institutes submitted to Parliament.

Audit of (i) 2009 State Accounts and (ii) accounts of new municipalities and embassies submitted to Parliament.

Submitted to its National Assembly the audited: (a) State General Accounts for the year 2006; and (b) accounts of key municipalities and embassies.

The completion of the audit of the state accounts for 2007 by the Court of Accounts to the National Assembly, including audits of the accounts of 13 municipalities, 5 embassies and 3 institutes, and the government’s submission by the Council of Ministers to Parliament of the state accounts for 2008 and 2009.

Completion of a PEMFAR exercise and adoption of a reform agenda on Public Financial Management based on the PEMFAR.

Submitted to its National Assembly the audited: (a) State General Accounts for the year 2006; and (b) accounts of key municipalities and embassies.

The completion of the audit of the state accounts for 2007 by the Court of Accounts to the National Assembly, including audits of the accounts of 13 municipalities, 5 embassies and 3 institutes, and the government’s submission by the Council of Ministers to Parliament of the state accounts for 2008 and 2009.

The submission of the State General Accounts of 2010 by the government to the Parliament and the adoption of the new budget classification system.

Changed: PRSC VI became less ambitious changed trigger for PRSC VII to PEMFAR issues -- PRSC VII dropped PEMFAR trigger due to donors delaying PEMFAR.

Submit to the Parliament the project of Law on the functioning of the tribunal of account.

Benchmark only.

26

Procure-ment

Improve transparency and efficiency of public procurement procedures.

Approval by Council of Ministers of new regulations accompanying the new Public Procurement Law.

The new Public Procurement Directorate for controlling UGAs’ activities is operational within the DGPE.

Compliance reviews of procurement procedures for all line ministries.

Approved, through its Council of Ministers the regulations of the new Public Procurement Law

The full operationalization of the Public Procurement Directorate (DSCP) according to: (a) the adoption of the decree by the Council of Ministers establishing it and defining its role; and (b) the issuance of its action plan for 2010 by the General Directorate of Patrimony and Public Procurement (DGPCP).

Further strengthening of the government procurement system as demonstrated by: the completion of the new procurement website and the introduction of the electronic reverse auction in government purchases.

Approved, through its Council of Ministers the regulations of the new Public Procurement Law

The full operationalization of the Public Procurement Directorate (DSCP) according to: (a) the adoption of the decree by the Council of Ministers establishing it and defining its role; and (b) the issuance of its action plan for 2010 by the General Directorate of Patrimony and Public Procurement (DGPCP).

Further strengthening of the government procurement system as demonstrated by: the fulfillment of the ARAP management directorate, the establishment of the Consultative Council and its Conflict Resolution Committee of ARAP and the recruitment of the staff for the audit and policy departments at ARAP.

PRSC VI same with more detail; introduced new trigger for PRSC VII which was refined as a prior action under PRSC VII.

Government Moderni-zation

Rationalize State structures for a cost efficient Government.

At least 5 ministries restructured according to plan.

Implementation of restructuring recommendations continued.

Implementation of restructuring recommendations continued.

Benchmarks only.

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Strengthen decentralization and municipal management capacity.

At least 11 municipalities use Municipal Information System (SIM).

At least 15 municipalities use SIM.

17 municipalities use SIM.

Completed the implementation of SIM in 11 of the Recipient’s municipalities

The enhancement of the government’s human resources management system as demonstrated by the adoption by the Council of Ministers of the related decree allowing for the mobile placement of civil servants.

Completed the implementation of SIM in 11 of the Recipient’s municipalities

The enhancement of the government’s human resources management system as demonstrated by the adoption by the Council of Ministers of the related decree allowing for the mobile placement of civil servants.

PRSC VI took recommended trigger with less ambition and added a focus on HR, picking up mobility action of PRSC V (see below). PCSS not approved because had fiscal implications.

Promote merit based civil service and broaden mobility options within and outside Government.

Decree on mobility approved by Council of Ministers.

New Career and Salary System (PCCS) approved by Council of Ministers.

Senior career service established.

See above.

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Statistics and M&E

Establish the new national statistical system and implement the statistical action plan (2007-2010).

Promulgation of Statistical Law.

Completion of the platform linking INE data and National M&E system.

Statistical Action Plan implemented.

Approved, through its National Assembly, the Statistical Law

Progress on the institutionalization and implementation of the M&E system as evidenced by: (a) the adoption of the resolution by the Countries of Ministers creating the Implementation Committee for the National M&E System (Commissão de Operacionalização do Sistema de Seguimento e Avaliação, COSiSA); (b) the completion of the platform linking the M&E system to the INE; (c) the inclusion in the Integrated Financial Management System for the government budget of the M&E indicators for the government programs in education, health,

The satisfactory implementation of the Statistical Agenda as evidenced by: (a) the completion of the technology and institutional capacity components and (b) the update of the Statistical Agenda for 2011-2014.

