REPUBLIQUE OF CAPE VERDE POVERTY REDUCTION STRATEGY

SCCD: G. G.

AFRICAN DEVELOPMENT FUND Language: English Original: French imited

REPUBLIQUE OF CAPE VERDE

POVERTY REDUCTION STRATEGY SUPPORT PROGRAMME I

PHASE I (PRSSP-I)

APPRAISAL REPORT

OSGE GOVERNANCE, ECONOMIC AND FINANCIAL MANAGEMENT DEPARTMENT OCTOBER 2006

TABLE OF CONTENTS List of Annexes ; Programme Information Sheet; Currency Equivalents; Weights and

Measures; Fiscal Year; Acronyms and Abbreviations ; Matrix of Programme Outcomes i-ix

Executive Summary x-

xiv 1. INTRODUCTION 1 1.1 Origin and History of Programme 1 1.2 Performance of Similar Operations 2 2. SOCIOECONOMIC CONTEXT 4 2.1 Macroeconomic Performance 4 2.2 Previous Reform Efforts 5 2.3 Persistent Problems and Reform Requirements 9 3. POVERTY REDUCTION STRATEGY 12 3.1 Medium and Long-Term Objectives of GPRSP 12 3.2 Sector Goals Pursued in Key Sectors Supported by Budgetary Support 12 3.3 Monitoring Mechanism and Major Indicators Selected 12 3.4 Overall Assessment and Monitoring of Progress 14 4. CONFORMITY WITH BUDGET SUPPORT 15 4.1 Political and Economic Stability and Government’s Commitment 15 4.2 Technical Pre-Requisites 15 5. BANK GROUP COUNTRY ASSISTANCE STRATEGY 17 5.1 Priority Areas of CSP and Strategic Context of Programme 17 5.2 Complementarities and Convergence of Strategy with other Donors 18

6. POVERTY REDUCTION STRATEGY SUPPORT PROGRAMME -I (PRSSP-I) 20 6.1 Programme Design, Formulation and Rationale 20 6.2 Programme Objective and Description 21 6.3 Programme Requirements and Financing 26 7. POVERTY REDUCTION LOAN AND GRANT 27 7.1 Purpose of ADF Loan and Grant 27 7.2 Contribution of ADF Loan and Grant 27 7.3 Procurement of Goods and Services 32 7.4 Disbursement 34 7.5 Programme Implementation and Monitoring 34 7.6 Coordination of Aid With Other Donors 36 8. JUSTIFICATION, IMPACTS AND RISKS 36 8.1 Justification of Programme 36 8.2 Impact of Programme 37 8.3 Major Risks 38 9. CONCLUSION AND RECOMMENDATIONS 39 9.1 Conclusion 39 9.2 Recommendations 39 The present report has been prepared following an appraisal mission in Cape Verde from 22 August to 2 September 2006 by Messrs. S. KONE, Country-Economist, ORWB and A. TONATO, System Analyst, CIMM.1. The preparation mission was conducted in Cape Verde from 29 May to 10 June 2006 by Messrs. S. KONE and a macroeconomist consultant. A joint mission of the Budgetary Support Group (World Bank, ADB, EU and Netherlands) was also held in Cape Verde from 17 to 26 May 2006 in which Messrs. S. KONE and S.L. CISSE, Financial Expert, SNFO. Further enquiries on this programme should be referred to J.K. LITSE, Director, ORWB (Ext. 2047), I. LOBE NDOUMBE, Acting Director, OSGE (Ext. 2163) and A. ZEJLY, Acting Division Manager. OSGE.2 (Ext.2127).

LIST OF ANNEXES 1. Administrative Map of Cape Verde 2. Letter of Development Policy 3. Matrix of Programme Measures 4. Major Macroeconomic Indicators 2002-2009 5. Table of Central Government Fiscal Operations 2002-2009 6. Monetary Survey 2002-2009 7. Balance of Payments 2002-2009 8. List of Non-eligible Goods 9. Monitoring of Implementation of GPRSP Indicators: Situation in 2005 10. GPRSP Monitoring-Evaluation Information System Chart 11. Result-Based CSP 2005-2007 Framework 12. Institutional Support to the GPRSP Monitoring-Evaluation System Detailed Costs 13. Institutional Support to GPRSP Monitoring-Evaluation System : Schedule 14. Institutional Support to GPRSP Monitoring-Evaluation System : Terms of Reference of Administration and Finance Officer 15. Summary of Operations of Bank Group Active Portfolio

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PROGRAMME INFORMATION SHEET

DATE : September 2006 The information given hereunder is intended to provide some guidance to prospective suppliers, contractors, consultants and all persons interested in the procurement of goods and services for projects approved by the Boards of Directors of the Bank Group. More detailed information and guidance should be obtained from the Executing Agency of the Borrower. 1. Country : Cape Verde 2. Name of Programme : Poverty Reduction Strategy Support Programme I (PRSSP I)

3. Borrower : Government of Cape Verde 4. Location : Countrywide 5. Executing Agency : Ministry of Finance and Public Administration (MFAP) 6. Programme Description : The programme comprises 2 components :

i) Consolidation of public finance reform; ii) GPRSP monitoring-evaluation capacity

building 7. Total Cost : N.A. 8. Source of Loan and Grant : ADF 9. Amount of Loan : UA 3.39 million Amount of Grant : UA 0.75 million 10. Other Sources (2006-2007) : IDA : UA 14.00 million E U. : UA 6.48 million The Netherlands : UA 12.95 million 11. Date of Approval : November 2006 12. Start-up Date and Duration : December 2006 for 18 months 13. Procurement of Goods and Services : In accordance with the procedure adopted under the

budgetary support, the national rules on procurement of goods and services will apply taking into account, improvements made to the public procurement system through the CPAR action plan reforms. Regarding the grant, the procurement of goods and services and consultancy services financed by the ADF will be based on the Bank’s rules of procedure.

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14. Disbursement of Loan : The loan will be disbursed in a single tranche of UA 3.39 million subject to the fulfilment by the borrower of the relevant conditions precedent.

15. Disbursement of Grant : A special account will be opened to receive the resources

of the institutional support grant, which will be specifically used to build the capacities of the GPRSP monitoring-evaluation system. Expenditures below UA 20,000 will be made from the special account. Disbursements on contracts will be by the direct payment to suppliers based on contracts signed following invitations for competitive bids.

16. Consultancy Services Required : N/A. for loan. Required, in conjunction with the grant to be used to

finance the institutional support to the GPRSP monitoring-evaluation system, for: (i) the organization of eight (8) training workshops in Cape Verde ; (ii) technical assistance in information system; (iii) short-term training (4 weeks) outside Cape Verde of four (4) administration officers; and, (iv) administrative and financial management of institutional support.

CURRENCY EQUIVALENTS September 2006

UA 1 = SDR 1 UA 1 = US$ 1.48852. UA 1 = 1.15829 Euro UA 1 = CVE 128.163 WEIGHT AND MEASURES

Metric System

Fiscal Year

1st January - 31 December

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ACRONYMS AND ABBREVIATIONS ABEDA : Arab Bank for Economic Development in Africa ADB : African Development Bank ADF : African Development Fund ANMCV : National Association of Municipalities of Cape Verde ARCA VERDE : National Shipping Line ARE : Economic Regulatory Agency ARFA : Food and Drug Regulation and Supervision Agency BCA : Banco Commercial Atlantico BCN : Banco Caboverdeano de Negocios (Merchant Bank of Cape Verde) BCV : Central Bank of Cape Verde BDEO : Official Statistical Database BDMP : Database on Policies and Projects BOT : Build Operate and Transfer BTCV : Banco Totta de Cabo Verde BWI : Bretton Woods Institutions CABMAR/CABNAV : Shipyards Company CAS : Country Assistance Strategy CECV : Caixa Economica de Cabo Verde CEMT : Medium-Term Economic Framework CFAA : Country Financial Accountability Assessment CGE : Central Government General Account CNRP : National Poverty Reduction Council CPAR : Country Procurement Assessment Report CPLP : Community of Lusophone States CRRP : Regional Council for Poverty Reduction CS-DRMS : Commonwealth Secretariat Debt Review Management System CSO : Civil Society Organization CSP : Country Strategy Paper CVE : Cape Verde Escudo DBSL : Development Budget Support Loan DGCI : General Directorate of Indirect Contributions DGO : General Directorate of Budget DGP : General Directorate of Planning DGT : General Directorate of Treasury EC : European Commission ECOWAS : Economic Community of West African States EDRF : Household Expenditure and Income Survey EMPA : Food Imports and Distribution Enterprise EMPROFAC : Pharmaceutical Products Importation and Distribution Enterprise ENAPOR : Ports Operator EU : European Union FDI : Foreign Direct Investment FEF : Financial Equilibrium Fund GAT : Transition Support Group GCAB : Budget Support Advisory Group GDDS : General Data Dissemination System GDP : Gross Domestic Product GEP : Department of Studies and Planning GPRSP : Growth and Poverty Reduction Strategy Paper HDI : Human Development Index ICF : Institute of Women’s Condition ICTI : Telecommunications Regulation Agency IEFP : Employment and Vocational Training Institute IGF : General Inspectorate of Finances