Approved, through its National Assembly, the Statistical Law

Progress on the institutionalization and implementation of the M&E system as evidenced by: (a) the adoption of the resolution by the Countries of Ministers creating the Implementation Committee for the National M&E System (Commissão de Operacionalização do Sistema de Seguimento e Avaliação, COSiSA); (b) the completion of the platform linking the M&E system to the INE; (c) the inclusion in the Integrated Financial Management System for the government budget of the M&E indicators for the government programs in education, health, agriculture and infrastructure; and (d) the issuance by the

The satisfactory implementation of the Statistical Agenda as evidenced by the approval of the relevant INE statutes and the national system of statistics and the passage of all necessary complementary legislation.

No major changes.

29

agriculture and infrastructure; and (d) the issuance by the Ministry of Finance of the Scope of Vision of the M&E government system.

Ministry of Finance of the Scope of Vision of the M&E government system.

Implement the new national M&E system.

All 2008 projects and programs’ output indicators integrated in the database of the national M&E system.

80% of all active projects and programs’ output indicators integrated and tracked in the database of the national M&E system.

90% of all active projects & programs outputs and outcome indicators integrated and tracked in the database of the national M&E system.

dropped in PRSC VI and VII because the system was already fully operational.

Human cpaital enhancement

Vocational Training

To improve the qualification of workforce to meet labor market demand.

Ministerial decision to re-activate and improve the TSF.

New operating procedures adopted for the TSF.

Satisfactory implementation of the TVET Action Plan, with private sector participation.

The satisfactory implementation of the TVET Action Plan for 2010 as evidenced by: (a) the adoption of a new decree defining the restructuring of the

The satisfactory implementation of the TVET Action Plan for 2010 as evidenced by: (a) the adoption of a new decree defining the statutes of the

PRSC VI took trigger for PRSC VII from PRSC V and added indicative element from actions for previous years.

30

Employment Centers; (b) the establishment of an operational Coordinating Unit for the National System of Qualifications; (c) the adoption of new operating procedures by TSF; and (d) the preparation of an Integrated Policy Letter for Technical, Educational and Vocational Training.

Employment and Professional Training Institute and the restructuring of the Employment Centers; (b) the establishment of an operational Coordinating Unit for the National System of Qualifications; (c) the adoption of new operating procedures by TSF; and (d) accreditation of four centers of vocational training in 2011.

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Competitiveness

Trade Better integration of Cape Verde in international trade.

Satisfactory progress in the implementation of the action plan to adapt procedures and legislation to WTO rules as evidenced by: i) approval of the Ecological Tax bill by the Council of Ministers; and ii) Approval by Council of Ministers of customs code consistent with the WTO agreement.

Revised Investment code consistent with WTO agreement in draft.

Completed the initial phase of implementation of the Recipient’s action plan which will adjust the Recipient’s procedures and legislation on trade to those of WTO rules as evidenced by: i) approval of the Ecological Tax bill by the Council of Ministers; and ii) approval by Council of Ministers of the draft-law for the customs code consistent with the WTO agreement.

The adoption of the investment code by the Council of Ministers, including regulations for fiscal incentives consistent with WTO norms.

Completed the initial phase of implementation of the Recipient’s action plan which will adjust the Recipient’s procedures and legislation on trade to those of WTO rules as evidenced by: i) approval of the Ecological Tax bill by the Council of Ministers; and ii) approval by Council of Ministers of the draft-law for the customs code consistent with the WTO agreement.

The adoption of the investment code by the Council of Ministers, consistent with WTO norms.

The investment code actions were delayed because they had tax implications which were dealt with simulataneously.

Preparation of a new draft law on intellectual property.

The adoption of the new intellectual property law by the Council of

The adoption of the new intellectual property law by the Council of

No major chnages.

32

Ministers. Ministers.

Tax System Improvement in the investment climate through tax reduction and overhaul of tax incentives.

Across the board reduction in corporate taxes for businesses approved by Council of Ministers.

Draft law revising tax incentives submitted to Council of Ministers for approval.

Approved through its Council of Ministers, the reduction in corporate tax rates for businesses

See the above Trigger regarding the investment code.

Approved through its Council of Ministers, the reduction in corporate tax rates for businesses

See the above Trigger regarding the investment code.