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IMF : International Monetary Fund IMP : Ports and Maritime Transport Agency INE : National Institute of Statistics INTERBASE : Refrigerated Storage Company I-PRSP : Interim Poverty Reduction Strategy Paper LDC : Least Developed Countries M.S. : Ministry of Health MAA : Ministry of Environment and Agriculture MAECC : Ministry of Foreign Affairs and Cooperation and Communities ACRM : Alternative Conflict Resolution Mechanisms MCC/MCA : Millennium Challenge Corporation/Account MDG : Millennium Development Goal MECC : Ministry of Economy, Growth and Competitiveness MEES : Ministry of Education and Higher Education MFAP : Ministry of Finance and Public Administration MIC : Middle Income Country MOU : Memorandum of Understanding MTEF : Medium-Term Expenditure Framework MTFS : Ministry of Labour, Family and Solidarity NDP : National Development Plan NEAP : National Environmental Action Plan NEPAD : New Partnership for Africa’s Development NGO : Non-Governmental Organization NOSI : Information Society Operational Nucleus NTIC : New Information and Communication Technologies PARE : Economic Reform Support Programme PER : Public Expenditure Review PIP : Public Investment Programme PPP : Public-Private Partnership PRGF : Poverty Reduction and Growth Facility PRSC : Poverty Reduction Support Credit PSI : Policy Support Instrument CWIQ : Core Welfare Indicators Questionnaire RAFE : Government Financial Administrative Reform SDR : Special Drawing Rights SIDS : Small Island Developing State SIGOF : Integrated Budget Management System SME/I : Small and Medium-Scale Enterprise/Industry SMTEF : Sectoral Medium Term Expenditure Framework SOA : System of Observation and Analysis STAD : Technical Secretariat for Development Support TACV : Cape Verde National Airline TdC : Court of Auditors TRANSCOR : Urban Municipal Transport UA : Unit of Account UNDP : United Nations Development Programme UNS : United Nations System US : United States VAT : Value-Added Tax

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MATRIX OF STRATEGIC OUTCOMES OF THE POVERTY REDUCTION STRATEGY SUPPORT PROGRAMME I (PRSSP-I)

Country : Cape Verde Date of Recap : October 2006 Design Team : S. KONE, Country Economist, ORWB

Hierarchy of Objectives (HO)

Expected Outcomes Impact (Beneficiaries)

Performance Indicators Objectively Verifiable Indicators and Time-frames Risk Assumptions

1. Overall Objective Sustain strong economic growth to reduce poverty

Long-Term Outcomes Improvement of the well-being of the population

Cape Verdean Population (487,118)

Percentage of population living below poverty line

The percentage of the poor population lowers significantly in 2007 below its 2004 level (37%).

2. Programme Objectives Contribute to competitiveness and growth by strengthening the macroeconomic framework and effectiveness of Government interventions 2.1 Consolidation of public finance reforms

Medium-Term Outputs Macroeconomic stability and growth Improvement of budget programming and budget allocation Improvement of budget execution Improvement of debt management Improvement of internal and external control Strengthening of decentralization

Private enterprises Population, notably rural population

Real GDP growth rate Major macroeconomic indicators Percentage of education and health budget in Government general budget Number of ministries with an MTEF Number of ministries operating with the deconcentrated system budget execution Time taken to formulate CGEs Number of autonomous institutions participating in the consolidation of treasury accounts Number of IGF missions Number of TdC instruments Number of instruments adopted Number of town halls and Government officials trained Number of town halls computerized

Real GDP growth of 5.8% in 2005, 5.5% in 2006 and 6.0% in 2007 Average inflation rate of 0.4% in 2005 and 0.2% in 2007 Public debt decreases from 88.1% of the GDP in 2005 to 77.1% in 2007 Overall deficit (excluding grants) falls from 16.1% of the GDP in 2006 to 13.2% in 2007 The share of Education increases from 22% in 2005 to 23% in 2007 The share of health increases from 6.5% in 2005 to 7.0% in 2007. Two (2) ministries in 2005 and five (5) in 2007 Over three (3) in 2005 and over six (6) in 2007. 6 months at the most after the end of the fiscal year The number increases from 2 in 2005 to over 15 in 2005 Inspection missions in the technical ministries, autonomous institutions and municipalities increase from 35 in 2005 to over 42 in 2007; The organic law of the TdC passed in 2006 Implementing orders passed in 2007 The enabling legislation on decentralization and decentralized cooperation passed in 2007

Government commitment to capacity-building External shocks Mitigative measures: - Policy dialogue as

part of budget support;

- Policy dialogue under PSI 2006-2009 with IMF

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2.2 Building capacities of GPRSP monitoring-evaluation system

Strengthening of effectiveness of monitoring-evaluation Strengthening of capacities of the observation and analysis system ( SOA) Improvement of information system

Number of reports produced Number of persons trained Number of databases Number of surveys conducted Sources : National statistics, Budget Act, budget execution reports (CGE), monitoring of GPRSP, IGF and TdC, CFAA, CPAR and donors ; expenditure reviews

Number of workers trained in 2007 (at least 100) At least half of town halls are computerized in 2007 GPRSP progress report produced regularly 20 workers of DGP/STAD, GEPs of 8 target technical ministries, DGO and DGT trained in 2007 sectoral database of BDMP completed for the 4 priority ministries (MEES, MS, MTFS, MAA) in 2007 survey conducted in 2007

Completion of organizational structure of the STAD

3. Outputs 3.1 Formulation of MTEF and sectoral MTEFs consistent with GPRSP priorities 3.2 Budget execution is deconcentrated 3.3 Procurement system improved 3.4 Debt management improved 3.5 Internal and external control 3.6 Decentralization is strengthened

3.7 Capacities of GPRSP monitoring-evaluation are enhanced

Short-Term Outputs MTEF/sectoral MTEF are formulated Financial comptrollers and delegated payment officers are appointed Adoption of procurement code Better control over debt level The number of IGF and TdC inspections increases and legal framework is strengthened Capacities and finances of town halls are enhanced Managerial executives of DGP/STAD, GEP (8 target ministries), INE, DGO and DGT’s are trained BDMP available CWIQ survey conducted

Priority ministries DGP /DGPO Administration and private sector Administration and private sector Administration Municipalities DGP/STAD GEP (8 target ministries), INE, DGO and DGT

Number of sectoral MTEFs Number of ministries operating under the deconcentrated budget execution system Public procurement code Debt/GDP ratio IGF Resources Td C Resources Number of TdC acts % of Gov’t resources transferred to town halls (FEF) Number of computerized town halls Number of staff trained Number of sectoral databases available Number of surveys

MTEF of five (5) ministries formulated in 2007

Two (2) ministries in 2005 and over six (6) in 2007 execute their budgets Appointment decision of delegated comptrollers and payment officers in ministries The code is adopted in 2006 and implementing orders passed in 2007 Debt ratio decreases from 88% in 2005 to 77% in 2007 Budgetary allocations of IGF and TdC increase TdC organic law passed in 2006 7% in 2005 and over 10% in 2007 About 10 in 2007 20 workers trained in 2007 on monitoring-evaluation 4 priority ministries available in 2007 -2 survey conducted in 2007

Government’s commitment to capacity building External shocks Completion of STAD organizational structure Mitigative measures : - Policy dialogue

under budgetary support;

- Policy dialogue

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Sources : National statistics, Budget Acts, budget execution (CGE), GPRSP monitoring, IGF and TdC, CFAA, CPAR and donors reports ; expenditure reviews

under PSI 2006-2009 with IMF

Financial Resources (2006-2007)

-ADF : UA 4.14 million -IDA : UA 14.0 million -EU : UA 6.48 million -Netherlands: UA 12.95 million

Adequate financing of programme.

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MATRIX OF STRATEGIC OUTCOMES OF THE POVERTY REDUCTION STRATEGY SUPPORT PROGRAMME I (PRSSP-I)

Country : Cape Verde Date of Recap : October 2006 Design Team : S. KONE, Country Economist, ORWB and A. TONATO, System Analyst CIMM.1



Performance Indicators Objectively Verifiable Indicators and Time-frames

Risk Assumptions

1. Overall Objective Sustain strong economic growth to reduce poverty

Long Term Outcomes Improvement of well-being of population

Cape Verdean Population (487,118),

Percentage of population living below poverty line

Percentage of poor population reduced significantly in 2007 below it 2004 level (37%).

2. Objectives of institutional support Contribute to the implementation of reforms and achievement of GPRSP goals 2.1 Support to planning

under GPRSP 2.2 Strengthening of information system

Medium-Term Outcome Improvement of GPRSP indicators Better monitoring-evaluation of GPRSP & MDG Enhancing effectiveness of monitoring-evaluation. Building the capacities and skills of structures involved in implementation of GPRSP Better monitoring of priority projects and programmes of GPRSP Improvement of skills in management of information system

Population DGP/STAD, GEP (8 target ministries), INE, DGO, DGT DGP/STAD, GEP (8 target ministries), INE, DGO, DGT

37 major indicators of GPRSP GPRSP Reports Number of persons trained Number of periodic surveys conducted Number of sectoral databases of the BDMP Number of persons trained Sources : CWIQ survey report (INE) DGP/STAD quarterly reports, CFAA, donor reports, IGF and independent audit reports

The objectives or targets of 37 GPRSP major indicators are achieved in 2007 Progress and performance reports and final report of GPRSP prepared in 2006-07 20 persons trained (2 DGP/STAD, 2 for each of the 8 target ministries, 1 DGO and 1 DGT) in 6 themes : MTEF, GAR, operational planning and budgeting of public programmes and projects, evaluation of public programmes and projects, implementation monitoring and performance chart; and, in MS- project for operational planning, monitoring and control. CWIQ-2 survey conducted in 2007 by INE 4 sectoral BDMP databases operational in 2007 for priority ministries (MEES, MS, MTFS and MAA) 3 DGP/STAD workers and 1 INE worker undergo short course (4 weeks) outside on the building of GPRSP monitoring-evaluation system 20 workers trained (2 DGP/STAD, 2 INE, 2 for each of 8 target ministries) in construction of GPRSP monitoring-evaluation system by the 4 national trainers trained abroad 20 workers trained (2 DGP/STAD, 2 INE, 2 each of 8 target ministries) in 2 themes : management and processing of data on monitoring-evaluation and data processing and performance indicators

Government’s commitment to capacity building Availability of financial resources Completion of setting up of STAD organizational structure

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Performance Indicators Objectively Verifiable Indicators and Time-frames

Risk Assumptions

3. Outputs objectives of GPRSP are achieved Effectiveness of GPRSP monitoring-evaluation enhanced Skills of structures involved strengthened Structures involved provided with computer and office equipment GPRSP indicators and MDGs produced and monitored Proper monitoring of GPRSP priority projects

Short-term outputs Improvement of GPRSP indicators Monitoring and performance reports produced regularly Training courses provided Equipment procured Documentation on monitoring-evaluation available CWIQ survey conducted by INE BDMP operational International technical assistance provided Training courses provided

Population DGP/STAD, GEP (8 target ministries), INE, DGO, DGT DGP/STAD, GEP (8 target ministries) INE DGP/STAD, GEP of 4 priority ministries (MEES, MS, MTFS and MAA) and INE Administration

Discrepancies between GPRSP objectives and outputs Number of reports Number of thematic training workshops Number of computers, desks, printers, photo-copying machines ; UPS, scanners and cupboards Number of documents available Number of surveys Number of sectoral databases Number of TA months Number of ministries linked to BDMP Number of training courses abroad on thematic information system Number of training courses in Cape Verde on thematic information system Sources : CWIQ survey report (INE) DGP/STAD quarterly reports, CFAA, donor reports, IGF and independent audit reports

37 GPRSP major indicators produced, monitored and analyzed regularly GPRSP progress and performance report - 6 training workshops (MTEF, GAR, budgeting and evaluation of programmes and projects, implementation monitoring and performance chart; and, in MS- project for operational planning, monitoring and control) - 16 micro-computers, 16 UPSs and 16 computer desks (2 for each of 8 target ministries) ; - 10 notebooks, 1 photocopying machine, 1 scanner, 1 server/ BDMP software and wiring of network (DGP/STAD); - 5 printers (1 DGP/STAD and 4 priority ministries (MEES, MS, MTFS, MAA) ; - 6 cupboards (2 DGP/STAD and1 for each of the 4 priority ministries) ; - Procurement of documentation (DGP/STAD) CWIQ survey conducted in 2007 4 sectoral databases built and linked to DGP and BDEO 2 TA for4 months 4 priority ministries linked to BDMP - 2 training workshops (performance indicators and management and processing of data on monitoring-evaluation) -Short-training abroad (3 managerial staffs of DGP/STAD and 1 from INE) - Workshop on construction of GPRSP monitoring-evaluation system led by the 4 national trainers trained abroad

Government’s commitment to capacity building Availability of financial resources Completion of setting up of STAD organizational structure

Financial Resources -ADF : UA 0.75 million -Gvt : UA 0.11 million

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EXECUTIVE SUMMARY Context 1. Since its political and economic liberalization in the early 1990s, Cape Verde has achieved significant progress in the area of democracy, good governance, macroeconomic management and structural reforms with the support of its development partners including the Bank. These achievements, combined with the sizeable remittances by non-resident Cape Verdeans, resulted in a steady growth in per capita income and an improvement in most social indicators. Consequently, the United Nations adopted Resolution 59/209, in December 2004, upgrading Cape Verde from the group of the least developed countries (LDC) to that of middle income countries (MIC) starting from 2008. However, Cape Verde must still overcome numerous challenges such as the vulnerable situation of the economy, constraints related to its insular nature, as well as the alarming level of unemployment (24%) and poverty that affects 37% of the population. 2. In the area of reforms, the Bank co-financed three balance of payments support operations in Cape Verde in close coordination with the Bretton Woods Institutions (BWIs) and other partners: PARE I (1997-2000), PARE II (2002-2004) and PARE III (2004-2005). These programmes were successfully implemented. Notable progress was made in macroeconomic stabilization, structural reforms, development of policy instruments and strategic papers, notably Public Expenditure Review (PER), Country Financial Accountability Assessment (CFAA) and the Country Procurement Assessment Report (CPAR). Furthermore, the Government adopted the GPRSP in September 2004, to intensify the fight against poverty. 3. However, despite the adjustment efforts made, the budget deficit and the financing requirements of Cape Verde, exacerbated by the rise in oil prices, will reach structurally high levels in the coming years, particularly in the context of implementation of the GPRSP. To address this challenge, the support of donors will be essential to consolidate the reforms and intensify the fight against poverty. The GPRSP is backed by budgetary support from the World Bank, Netherlands and the EU which have set up the Budget Support Advisory Group (GCAB), under a memorandum of understanding (MOU) signed in April 2005. The Bank joined the GCAB in 2006. Furthermore, the IMF approved in August 2006, a medium-term programme 2006-2009 supported by its new non-financial instrument, namely, the Policy Support Instrument (PSI). The interventions of other donors, which are set within the framework of the GPRSP, are linked to its main components. Following the request from the Government and pursuant to the orientations of the CSP 2005-2007, the Bank proposes to contribute to the implementation of the GPRSP reforms through the PRSSP-I (2006-2007). The Bank’s intervention will fall under the GCAB coordination. The present operation is the Bank’s first budgetary support to Cape Verde. Programme Objectives and Description 4. The main objective of the PRSSP-I is to support economic growth and poverty reduction by contributing to the implementation of the GPRSP 2005-2007 reforms. The specific objective is to contribute to the competitiveness of the economy and private sector development, through the consolidation of the macroeconomic framework and strengthening the effectiveness of the Government in the area of public finance management. Under this programme, the Bank will provide institutional support to the GPRSP monitoring-evaluation system, with a view to effectively supporting the Government’s implementation of the