See above comment on interrelationship between tax code and investment code.

Financial Sector

Strengthen stability.

2007 Microfinance Law revised to limit deposit taking.

Bank supervision legal framework revised to give BCV more authority.

IFRS accounting norms applied to banks and insurance companies.

IFRS dropped because it was already in place. PRSC VI indicators merged (new banking law for onshore and offshore and more authority to BCV). Microfinance benchmark only.

33

Reduction of exposure of offshore banking with the closure of a noncompliant offshore institution.

IFI law revised to align its regulatory regime with onshore system.

Reduced exposure of off-shore banking as shown by the closure of a noncompliant offshore institution.

Adoption of the draft banking law by the Central Bank board and its submission to the Council of Ministers, thereby strengthening the Central Bank’s supervisory authority and unifying the legislation regarding onshore and offshore banking activities.

Reduced exposure of off-shore banking as shown by the closure of a noncompliant offshore institution.

Adoption of the draft banking law by the Central Bank board and its submission to the Council of Ministers, thereby strengthening the Central Bank’s supervisory authority and unifying the legislation regarding onshore and offshore banking activities.

See above.

Business Climate

Improve regulatory environemt.

House of Citizen operational with 4 services.

New bankruptcy law drafted.

Implementation of actions to lower the cost of property registration.

Improvements in the business climate as evidenced by: (a) submission of the draft bankruptcy law by the Business Development and Innovation Agency (ADEI) to the Council of Ministers; and (b) the switch from ad-valorem to fixed rates for real estate and commercial registration duties.

The adoption by the Council of Ministers of the Rehabilitation of Firms and Bankruptcy Law and submission of the draft Bankruptcy Law for public consultation.

Improvements in the business climate as evidenced by: (a) submission of the draft bankruptcy law by the Business Development and Innovation Agency (ADEI) to the Council of Ministers; and (b) the switch from ad-valorem to fixed rates for real estate and commercial registration duties.

The adoption by the Council of Ministers of the Rehabilitation of Firms and Bankruptcy Law

PRSC VI introduces cost of proerty and commerical transactions. VII dropped public consultation from VI.

34

Land Manage-ment

Transparent rules for land allocation.

Cadastre Law approved and task force appointed to operationalize it.

All islands development plans (EROTs) completed and approved by GOCV.

Finalization and approval of a national strategic development plan.

Approved, through: (a) its Council of Ministers, the Cadastre Decree- Law; and (b) its Prime Minister Office, the appointment of a task force empowered to implement it

The adoption of the national development strategy for land use by the Council of Ministers.

Approved, through: (a) its Council of Ministers, the Cadastre Decree- Law; and (b) its Prime Minister Office, the appointment of a task force empowered to implement it

Triggers dropped (no policy dialogue with the Bank in this area).

Energy Restore financial viability of the electricity sector.

Preparation of a medium term development strategy for the electricity sector.

Advancement toward implementation of the medium term development strategy, as evidenced by: i) definition of ELECTRA restructuring, including private sector participation options and legal and regulatory implications; ii) measures to improve operational and commercial performance. Implementation by ELECTRA of measures to improve operational

Advancement toward implementation of the medium term development strategy as evidenced by:i) definition and implementation of a mechanism to settle public customers electricity bills; ii) adoption of a new tariff mechanism consistent with the restructured ELECTRA.

Approval by Council of Ministers of a medium term development strategy for the electricity sector.

Improvements in the organizational structure of ELECTRA and measures to improve its operational and commercial performance as evidenced by: (a) the adoption by ELECTRA Board of a comprehensive investment plan, including financing and implementation schedule; (b) the adoption by the Council of Ministers of the institutional restructuring program for ELECTRA

Further improvements in ELECTRA’s performance as evidenced by: (a) the adoption of the action plan for the second phase of its institutional restructuring; (b) the design of a comprehensive, realistic and time-bound approach to the financial restructuring of ELECTRA, including: recapitalization; restructuring of financial

Approval by Council of Ministers of a medium term development strategy for the electricity sector.

Improvements in the organizational structure of ELECTRA and measures to improve its operational and commercial performance as evidenced by: (a) the adoption by ELECTRA Board of a comprehensive investment plan, including financing and implementation schedule; (b) the adoption by the Council of Ministers of the institutional restructuring program for ELECTRA including a roadmap for its

Further improvements in ELECTRA’s performance as evidenced by: (a) the adoption of the action plan for the second phase of its institutional restructuring; (b) the design of a comprehensive, realistic and time-bound approach to the financial restructuring of ELECTRA, including: recapitalization; restructuring of financial

PRSC VI refined trigger from V. PRSC VI enhanced PRSC VII trigger with additional comoponents.

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and commercial performance.

including a roadmap for its implementation and the creation and registration of the two new subsidiaries; (c) the adoption by ELECTRA board of a set of measures to improve commercial and operational performance (billing, use of fuel oil and transmission losses); (d) the issuance by ELECTRA Board of a time-bound action plan to restructure the arrears with its providers and initial actions inviting the creditors to negotiate the rescheduling of these arrears.

short term debt and financing mechanisms for public lighting; (c) the adoption of a new regulatory tariff-adjustment model compatible with ELECTRA’s institutional restructuring; and (d) the signature of a results-based management contract between ELECTRA and the General Directorate of the Treasury.

implementation and the creation and registration of the two new subsidiaries; (c) the adoption by ELECTRA board of a set of measures to improve commercial and operational performance (billing, use of fuel oil and transmission losses); (d) the issuance by ELECTRA Board of a time-bound action plan to restructure the arrears with its providers and initial actions inviting the creditors to negotiate the rescheduling of these arrears.

short term debt and financing mechanisms for public lighting; (c) the adoption of a new regulatory tariff-adjustment model compatible with ELECTRA’s institutional restructuring; and (d) the signature of a results-based management contract between ELECTRA and the General Directorate of the Treasury.

36

Transport Increase operational efficiency of air transport company

Improvement in TACV financial sustainability through: (i) reduction of direct operating costs (excluding fuel) per passenger seat kilometer offered; and, (ii) (ii) increase of unit revenues (as measured by passenger seat kilometer offered).

Improvement in TACV financial sustainability through: (i) reduction of direct operating costs (excluding fuel) per passenger seat kilometer offered; and, (ii) increase of unit revenues (as measured by passenger seat kilometer offered).

Improvement in TACV’s operational, financial and commercial management as evidenced by: (a) the presentation of its annual balances for 2007, 2008 and 2009 (including audited balances for 2007); (b) the complete clearance of arrears with its private suppliers, and the proper execution of its debt rescheduling agreement with ASA including adherence to the agreed debt service schedule; (c) the establishment of an integrated accounting and receipt collection system; and (d) adoption of a set of appropriate measures by the Board of

Further improvements in TACV’s operational, financial and commercial management as evidenced by: (a) the presentation of the audited annual accounts for 2009 and 2010; (b) the maintenance of zero arrears in the balance for 2010; (c) full operation of the integrated accounting system for the timely preparation of reports; (d) signature of a result-based management contract between the government and TACV; and (e) the adoption of a business plan for 2011-2015 by the TACV

Improvement in TACV’s operational, financial and commercial management as evidenced by: (a) the presentation of its annual balances for 2007, 2008 and 2009 (including audited balances for 2007); (b) the complete clearance of arrears with its private suppliers, and the proper execution of its debt rescheduling agreement with ASA including adherence to the agreed debt service schedule; (c) the establishment of an integrated accounting and receipt collection system; and (d) adoption of a set of appropriate measures by the Board of TACV to

Further improvements in TACV’s operational, financial and commercial management as evidenced by: (a) the presentation of the audited annual accounts for 2008, 2009 and 2010; (b) the maintenance of zero arrears in the balance for 2010; (c) acquisition of an integrated accounting system for the timely preparation of reports.

Triggers for VI and VII badly designed in PRSC V: 1) indicators not actions; 2) identifal forPRSC VI and VII). Improvements in PRSC VI.

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TACV to reduce costs and improve the operational performance such as personnel rationalization measures, the suspension of several costly employee benefits including free airfare allowances for family members and a new sales and distribution policy to increase revenues.

Board. reduce costs and improve the operational performance such as personnel rationalization measures, the suspension of several costly employee benefits including free airfare allowances for family members and a new sales and distribution policy to increase revenues.

Efficiency of Government Poverty Reduction Activities

Improve targeting of social actions via pilot programs.

Approval by the Council of Ministers of a strategy for the implementation of new instruments for targeted safety net.

Dropped: the government decided to consider the area cross-cutting in its poverty reduction strategy

38

Annex 2: Key outcome indicators PRSC V PRSC VI PRSC VII Amount of Government arrears towards its suppliers, agencies and municipalities reduced to zero.

Remaining government arrears (as a % of total arrears recognized in 2005).

Proportion of non-complying sole source contracts reduced to zero.

Weighted average (by assets) of capital adequacy ratio increased above 11 percent.

Weighted average by assets of the capital adequacy ratio (Basel 1) of banks (%).

Debt service coverage ratio of ELECTRA increased above 1.