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reforms. This support is in line with the priorities of CSP 2005-2007 that highlights the promotion of the competitiveness of the economy and improvement of private sector activities of which macroeconomic stability and the strengthening of the effectiveness of Government interventions constitute the key ingredients. It is also consistent with the Government’s overall strategy to promote the competitiveness of the economy and development of the private sector as reflected in the GPRSP. 5. Thus, the PRSSP I consists of two components: (i) consolidation of public finance reforms; and, (ii) building the capacities of the GPRSP monitoring-evaluation system. The first component aims to consolidate the budgetary reforms in order to enhance the effectiveness of Government’s interventions and support the macroeconomic stability needed for the competitiveness of the economy and improvement of the private sector activity framework. It will contribute to creating the conditions needed for growth, employment creation and, consequently, poverty reduction. The second component of the PRSSP-I is institutional support aimed at building the capacities of the GPRSP monitoring-evaluation system. It will contribute to creating the appropriate conditions for achieving the growth and poverty reduction goals of the GPRSP. The institutional support will also help better sustain dialogue on the allocation of adequate resources to the monitoring-evaluation system. Justification of the Use of Budgetary Support 6. The reforms pursued, particularly since 2001, have considerably improved the framework for setting up budgetary supports. Progress in the management of public resources, notably since the conducting of the PER and CFAA in 2003 and the CPAR in 2004, have led the major donors to use budgetary support as the instrument of assistance to reform programmes. To this progress may be added the political and social stability the country has been enjoying since the political and economic liberalization in 1990/91. The Government has also undertaken, since the formulation of the I-PRSP, to promote budgetary support as the preferred method of intervention by its development partners for the execution of the annual budget. To this end, it has put in place MTEFs at the central and sectoral level in conformity with the priorities of the GPRSP. The country’s major development partners participate in the implementation of the GPRSP, notably through supports to the Government budget within a harmonized framework. The completion reports of previous reform programmes co-financed by the Bank have also helped draw lessons that advocate the use of budgetary support. Programme Requirements and Financing 7. The overall balance (excluding grants) shows a deficit of CVE 15.81 billion in 2006 and CVE 13.88 billion in 2007. The financing identified amounts to CVE 6.99 billion in 2006 and CVE 4.49 billion in 2007. This indicates a financing gap of CVE 8.82 billion in 2006 and CVE 9.39 billion in 2007, representing a total amount equivalent to UA 142.05 million, to be covered through budgetary support and project support provided by development partners. The cumulative contribution of the GCAB amounts to UA 37.57 million, equivalent to 26.45% of the total financing required. The financing of the PRSSP-I of the ADF of UA 4.14 million represents 11.02% of the GCAB contributions.

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Programme Implementation and Monitoring 8. Thee PRSSP-I will be implemented through the GPRSP national monitoring-evaluation system, coordinated at the technical level by the DGP/STAD at the MFAP and comprising the INE and the GEPs of sector ministries. The DGP/STAD will be the executing agency of the programme and the PRSSP-I institutional support programme. Overall, the national system is expected produce the following monitoring-evaluation elements: (i) the annual implementation report of the GPRSP; (ii) periodic reports on the MDGs, with the support of the UN system; (iii) annual monitoring of the budget through expenditure reviews ; (iv) annual statement on execution of sectoral budgets and definition of objectives and targets by the priority technical ministries; (v) periodic INE household surveys, including the CWIQ survey, to monitor the trend of poverty and access to services; (vi) surveys among stakeholders, qualitative monitoring of the performance of the Government and an analysis of the impact of poverty to be carried out by the STAD ; (viii) an analysis of fiduciary performance; and (ix) sectoral studies. In particular, the Government will produce timely quarterly budget execution accounts, annual CGE and progress reports on the PRGSF which will help keep a close watch over the implementation of the programme. 9. Also, the DGP/STAD will prepare and forward to the ADF specific quarterly reports on the progress of the PRSSP-I institutional support. It will keep an account to monitor and control the proposed expenditures by category and the financial evaluation of the support. The ADF will commission an auditing firm to set up the system of accounting and the auditing for two institutional support audits. The STAD Coordinator will undertake the technical coordination under the authority of the DGP. In discharging its daily duties, the DGP/STAD will be assisted by an administration and finance officer recruited from a shortlist and paid from the ADF resources. The supervision missions will ascertain the smooth operation of activities in relation to outputs. 10. Furthermore, the Bank will monitor the programme through coordination with the GCAB (ADB, World Bank, EU, and the Netherlands). In this regard, the measures, performance indicators and conditions precedent to disbursement have been harmonized. The second joint mission of the GCAB is scheduled for December 2006. Disbursement of the PRSSP-I resources will follow this mission. Also, a joint public expenditure review will be conducted in 2007. Furthermore, the GCAB will draw on the IMF’s PSI 2006-2009 reviews, notably with regard to macroeconomic issues. Procurement of Goods and Services 11. In accordance with the procedure adopted under budgetary support and in line with the other GCAB partners, the national rules for the procurement of goods and services will apply, taking into account improvements made to the public procurement system under the CPAR action plan. Adoption of the national public procurement Code by the Council of Ministers and its submission to Parliament will constitute a condition precedent to the disbursement of the ADF loan resources. Regarding the grant, procurement of goods and consultants’ services financed by the ADF will be in line with the Bank’s Rules of procedure for the procurement of goods and works or, where applicable, to the Bank’s Rules of procedure for the use of consultants, based on appropriate standard bidding documents.

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Loan Disbursement 12. The PRSSP-I budget support amounting to UA 3.39 million will be disbursed in a single tranche between the end of 2006 and start of 2007 to back the Government’s programme in 2007. The single tranche is justified by the need to follow the Government budgetary cycle and synchronize with other partners. It is further justified by progress made in the implementation of measures that will intensify by end 2006 with the setting up of the PRSC triggers. Furthermore, the experience in single tranche disbursements from two previous programmes (PARE II and PARE III) was positive. Disbursement will not cover specific procurements, provided the list of non-eligible goods is adhered to. As soon as the loan enters into force and the conditions precedent are fulfilled, the ADF will pay the loan amount into a special account to be opened by the Treasury at the BCV. Opening of the special account shall constitute a condition precedent of the disbursement of the ADF loan resources. Grant Disbursement 13. The institutional support grant of UA 0.75 million, which will specifically target the building of the capacities of the GPRSP monitoring evaluation system, will be lodged in a special account to be opened by the Government at the BCV. Opening the special account shall be a condition precedent to the disbursement of the grant. Disbursements for operating expenses will be through the special account which will be replenished in accordance with the modalities approved by the ADF. Requests for the replenishment of the special account must be accompanied by a programme of activities acceptable to the ADF and a summary of the justification of the use of the previous replenishment. Disbursements related to contracts (for goods and services) will be by direct payment to suppliers based on contracts signed following the invitations for bids. Replenishment of the funds will be subject to the use of at least 50% of previous funds. The DGP/STAD will prepare the disbursement request to be sent to the ADF. It will ascertain the conformity of the services of the various suppliers of the institutional support with the terms of reference. Expenditures below UA 20,000 will be covered from a special account, with the prior approval of the ADF. The national counterpart fund will be paid directly from the Government budget. Coordination with Other Donors 14. Coordination of Government aid is jointly carried out by the Ministry of Finance and Public Administration (MFAP) and the Ministry of Foreign Affairs, Cooperation and Communities (MAECC), which manage the multilaterals and bilaterals respectively. Round table meetings are organized periodically, with the support of the resident mission of the United Nations System (UNS). The last meeting, held in April 2003, marked the beginning of discussions on new modalities of aid, budgetary support, harmonization and the possibility of appointing thematic or sectoral lead organizations. The UNS recently took to steps to hold more frequent and regular donor meetings. Besides, the Government put in place in May 2006 the transition support group (GAT), under the mechanism to enhance dialogue with partners in the implementation of the strategy for the smooth graduation of Cape Verde to the status of a middle income country (MIC), which was presented to the donor community in May 2006. The GAT comprises 12 members namely: ADB, World Bank EC, UNS Austria, Spain, United States, France, the Netherlands, Luxembourg, Portugal and People’s Republic of China.

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15. Partnership and harmonization will be strengthened under the framework put in place by the Budgetary Support Advisory Group (GCAB) made up of the Bank, World Bank, EU and Netherlands. Spain recently confirmed its adherence and other partners have expressed interest in joining the GCAB, notably Austria. Besides, the GCAB uses the IMF’s PSI evaluations for the macroeconomic component of the programme. The completion of the establishment of the GPRSP monitoring-evaluation system will also contribute to the coordination of aid. Conclusion and Recommendations Conclusion 16. The PRSSP-I is a follow-up of previous reform programmes. By supporting the implementation of the GPRSP 2005-2007, it aims to support growth and intensify the fight against poverty that affects 37% of the population. The PRSSP-I measures aim at the promotion of governance aimed at equity and effectiveness in the action of the Government, through the enhancement of public finance and the GPRSP monitoring-evaluation system. These measures will contribute to assuring the quality of public expenditures, maintaining the stability of the macroeconomic framework and promoting the competitiveness of the economy, key factors for improving the private sector environment and employment creation and, consequently, poverty reduction. Recommendations 17. In light of the foregoing, it is recommended that a loan of UA 3.39 million in the form of budgetary support be granted to the Government of Cape Verde and a grant of UA 0.75 million for institutional support to the GPRSP monitoring-evaluation, to support the implementation of reforms as outlined in the present report and reflected in the Government’s Letter of Development Policy contained in Annex II.