ELECTRA’s debt service coverage ratio above 1.

ELECTRA’s technical and non-technical losses (as a % of total megawatts generated).

ELECTRA’s technical and non-technical losses (as a % of total megawatts generated).

TACV’s direct operating costs, excluding fuel, per passenger seat-kilometer.

TACV’s revenue- passenger- kilometer (in million of CVE).

Projects and programs for which indicators are tracked by the M&E system (as a % of the total budget).

Projects and programs for which indicators are tracked by the M&E system (as percent of total budget).

Number of years to submit the General Accounts of the State to the Court of Accounts Number of audits prepared by ARAP Average time to close a firm (years) Recovery rate by claimants (creditors, employees, govt.) from insolvent firms (cents per dollar owed)

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Annex 3: Matrix of Indicators

PRSP Policy Area

Results Framework V VI

VII

2008 Base- line 2009

PRSC V 2010

PRSC VI 2011

Latest Available*

Target* Evalu- ation

Good Governance

Macroeconomic Stability

Remaining government arrears (% of total arrears assumed in 2005)

X X X 40 15 0 0 0 S

Amount of arrears of ELECTRA towards its suppliers

X 100 <100 (2010)

Not rated


Number of years between budget execution and completion of audits

X X X 3 3 2 2 2 S

Number of years to submit the General Accounts of the State to the Court of Accounts

X 3 1 <1 <1 S

Number of municipalities, embassies and institutes audited by TdC

X X 19 21 18 12

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U

Procurement

% of non-complying sole source contracts.

X 9.6 0 (2011)

U

Number of staff trained under the strategic plan of DSCP capacity building (cumulative)

X X 0 266 329 401 400 S

Number of staff at the UGAC subject to prior review by DSCP (cumulative)

X 0 5 9 9 (2011)

10 (2011)

S

40

Number of audits prepared by ARAP

X 0 3 >10 >10 S

Government/ State

Modernization

Number of research functions transferred to university.

X 0 2 (2010)

Not rated

Number of DGPOG created and staffed.

X 4 12 12 (2010)

10 (2010)

S

Number of municipalities producing timely accounts.

X 3 21 21 (2010)

21 (2010)

S

Steps towards Implementation of the new career system/ adoption of system

X Not approved

Not approved

Not approved

Not approved

Approved (2010)

U

Number of municipalities included in the Municipal Information System

X X 3 15 18 21 22 22 S

Number of ministries restructured

X 5 10 11 13 15 M.S.

Statistics and M&E

% of household survey data available in Statline (national data website)

X 40 100 100 (2010) 100 (2010)

S

% of project and program for which indicators are tracked by the M&E system.

X X X NA 80 0 100 100 S

Human Capital Enhancement

Vocational Training

% of TSF funds used for TVET delivery.

X 0 0 >75 (2010)

Not rated

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Number of institutions accredited by the Ministry of professional training / TVET System

X X 0 15 22 22 (2011)

22 (2011)

S

Number of students enrolled

X X 4500 4600 2380 1500 6000 U

Competitiveness

Trade/ FDI Trade openness indicator in % of GDP

X 123.7 103.5 105.7 113.9 109.7 110 (2011)

S

Net FDI flows (as % of GDP)

X X 13.4 7.5 6.7 5.6 3.4 8.5 M.U.

Tax System Marginal Tax Rates for businesses.

X X 30 25 25 25 (2011)

25 (2011)

S

New tax incentive system adopted

X No No Yes Yes S

Financial Sector

Weighted average (by assets) of capital adequacy ratio (Basel 1) of the entire system in %.

X X X 9.9 ( includes only onshore banks)

10.7 10.3 13.4 >12 S

Business Climate

Number of days to open a business.

X X 52 24 11 11 11 ≤24 (2011)

S

Cost of property registration.

X X X 7.7 7.6 3.9 3.9 3.7 ≤4 S

Average number of years to close a business.

X >4 NA NA NA NA ≤2 Not rated

Recovery rate by claimants (creditors, employees, govt.) from insolvent firms (cents per dollar owed)

X NA NA NA NA NA 40.0 Not rated

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Infrastructure

Land Management

Number of Regional Plans for Territorial Organization (EROT) homologated (cumulative)

X X X 0 0 3 7 7 (2011)

10 (2011)

M.S.

Number of Municipal Development Plans (PDMs) homologated (cumulative)

X X X 1 1 6 7 14 22 U

Energy Debt service coverage ratio of ELECTRA.

X X X 0.3 0.75 1 NA NA 1.1 Not rated

Technical and non technical losses as % of MGW generation.