I INTRODUCTION 1.1 Origin and History of Programme 1.1.1 Since its political and economic liberalization in the early 1990s, Cape Verde has achieved significant progress in the area of democracy, good governance, macroeconomic management and structural reforms with the support of its development partners including the Bank. These achievements, combined with the sizeable remittances by non-resident Cape Verdeans, resulted in a steady growth in per capita income and an improvement in most social indicators. Consequently, the United Nations adopted Resolution 59/209, in December 2004, upgrading Cape Verde from the group of the least developed countries (LDC) to that of middle-income countries (MIC) starting from 2008. However, Cape Verde must still overcome numerous challenges such as the vulnerable situation of the economy, constraints related to its insular nature, as well as the alarming level of unemployment (24%) and poverty that affects 37% of the population. 1.1.2 The Bank has supported reforms in Cape Verde through three balance of payments support operations, in coordination with the Bretton Woods Institutions (BWI) and other partners, notably the European Union (EU) and Netherlands.1 The completion reports indicated that these programmes were successfully implemented and their performances were satisfactory. Notable progress was made in macroeconomic stabilization, structural reforms, development of policy instruments and strategic papers, in particular Public Expenditure Review (PER), Country Financial Accountability Assessment (CFAA) and the Country Procurement Assessment Report (CPAR). To step up the fight against poverty, the Government adopted in September 2004, the Growth and Poverty Reduction Strategy Paper (GPRSP) 2005-2007 that was endorsed by the Bretton Woods Institutions (BWIs) in January 2005. 1.1.3 However, despite the adjustment efforts made, the budget deficit and the financing requirements of Cape Verde, exacerbated by the rise in oil prices, will reach structurally high levels in the coming years, particularly in the context of implementation of the GPRSP. To address this challenge, the support of donors will be essential to consolidate the reforms and intensify the fight against poverty. The GPRSP is backed by budgetary support from the World Bank, Netherlands and the EU which have set up the Budget Support Advisory Group (GCAB), under a memorandum of understanding (MOU) signed in April 2005. The Bank adhered to it and participated in the joint mission of May 2006.2 Furthermore, the IMF approved in August 2006, a medium-term programme 2006-2009 supported by its new non-financial instrument, namely, the Policy Support Instrument (PSI). The interventions of other donors, which are set within the framework of the GPRSP, are linked to its main components. 1.1.4 Following the request from the Government, the Bank is proposing to lend its assistance to the implementation of the reforms of the GPRSP through the Poverty Reduction Strategy Support Programme I (PRSSP-I) for the 2006-2007 period. The present operation is the first budget support of the Bank to Cape Verde. The three previous programmes were balance of payments loans. The shift to budgetary support is in line with the Bank’s guidelines on development budget support lending (DBSL). Indeed, the reforms initiated, particularly since 2001, have improved the framework for budgetary support favoured by the major donors. The remaining shortcomings are undergoing reform as part of the CFAA and CPAR action plans.

1 The economic reform support programme I (PARE I) 1997-2000, followed by PARE II (2002-2004) and PARE III (2004-2005). 2 The formal signing of the MOU for 2006-2007 is scheduled for December 2006, during the second annual joint mission.

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1.1.5 Through the PRSSP-I, the Bank will contribute to the implementation of the GPRSP during the 2006-2007 period, in close coordination with other donors, in particular the GCAB. The PRSSP-I was identified during the preparation of the Country Strategy Paper (CSP) 2005-2007 in April 2005. The preparation mission was conducted in May-June 2006 at the same time as the joint GCAB review, whose outcomes were taken into account in the preparation of the PRSSP-I. The appraisal mission of August-September 2006 confirmed the major elements of the programme with the stakeholders. The PRSSP-I will contribute to the implementation of the GPRSP measures and, more specifically, the consolidation of the public finance reforms and creation of favourable conditions for the implementation of the GPRSP. These factors are in conformity with the CSP 2005-2007 adopted by the Bank in February 2006, which highlights the promotion of the competitiveness of the economy and the improvement of private sector activities, of which macroeconomic stability and enhanced effectiveness of Government’s interventions constitute the key areas. 1.2 Performance of Similar Operations 1.2.1 Major Objectives of Previous Operations: The Bank co-financed three balance of payments support operations in the country: PARE I (1997-2000), PARE II (2002-2004) and PARE III (2004-2005). PARE I aimed at accelerating the process of Government disengagement from productive activities, the liberalization of the economy and the reform of the public sector. The objectives of PARE II and PARE III related to enhancing the reforms of PARE I with special emphasis on poverty reduction and governance. 1.2.2 Outcomes of Previous Operations: The loan for PARE I amounting to UA 3 million was disbursed in two tranches and those of PARE II and PARE III were single tranches of UA 2.5 million. The resources of the Bank and those of the other co-financiers were fully disbursed. Virtually all the measures of PARE I were executed, except those relating to the privatization of certain enterprises and the clearance of the domestic debt, which had suffered delays essentially due to capacity and resource mobilization problems. PARE I helped restore the major macroeconomic balances and create conditions for reviving the economy, coupled with progress in Government disengagement from and promotion of the private sector. Real GDP grew at an annual average of over 7%. The Government undertook a vast programme of privatization of 29 public enterprises, restructuring of the banking and financial sector as well as liberalization measures aimed at eliminating quantitative restrictions, the first tariff reform and strengthening of the legislation on trade and competition. The initial measures for the modernization of the public sector were initiated, in particular downsizing of the civil service and the administrative and financial reform programme (RAFE) that gave rise to the setting up of the integrated budgetary and financial management system (SIGOF) in financial administration. 1.2.3 However, at the end of PARE I, and against a backdrop of the preparation of the 2000/2001 legislative and presidential elections, the relaxing of the management of public finance deepened the budget deficit, resulting in an increase in the domestic and external debt, significant decrease in international reserves and pressure on the escudo-euro parity as well as the compromising of poverty reduction efforts. The Government stemming from the 2001 elections successfully implemented the interim programme from August to December 2001, which helped restore macroeconomic balances and formulate the PRSP-I, thereby paving the way for the implementation of the three-year development programme 2002-2004 supported by the PARE II.

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1.2.4 Under the PARE II and PARE III, the reforms were pursued with greater vigour, commitments, political will and participation and this fostered ownership of the measures by the administration and other stakeholders. Most of the PARE II measures were implemented, albeit with some slippage due to capacity constraints related to the large number of measures, the need to prepare strategy papers and put in place policy instruments to better accommodate the acceleration of the liberalization and modernization of the administration. PARE III completed and strengthened the reforms of PARE II over the 2004-2005 period. 1.2.5 Over the 2002-2005 period, the average real GDP growth exceeded 5% against a background of control over inflation, budget deficits and the external current account. The main reforms in the area of governance chiefly concerned the improvement of the expenditure chain with the installation of the SIGOF, undertaking of various fiduciary reviews (CFAA, PER, CPAR), and the autonomy and independence of the Central Bank (BCV) in legal and practical terms. Also, the privatization programme was launched, although it could not be completed, and focused on the remaining six enterprises. With regard poverty reduction, significant achievements were made towards attaining the millennium development goals (MDGs) relating to the educational and health sectors. The GPRSP was prepared following a broad-based participatory process and validated in 2004. Significant strides were made in 2005, which represented the first year of implementation of the GPRSP. Significantly, there were no slippages in public finance, despite the elections, between the end of 2005 and first quarter of 2006. However, the rate of implementation of certain reforms suffered some delay, mainly due to the inadequate monitoring-evaluation capacities of the GPRSP. 1.2.6 Main Lessons: A number of lessons can be drawn from the success of the reform of enterprises, and the completion reports of previous programmes, namely: (i) the political will and commitment of the Government helped intensify and sustain dialogue with the partners, thus contributing to the irreversibility of the reform process; (ii) the context of democracy and good governance prevailing in the country fostered a participatory process and the ownership and sustainability of the reforms; (iii) programmes must focus on a reduced number of key measures in order to better accommodate the country’s capacity constraints, facilitate dialogue and follow-up, with a view to enhancing effectiveness and performance; (iv) although the harmonization of measures and coordination of donors were carried out on an informal basis, they constituted an important factor of the success and follow-up of the programmes; (v) targeted institutional support significantly contributed to dialogue and the performance of the programmes by providing the framework and the necessary tools for the acceleration of the reforms in a fast-changing administration where capacities need to adjust rapidly3 and, (vi) the reforms must be pursued in order to consolidate the achievements made, notably in public finance, improvement of the quality of the educational system, vocational training and employment, the sustainability of the financing of the health and social protection system, as well as the capacities of the GPRSP monitoring-evaluation system. These lessons were taken into account in the design of the present programme (cf. Section 6.1). 3 These institutional supports were essentially provided by other co-financiers, notably in the form of technical assistance or finance. Others were directly financed from the State budget. Past programmes of the Bank did not specifically finance institutional support. However the Bank financed an institutional support project at the Ministry of Finance and Planning, approved in April 1990, aimed at the operationalization of the structures of the Ministries of Planning and Finance created by organic laws of 1987 to replace the colonial structure. This project comprised a large number of components without a stable implementation unit to ensure their regular monitoring. This affected the performance of the project whose activities were suspended for several years. The resumption of dialogue with the authorities in 2002-2003 and their commitment helped provide greater focus leading to the completion of the project activities by end 2004. However, the failure to implement some training activities limited the achievement of the development objectives of the project.

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II. ECONOMIC CONTEXT 2.1 Macroeconomic Performance 2.1.1 Economic Growth and Inflation: Over the 2002-2005 period, economic activity developed favourably in a context of stable prices, largely due to the resumption of the reforms in 2001 and the strong growth in the tourist, construction and transport sectors. Average real GDP growth was higher than 5%, supported by public and private investments that rose from 33.8% in 2001-2002 to 37.9% in 2005. National savings, largely driven by remittances grew sharply from 24.4% to 33.3%. The average annual rate of inflation was 0.4%, thanks to the prudent monetary policy pursued, diversification of import sources, a decline in the prices of foodstuffs and custom tariffs and the successful introduction of the VAT in January 2004 to replace the various consumption taxes. 2.1.2 Public Finance: Improved tax recovery and reduced spending helped stabilize the budget deficit, which is still structurally high. The tax ratio rose from 20.2% of the GDP in 2002 to 21.3% in 2005. Current expenditures were maintained at 21% of the GDP, while capital expenditures rose from 12.9% to 13.3% of the GDP. The overall deficit (including grants) averaged 3.5% of the GDP over the 2002-2004 period, but rose to 5.1% in 2005, largely as a result of the increase in public investments and lower increase in grants. Further budgetary adjustment and external support will be required to lessen the vulnerability of public finance and help implement the GPRSP. 2.1.3 Money and Credit: The monetary situation in 2002-2005 was consistent with the economic activity, the external stability and prices objective, and support to the private sector. Money supply rose on average by 12%. Credit to the private sector increased sharply at about 11.4%, while net credit to the Government slowed down and dropped to 4.3% in 2005. International reserves improved, from 1.9 to 3 months of the imports of goods and services. This favourable context enabled the BCV to lower the refinancing rate and Treasury bills and Treasury Bonds rate from 19% to 15%; these reductions in turn affected the lending rates of commercial banks. Furthermore, the banking sector pursued its development. The assets of the sector grew sharply to 90% of the GDP in 2005. Total deposits rose from 63% to 74.6% of the GDP in 2002-2005, driven mainly by non-residents’ remittances whose deposits accounted for nearly 40% of total deposits. About 84% of these deposits are made up of time deposits. 2.1.4 Balance of Payments: The current account deficit (excluding grants) improved significantly from 17.2% of the GDP in 2002 to 9.3% in 2005, mainly driven by exports from the fishery sector and tourism. Net inflows from tourism, which increased from 9.4% to 11% of the GDP, sustained the average increase of 12.8% of the exports of goods and services. Conversely, imports rose by 8.1% during the period. The current account deficit, including grants, decreased significantly from 11.4% of the GDP in 2002 to 4.6% in 2005, as a result of the sizeable net transfers, notably remittances of non-residents (20% of the GDP). Furthermore, official support, FDIs and emigrant deposits constituted relatively stable sources of capital. The overall surplus of the balance of payments averaged 3.9% of the GDP. The reforms and diversification of exports will have to be pursued in order to ensure the long-term external balance of the economy.

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2.1.5 Public Debt: Cape Verde is not eligible for the HIPC Initiative, in view of its relatively high income per capita. An analysis of the debt sustainability made in 2006 showed a continued sustainable level of debt. There are no external arrears, and payments due are settled satisfactorily. The external debt ratio fell from 56.4% in 2002 to 55.4% in 2005. The debt service ratio fell to 8.8% of the exports of non-factor goods and services in 2005, compared to 15.6% in 2002. On the other hand, the external debt was brought under control through a better control of bank credit to the Government. It fell from 29.2% of the GDP in 2002 to 27.3% in 2003, before rising back to 35% in 2004 following the inventory of the domestic debt that revealed a significant share of the debt stock. In 2005, it fell to 32.7% of the GDP. However, the total public debt ratio of 88.1% of the GDP in 2005 remains high, although it remains within sustainable levels. The significant reduction of the domestic debt stock constitutes a priority to ensure the sustainability of public finances. 2.1.6 Impact of Escalation in Oil Prices: The macroeconomic effects of the rise in oil prices were mitigated in 2004 and 2005, thanks to the economic reforms, in particular the lowering of customs tariffs and rationalizing of indirect taxes, as well as official supports, transfers and private capital. Subsidies to oil products (0.5% of the GDP in 2005) also contributed to stabilizing the prices of electricity and water, since oil accounts for 93% of total energy consumption. However, the persistent rise in oil prices will affect economic growth and prices in 2006, particularly through the energy and water tariffs. Indeed, to ensure the sustainability of public finance, the Government abolished subsidies on oil products in June 2006; and this resulted in a 23% rise in electricity rates and 13% in water rates, that were directly borne by enterprises and consumers. This repercussion of costs will only contribute in a transient manner to the slowdown in real GDP growth to 5.5% and the increase in rate of inflation that is expected to attain 6% in 2006. However, the reforms should contribute to accelerated growth by 2007 (6%) and a downturn in the rate of inflation (0.2%) which should converge to its equilibrium level. 2.2 Previous Reform Efforts 2.2.1 Since the beginning of the 1990s, Cape Verde has embarked on reforms aimed at liberalizing the economy, promoting the private sector and ensuring a strong and lasting economic growth that would help reduce poverty. The recent reforms focused on the promotion of governance, structural measures and poverty reduction actions. The governance measures essentially dealt with public finance reforms as part of the CFAA and CPAR action plans. Public Finance Reforms 2.2.2 In October 2004, the Government adopted the CFAA action plan for the 2004-2007 period. The steering committee and management team of the CFAA were put in place in November 2004 to carry out the reforms. With regard to the management and control of Government revenues, the reforms aimed at increased and steady tax revenues. The tax arrears act was adopted in 2003. The process of improvement of the tax base and assignment of single tax identification numbers (NIF) continued and ended in 2006. The VAT and tariff reform were successfully introduced in January 2004. These measures helped increase the tax ratio. Furthermore, with the assistance of the IMF, a study was undertaken to rationalize tax exemptions.

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2.2.3 Budget Programming and Preparation: The reforms aimed at the elimination of the dual budgetary approaches by programme and by category of expenditures, improved coordination in budget preparation and linkage between macroeconomic policy and fiscal policy. The Medium-Term Expenditure Framework (MTEF) was put in place at the central level for the 2005 budget. The sectoral MTEFs were formulated in the four priority ministries, namely: Education and Higher Education (MEES), Agriculture and Environment (MAA), Labour, Family and Solidarity (MTFS) and Health (MS). There was close coordination between the DGO and DGP during the preparation of the 2006 budget, which was formulated in a decentralized manner in the sector ministries that keyed them into the SIGOF. The integration of the operation and investment components was facilitated by the new single nomenclature. The 2006 budget is in line with the GPRSP and the overall and sectoral MTEFs. 2.2.4 Budget Execution: Progress made in 2003-2004 in the establishment of the SIGOF helped observe ceilings and bring expenditures under control. The SIGOF was deployed in all the sector ministries which, for the moment, only have read-only access pending the enacting of legal mechanisms and undertaking of training activities. The legal instruments and regulations governing the functions of payment authorization officers and financial controllers were drafted and are awaiting approval. The budget supervision bill was submitted to Parliament in April 2006 for consideration and approval by the end of the year. The new law is designed to improve transparency, effectiveness and accountability of the sector ministries in budget management. Furthermore, the new public chart of accounts will be finalized by the end of 2006. It aims at establishing a modern accounting system to record fund flows, budgetary transactions (incomes and expenditures) and the public debt. The auditing of the accounts will be improved through the improvement of budget and public audited account reports. Backlogs in the preparation of the Government general accounts (CGE) for the 1998-2003 period have been rectified. These accounts were submitted to the Court of Auditors (TdC). The 2004 CGE was prepared in June 2006 and that of 2005 is nearing completion for subsequent transmission to Parliament before end 2006. The delay, which has thus been reduced to less than one year, marks a significant improvement in relation to the situation of 2003-2004 where the delay was five years. Quarterly accounts of the Central Government fiscal transactions were prepared within the legal timeframe of 45 days. The State budget and accounts can be accessed on the Government’s website (www.minfin.cv). 2.2.5 Public Debt Management: Emphasis was placed on capacity building and improved management at the level of the DGT, with the support of the Portuguese Treasury. A Programming Directorate was created to formulate and monitor the monthly treasury and debt payment plans. Furthermore, the inventory of the domestic debt which began in 2004 was completed in November 2005. The application of the three-year debt clearance plan began in 2006. Also, the Government no longer signs new protocols and the existing stock has been converted into Treasury Bills and Bonds. 2.2.6 Budgetary Control: The new decree law on the statute of the personnel of the IGF, financial control and autonomous funds was adopted in August 2005. It aims at promoting effectiveness, improving working conditions and coordination with the Court of Auditors (TdC). Since 2003, the capacities of the IGF have been strengthened with the procurement of equipment, recruitment and training of 7 inspectors. The current staff totals 26, 18 of whom are effectively at post. The others have been seconded to other units of the administration. Compliance with the approved work plan of the IGF helped streamline its