X X X 26.5 28 26.1 27 27.8 <25 U

Power generation capacity (in megawatts)

X X 86 90 94 116 >110 S

Renewable energy (as % of total power generated)

X X 3 3 4.8 30 18 S

Transport (air transport company)

Direct operating costs, excluding fuel, per passenger seat-kilometer (CVE)

X X X 7.67 NA 7.91 7.91 (2011) 2.85 (2011)

U

Unit revenues as measured by passenger seat-kilometer (CVE)

X X X 606 720 783 783 (2011) 779 (2011)

S

43

Yield as measured by passenger -kilometer (CVE)13

X 7.23 NA 12.73 8.2 Not rated

Social cohesion

Efficiency of Government

Poverty Reduction Activities

Annual reports published.

x A report on social cohesion GPRSP II axis progress was published in 2010 (relating to 2009)

A report on social cohesion GPRSP II axis progress was published in 2010 (relating to 2009) (2010)

First Report Published (2011)

S

*2012 unless stated otherwise

13 Note: 2012 data not available but this is an indicator for PRSC VII, therefore it cannot be rated.

44

Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members P113306 - Cape Verde - DPL 1/PRSC V

Names Title Unit Responsibility/

Specialty Lending Charles Coste Consultant AFTP4 Ghislaine C. Delaine Senior Statistician DECDG Mamadou Diarrassouba Monitoring & Evaluation Spec. AFTDE Sidy Diop Senior Procurement Specialist AFTPW Maria Manuela Do Rosario Francisco

Senior Economist OPSPQ

Alvaro S. Gonzalez Lead Economist ECSF1 Helene Grandvoinnet Lead Social Development Specia SDV Sidonie Jocktane Executive Assistant AFMGA Olivier J. Lambert Program Manager MIGEA

Ezzeddine Larbi Consultant AFTPR-

HIS

Haroune Ould Sidatt Consultant AFMM

R

Supervision

(b) Staff Time and Cost

P113306 – Poverty Reduction Support Credit (5) Staff Time and Cost (Bank Budget only) Stage No. of staff weeks USD Thousands (including

travel and consultant costs) Lending $111,327.025 FY09 48.05 $331,085.34 FY10 15.69 Total: $442,412.34 Supervision P1212812 – Poverty Reduction Support Credit (6) Staff Time and Cost (Bank Budget only) Stage No. of staff weeks USD Thousands (including

travel and consultant costs) Lending FY10 6.56 $36,423.62 FY11 14.89 $132,933.44

Total: $169,357.06 Supervision

45

P122669 – Poverty Reduction Support Credit (7) Staff Time and Cost (Bank Budget only) Stage No. of staff weeks USD Thousands (including

travel and consultant costs) Lending FY11 12.35 $111,038.56 FY12 14.95 $162,212.92

Total: $273,251.48 Supervision Annex 5. Beneficiary Survey Results N/A

Annex 6. Stakeholder Workshop Report and Results N/A

46

Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR 1. The World Bank’s latest series of Poverty Reduction Support Credits (PRSCs V through VII) was essential in supporting the implementation of the Government’s Second Growth and Poverty Reduction Strategy (spanning the period from 2008 to 2011). The implementation of the strategy faced a particular adverse and challenging macroeconomic environment due to the world financial and economic crisis that impacted Cape Verde’s balance of payments and growth dynamics particularly through a sharp decrease in Foreign Direct Investment. In response, the Government pursued a strategy of anti-cyclical stimulus through an expansion of the public investment program. This strategy pursed key investments in ports, airports, roads, dams, schools, hospitals, and other key infrastructure meant to improve the business environment and achieve socially inclusive growth. 2. The use of the macroeconomic buffers that had been built up in previous years, considering the context of a challenging external environment and Cape Verde’s vulnerability as a small island state, means the close surveillance of macro-fiscal risks and a close coordination of monetary and fiscal/budget policies. To that effect, the PRSC series was an important contribution in supporting and advising towards the maintenance of Cape Verde’s stability and peg policy to the euro whilst enabling authorities to engage in the economic stimulus program. 3. Furthermore, the World Bank’s prominent role in the Budget Support Group (BSG) - made up of the six budget support partners and which is the leading reference forum for policy and technical dialogue between development partners and Cape Verdean authorities - allowed for high level discussions that opened up a series of analytical and advisory assistance avenues and further enhanced donor coordination, harmonization and alignment with national priorities. The PRSC’s continuous monitoring and evaluation can be very much viewed as the “pivot” in the Bank’s relationship with the country. The open and frank dialogue in the several pillars of the operations contributed to the advancement of reforms in the several key areas of good governance. With regards to Public Finance Management, the support to the reform on the improvement of debt management, enhancement of control of SOEs and tax policy advisory assistance, is instrumental in enabling a better control of liabilities and efficiency in revenue collection. Furthermore, the support and technical assistance of the Bank to the National Planning System is ongoing and has been important in advancing key reforms such as the state budget programming methodology and the national investment system, with a heightened emphasis on monitoring and evaluation and the capacitation of the national statistics body, now being rolled out by occasion of the third Growth and Poverty Reduction Support Paper (2012 – 2016). The process of conceiving the GPRSP III also received analytical inputs from the Bank from the continuous dialogue in the BSG Forum under the PRSC series, elaboration of the Country Economic Memorandum, and the ensuing consensus on the structural challenges facing the Cape Verdean economy going forward. 4. The areas of public procurement, competitiveness and trade have earned significantly from the Bank’s technical assistance through a dedicated Small and Medium Enterprise Capacity Building and Economic Governance project and the PRSC’s monitoring and evaluation and positive “pressure” on associated triggers. The overhaul of the whole public procurement legislation in order to adapt it to international standards and the creation and capacitation of the