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interventions and improve its performance. Thirty-two inspections in 2004 and 2005 and 40 have been planned for 2006. At the level of TdC, equipment was procured and the audit training provided to the executive staff. Furthermore, the new organic law of TdC was formulated in order to spell out more clearly the role of independent control in the new institutional landscape. Its adoption by Parliament will help undertake the wide-ranging reform of the TdC. 2.2.7 Decentralization: The reforms aim at strengthening the legal and judicial framework of decentralization, the management of municipalities, human resources and local finances. In coordination with the National Association of Municipalities of Cape Verde (ANMCV), the bills on the framework law on decentralization, decentralized cooperation, local finances, the cadastre and land use planning were prepared. The amended law of local finances was passed in September 2005, with the establishment in 2006 of new modalities for calculating transfers from the Government’s budget through the Financial Equilibrium Fund (FEF). The revised formula, based on equity and effectiveness in the distribution of resources to town halls, helped increase the amount of the FEF by 60% in 2006. Government revenues thus transferred rose from 7 to 10%. The Decree Laws of land registry and land management were adopted by the Government in December 2005. The other bills are expected to be examined and approved by Parliament by 2007. The regularization of the cross-debt between the Government and the municipalities, adopted in November 2005, began in 2006. The 2006-2007 training scheme for town hall employees and Government officials on decentralization were formulated in December 2005 and a permanent training pole was created at the National Institute of Administration and Management (INAG). The computerization in 2003 of the budgetary services of three pilot town halls (Praia, Mindelo and Sal), by the Information Society Operational Nucleus (NOSI) put in place in 2003, helped improve productivity as well as management and recovery of local tax revenues. A memorandum of understanding was concluded in 2005 between the Government and the ANMCV to computerize all town halls by the end of 2007. 2.2.8 Public Administration: The Government undertook to rationalize the management of human resources by putting in place the relevant instruments for the purpose. The results of the civil-service census undertaken in 2002 were finalized in 2005 and the civil-servant database is currently in the process of being integrated into the SIGOF for the management of the payroll. A formulation of planned expenditures, careers and wages (PCCS) has been initiated. Upon completion by end 2006, it will help institutionalize the training and management of careers. The regulatory framework and training plan of public administrators were developed. The opening of the first citizens’ houses (e-gateway version) aimed at bringing the administration closer to the people and enterprises is underway. The products include online certificates and business registration in 24 hours. 2.2.9 Public Procurement System: The CPAR report was finalized in May 2004 with the support of the World Bank and the Netherlands. It took cognizance of the existence of a national system that was operating satisfactorily with regulations governing the procurement of works and annual budget execution acts defining the procurement of goods and services. The existence of an environment conducive to the culture of good governance, where corruption is limited, was also noted. Most invitations for bids were systematically published, notably those involving external financing. However, the diagnosis indicated shortcomings that were subsequently dealt with in the CPAR action plan approved in September 2004. The Government also put in place in November 2004 the reforms steering committee. The execution of the action plan measures is supported by the World Bank, the

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Netherlands and the Millennium Challenge Account (MCA) of the United States of America. Formulation of the national public procurement code, initiated in May 2006, will help create a single legal framework for all procurement by public structures. The provisional document of the code, available since August 2006, is currently undergoing examination. Structural Reforms 2.2.10 The main structural reforms related to justice, privatization, regulation, price and trade liberalization and the setting up of a flexible and transparent mechanism for fixing the prices of petroleum products. The legal and judicial reforms aim at putting in place alternative conflict resolution mechanisms (ACRM) to accelerate court rulings and widen access by the poor and enterprises to judicial services. MOUs were signed between the Ministry of Justice, 8 institutions (including 2 town halls) and associations. The first conflict arbitration centre (Casa do Direito) opened in 2006 in the Municipality of Santa Catarina. Following the liquidation of TRANSCOR (municipal urban transport company) and EMPA (food imports and distribution) in 2002 under PARE II, the privatization programme focused on the six remaining companies, compared to the initial forty at the end of the 1990s. Progress was made in the restructuring of TACV (Cape Verde National Airline), which underwent private management in the second quarter of 2006 in preparation for its privatization later in 2007. The liquidation and privatization of five others is well advanced and could be concluded by the end of 2006 for CABNAVE (shipping yard), INTERBASE (refrigerated storage), EMPROFAC (pharmaceutical products importation and distribution) and ARCA VERDE (national shipping line) and the beginning of 2007 for ENAPOR, for which an invitation for bids has been launched. 2.2.11 Regarding regulation, agencies were created to enable the Government to fulfill its role as a regulator of economic activities. The Economic Regulation Agency (ARE), created in 2003 for the water, electricity, fuels, telecommunications, urban and maritime transport of passengers sectors, started operation in 2004 with the recruitment of staff and the development of the electricity and water tariff model. Additionally, the pharmaceutical products Regulation Agency (ARFA) was created in 2004, aimed at the privatization of IMPROFAC. Subsequently, two new agencies were created in 2005 for maritime transport, the Maritime and Ports Institute (IMP), and Telecommunications, Institute of Communications and Information technologies (ICTI). 2.2.12 In the area of Trade liberalization: A new seven-band tariff system, ranging from 0 to 50%, entered into force in January 2004. To ensure the sustainability of public finances and the economic and financial equilibrium of the energy sector, measures were taken in May 2006 to mop up and avoid the accumulation of the Government and municipalities’ arrears owed to the electricity and water company (Electra) and petroleum companies. Subsidies for petroleum products were eliminated, and the 2006 budget took into account the clearance of current and past arrears corresponding to 1.2% of the GDP (cf. Section 2.1.6). Furthermore, ARE will put in place an automatic adjustment mechanism for electricity and water tariffs related to costs and increased efficiency. Targeted Poverty Reduction Actions 2.2.13 Past efforts entailed targeted poverty reduction actions aimed at supporting irrigated agriculture, access to education and health, promotion of income-generating activities and social safety nets. These measures contributed to increasing access to

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education and health care that would enable the country to achieve the MDGs relating to universal primary education and gender equality in primary and secondary education. Pursuing these efforts should help achieve the MDGs of health, notably the reduction of under-5 mortality and the improvement of maternal health. However, significant efforts will be needed to achieve the MDGs relating to extreme poverty, whose major determinants are unemployment, inadequate skilled labour, insularity and constraints related to the rural and peri-urban environment. Indeed, unemployment has remained at a worrying level (24%) and poverty still affects 37% of the population. Recent efforts have therefore consisted of putting in place a global strategic framework and relevant instruments to deepen the poverty reduction policies. 2.2.14 To this end, the PARSP-I, completed in January 2002, served as a basis for the implementation of reforms under the PARE II. The formulation of the GPRSP 2005-2007 which began in February 2002 was completed in September 2004. The Government has begun setting up the institutional framework and instruments for its implementation and monitoring-evaluation. Furthermore, in 2004, the Government approved and initiated the implementation of the second national environmental action plan (NEAP 2) 2004-2014, aimed at sustainable development through environmental protection, water availability, employment creation and food security. Furthermore, a new ministry for vocational training and employment was created in March 2006 to coordinate activities in this area. 2.3 Persistent Problems and Reform Requirements 2.3.1 Despite the progress made in recent years, the major challenges facing Cape Verde relate to sustained growth and job creation to reduce poverty in a constraining insular context. The major challenge is to ensure the successful transition to the post-LDC era by developing employment creation opportunities. This will require an improved competitiveness of the economy and the framework of private sector activities, of which macroeconomic stability and improved effectiveness in Government interventions constitute the key areas particularly in the context of Cape Verde. Furthermore, actions must aim at the sustainable improvement of agricultural productivity, the quality of the educational system, vocational integration of a labour force whose skills need to be improved, the reduction of factor costs through the institutional strengthening of regulatory agencies and the development of basic economic facilities, notably in the energy, water and transport sectors. This will mean applying the measures defined in the major areas of the GPRSP and ensuring an effective monitoring-evaluation. The progress made in 2005, the first year of implementation of the GPRSP, are satisfactory on the whole (cf. Section 3.4). 2.3.2 However, two major challenges are to be addressed with regard to the reforms, namely: (i) the consolidation of reforms in good governance, notably in the area of public finances and the administration as part of the CFAA and CPAR action plans and to some extent the legal and judicial reforms; and, (ii) acceleration of the capacity building programme for the GPRSP monitoring-evaluation system, which has suffered a delay compared to the schedule set. Public Finances 2.3.3 Management and Control of Government’s Revenue: Despite the significant progress made in the recovery and identification of taxpayers, the tax base remains narrow. There is therefore the need to widen it focusing particularly on the informal sector and