47

Public Procurement Regulatory authority were key advances that took place under the PRSCs umbrella. In addition, the reform of the Investment Code and Tax Benefit diplomas were fundamental to reverse discretionary aspects and lack of return of certain benefits given out to FDI projects. 5. The infrastructure pillar was the source to some of the most difficult dialogue in the PRSC context between the Bank and authorities considering that progresses specifically in the energy and transport sectors were deemed insufficient up to 2010. Nonetheless, since then progress in the state utility ELECTRA is noticeable, a multi pillar restructuring program is now in full effect with the support of a credit of the International Bank for Reconstruction and Development. The reform aims to tackle chronic issues in the sector such as energy production capacity and the reduction of technical and commercial losses in distribution. In the transport sector, progress has been less satisfactory since the state airline is still financially unsound and loss making, nonetheless the change of management has marked the first steps towards a reversal and the close support of the Bank’s transport project – now to be renewed in the context of the new Country Partnership – will be instrumental in supporting the forthcoming restructuring. 6. In conclusion, the World Bank’s PRSCs were vital in supporting the Government’s agenda and maintaining macroeconomic stability during a difficult and volatile context. The associated dialogue on the analytic and advisory assistance remains critical since Cape Verde’s challenge is now to manage a transition from a strong public investment stimulus to a private sector led growth model. Such challenge will require key reforms to be implemented in the coming years under the GPRSP III, namely labor market flexibility, continuous business environment improvement, better utility and state enterprise performance, high value and market aligned technical and vocational education and training, amongst others. The World Bank as the lead coordinator of the BSG since early 2012 is expected to be a key enabler and contributor to this ambitious reform agenda through a renewed PRSC series.

Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders N/A

48

Annex 9. List of Supporting Documents PRSC V: Program Document: Fifth Poverty Reduction Support Credit. Report number 51426-CV. PRSC VI: Program Document: Sixth Poverty Reduction Support Credit. Report number 56183-CV. PRSC VII: Program Document: Sixth Poverty Reduction Support Credit. Report number 65183-CV. JSAN: Joint ISA-IMF Staff Advisory Note of the Second Poverty Reduction Strategy Paper. Report number 43927-CV. CPS: Country Partnership Strategy for the Republic of Cape Verde for the Period FY09-12. Report number 47750-CV. PEMFAR: Cape Verde Public Expenditure Management and Financial Accountability Review. May 2012. Analytical Underpinnings:

PRSC V:

Poverty Assessment (2008) / QUIBB (Questionário dos Indicadores Básicos de Bem-estar - Unified Questionnaire of Basic Wellbeing Indicators) Poverty Update (2009) Public Expenditure Review (PER, 2006) - Report No. 34523 Public Expenditure Review Update (2008), “Cape Verde: The Challenge of Increasing Fiscal Space to Meet Future Pressures” Cape Verde, Improving the Performance of the State: Governance and Public Management Public Expenditure and Financial Accountability (PEFA) Assessment Financial Sector Assessment Program (FSAP) Tax incentives by IMF and PFD (2008) Investment Climate Assessment (2006) - Report no. 38367 Cape Verde’s Insertion in the Global Economy - Diagnostic Trade Integration Study (DTIS) for the Integrated Framework for Trade-related Technical Assistance to the Least Developed Countries (2009) Tourism Satellite Accounting (World Travel and Tourism Council, 2008) Fisheries Sector Strategy - Report no. AAA21-CV Cost of Insularity Funded by ADB (Draft, 2007) Governance - Role of State ESW (3/04) Preliminary analysis of Civil Service Database (2005)

49

Social Protection Strategy (2005) Country Financial Accountability Assessment (CFAA, 2003) Country Procurement Assessment Review (CPAR, 2004) - Report no. 40412

PRSC VI:

Electra; From Recovery to Sustainability Study -Subnational Technical Assistance Program (SNTA) - Public-Private Infrastructure Advisory (PPIAF) (2010 Forthcoming) Cape Verde: Initial Assessment of the Formal Labor Market (2010) Cape Verde: Debt Management Performance Assessment DeMPA, (2010) Cape Verde: Joint World Bank – IMF Debt Sustainability Analysis (2009) Cape Verde: Enhancing Planning to Increase Efficiency of Public Spending. Public Expenditure Review (2009) Cape Verde’s Insertion in the Global Economy - Diagnostic Trade Integration Study (DTIS) for the Integrated Framework for Trade-related Technical Assistance to the Least Developed Countries (2009) Financial Sector Assessment Program (FSAP) (2009) Public Expenditure and Financial Accountability (PEFA) 2007 Doing Business 2010: Comparing Regulation in 183 countries (2009) Cape Verde: The Challenge of Increasing Fiscal Space to Meet Future Pressures (2006) Investment Climate Assessment (2006) - Report no. 38367 Cape Verde: Country Economic Memorandum (Forthcoming, 2011)

PRSC VII

Cape Verde: Country Economic Memorandum (2013, Draft of 2011) Cape Verde: Inter-island Transport Study (Forthcoming, 2011) Electra; From Recovery to Sustainability Study -Subnational Technical Assistance Program (SNTA) - Public-Private Infrastructure Advisory (PPIAF) (Forthcoming, 2011) Cape Verde: Higher Education (Forthcoming, 2011) Cape Verde: Country Partnership Strategy Progress Report (2011) Doing Business 2011: Cape Verde: Making a Difference for Entrepreneurs Initial Assessment of the Formal Labor Market (2010) Doing Business 2010: Comparing Regulation in 183 countries Cape Verde: Enhancing Planning to Increase Efficiency of Public Spending. Public Expenditure Review (2009) Cape Verde’s Insertion in the Global Economy - Diagnostic Trade Integration Study (DTIS) for the Integrated Framework for Trade-related Technical Assistance to the Least Developed Countries (2009) Financial Sector Assessment Program (FSAP) (2009)

São Domingo

Santa Catarina

Santa Maria

Espargos

Norte

Ribeira BravaRibeira Brava

Povocão Velha

Lajes(1803 m)

Mt. Fogo(2,829 m)

BOA VISTA

BRAVA

MAIO

MOSTEIROS

PAÚL

PORTONOVO

TARRAFAL

SAL

SANTA CATARINASANTA CRUZ

SÃO MIGUEL

SÃO DOMINGOS

PRAIA

SÃO FILIPE

SÃO NICOLAU

SÃO VINCENTE

RIBEIRAGRANDE

RIBEIRA BRAVA

SANTA CATARINADO FOGO

SÃO LOURENÇODOS ÓRGÃOS

RIBEIRA GRANDEDE SANTIAGO

SÃO SALVADORDO MUNDO

Ribeira da Cruz

Ribeira GrandeVila das Pombas

Porto Novo

MadeiralCalhau

Tarrafal

Sal-Rei

Tarrafal

Santa CruzVila do Maio

São Domingo

Santa Catarina

SãoFilipe

Furna

Mosteiros Igreja

Santa Maria

Espargos

Norte

Ribeira Brava

Mindelo

São Pedro

Preguica

Povocão Velha

PRAIA

AT L A N T I C O C E A N

W I N D WA R D I S L A N D S

L E E WA R D I S L A N D S

Santo Antão

São Vicente

Ilhéu BrancoIlhéu Raso

Santa Luzia

São Nicolau

Sal

Boa Vista

MaioSão Tiago

Fogo

Brava

Ilhéus DoRombo

Lajes(1803 m)

Mt. Fogo(2,829 m)

17˚N

16˚N

17˚N

16˚N

15˚N15˚N

23˚W24˚W25˚W

23˚W24˚W25˚W

CAPEVERDE

0 10 20

0 10 20 30 Miles

30 Kilometers IBRD 33383R

MAY 2013

CAPE VERDECITIES AND TOWNS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

CONCELHO (MUNICIPALITY)BOUNDARIES

This map was produced by the Map Design Unit of The World Bank.The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

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