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rationalizing tax exemptions which remain significant. The completion of the computerization of the consolidated Taxes, Customs, Treasury and Public Accounting should help safeguard public revenues and improve the budgetary framework. 2.3.4 Budget Programming and Preparation: Public expenditure and revenue estimates often lack reliability, in view of the inadequate viable medium-term projection tools. In this regard, the macroeconomic framework exercise, the coordination and capacities of the DGO and the DGP need to be strengthened. Furthermore, the sector ministries do not have qualified human resources in structures responsible for preparing the budget. The sectoral MTEFs were developed for the MAA, the MEES, the MTFS and the MS. However, their effective implementation and extension to the other ministries constitutes a challenge that will require sustained efforts, especially in terms of capacity building. 2.3.5 Budget Execution: Budget execution remains centralized at the MFAP, despite the deployment of the SIGOF in the sector ministries. For the moment, the latter can only make commitment proposals, since payment authorization is the responsible of the MFAP. Rules establishing the mandate and functions of financial comptrollers and commitments officers as well as training activities are necessary to enable accountability, transparency and effectiveness through the deconcentration of budget execution in the sector ministries. 2.3.6 Public Debt: The debt management software (CS-DRMS) is still not incorporated into the SIGOF. This situation has reduced the reliability of the database and effectiveness of public debt monitoring, which does not make for an effective planning of payments by the DGT either. Despite the achievements made, the capacities of the DGT need to be developed with regard to analysis and active management of the debt and the Treasury, notably infra-annual forecasts. Also, the consolidation of public finances to create the fiscal space needed for growth and poverty reduction entails the significant reduction of the domestic debt stock, by clearing the outstanding arrears through adequate provision in the budget, which will also reduce excessive interests payments that represented 1.6% of the GDP in 2005. Efforts also need to be made to avoid the accumulation of arrears, by integrating autonomous institutions in the budget in order to limit the contingent liabilities of the Government. It is worth noting that after the restructuring of the domestic debt at the end of the 1990s, it rose recently following the general stock-taking completed in 2005 that enabled the Government to recognize a significant portion of outstanding arrears. Indeed, this indicated a higher than expected debt stock (32.7% of the GDP in 2005 as against 27.3% in 2003); the major creditors being the commercial banks (55%) followed by the national social security institutes, (INPS) (26%). Also, the recent assessment of the cross-debt between the Government, the municipalities, the INPS and other autonomous institutes revealed a net amount owed to these institutions by the Government amounting to 5.5% of the GDP 2.3.7 Internal and External Control: Despite the recent progress, the IGF remains confronted with insufficient human and budget resources to accomplish its internal audit mission, which covers the central administration, 30 autonomous institutes, 21 municipalities and embassies. Furthermore, the Court of Auditors (TdC) is also beset by insufficient budgetary and human resources. It has a workforce of thirteen persons made up of auditors, assistant auditors and inspectors. It is behind schedule in the accounts reviews (CGE) and auditing of municipalities and embassies. Also, to enable the TdC to deepen its reforms, the laws relating to its reorganization and powers will be adopted by Parliament.

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2.3.8 Decentralization: The progress made helped rationalize and increase the resources of the Government transferred to town halls and to evaluate the cross-debts between the two entities. The reforms must be pursued in order to achieve the decentralization objectives set. Indeed, the issue of the conflicting competences between the Government and the municipalities has not yet been resolved legally. There are redundancies in investment projects. The resources and capacities of town halls are still weak. The monitoring of the budget execution and auditing of accounts encountered difficulties in the municipalities. 2.3.9 Public Procurement: The CPAR report noted some shortcomings that affect the effectiveness of Government investments and expenditures. These are: (i) the dispersal of regulations on the procurement of goods and services, resulting in the multiplicity of practices depending on the sectors; (ii) lack of organization of the public service concession, the delegated responsibility for implementation (MOD) and the BOT (Build Operate Transfer) type of contracts; (iii) insufficient involvement of the private sector in the execution of tenders; (iv) inadequate resources of the TdC and IGF to ensure the control of expenditure; and, (v) inadequate capacities in most Ministries, with the exception of that of infrastructure. The ongoing action plan of the CPAR must be fully implemented by 2007 as planned. 2.3.10 Public Administration: The management of human resources and the institutional structure of the administration are marked by multiplicity of statutes, significant fluctuations in human resources due to the system of service commissions (temporary release) and the absence of career training-development activities. Furthermore, bringing the people and business closer to the administration constitutes a challenge that needs to be met in this archipelago country. Legal and Judicial Reforms 2.3.11 The main constraints relate to delayed court rulings, limited access by the poor and businesses to judicial services on the entire territory of this archipelago country. In this regard, it will be necessary to pursue the setting up of alternate mechanisms for settling disputes (MARC), by opening dispute arbitration centres (Casa do Direito) in other municipalities and strengthening the training and the legal assistance fund mechanism. Plans are also underway to provide free legal assistance and finance the training plan from the legal assistance fund. Constraints relating to the GPRSP Monitoring-Evaluation 2.3.12 The progress made in the reform of the GPRSP monitoring-evaluation system for the moment falls below expectations. In the institutional plan, the capacities of the DGP/STAD and sector ministries do not enable them to fulfil their monitoring-evaluation functions. The organizational structure of the DGP/STAD, responsible for technical coordination in the implementation of the GPRSP, is to be completed in order to render it fully functional. The Government has not yet undertaken the recruitment of a coordinator, an economist and an information system expert. The Departments of Studies and Planning (GEP) of the technical ministries and DGP/STAD focal points are faced with the problem of lack of qualified human resources to effectively manage the budget programme and the monitoring-evaluation of the GPRSP. Moreover, the setting up of a database of priority programmes and projects (BDMP) has suffered some delay. Out of the four databases of the priority sector ministries, two have started but are yet to be completed. In view of the lack of

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financial resources, the completion of the core welfare indicators questionnaire on basic well-being indicators (CWIQ) has also been delayed, and this has affected the timely finalization of the initial GPRSP progress report in May 2006, as originally planned. It is crucial that appropriate resources be provided, as planned, for the activities to be undertaken in order to build the capacities of the GPRSP in monitoring-evaluation, with a view to enhancing the effectiveness of poverty reduction policies. III. POVERTY REDUCTION STRATEGY 3.1 Medium- and Long-Term Objectives of PRSP The Government’s medium-term programme is reflected in the GPRSP 2005-2007, adopted in September 2004. It aims at sustaining growth and halving the proportion of the poor by 2015. 3.2 Sector Goals Pursued in Key Sectors Supported by Budgetary Support The sector goals of the Government’s programme focus on the five main thrusts of the GPRSP: (i) promote good governance, strengthen effectiveness and ensure equity; (ii) promote competitiveness to boost economic growth and employment creation; (iii) develop and enhance human capital; (iv) improve and develop basic infrastructure, promote land management, regional development and protect the environment; and, (v) improve the social protection system and guarantee its sustainability. The objectives pursued in the various areas of the GPRSP are outlined in Box 1. The overall budget support programme backed by the Budget Support Advisory Group (GCAB) aims to shore up the implementation of the various GPRSP reforms over the 2005-2007 period. 3.3 Monitoring Mechanism and Major Indicators Selected 3.3.1 The Government designed, with the support of its partners, a monitoring-evaluation system to ensure the effective steering of the implementation of the GPRSP and the monitoring of donor assistance, particularly with regard to budgetary support. The system is expected to be fully operational in 2007. This will in particular result in the integration of national planning, budgeting and statistical systems, through an information system that links the database of official statistics (BDEO), the database on policies and projects (BDMP) and the SIGOF (cf. chart in Annex 10). Its essential functions are: (i) the monitoring and analysis of growth and poverty reduction-related trends; (ii) monitoring of the implementation of priority programmes and projects; (iii) evaluation of the impact of policies and programmes on growth and living conditions. 3.3.2 At the institutional level, three entities are involved in the monitoring-evaluation system: (i) the National Council on Poverty Reduction (CNRP); (ii) the system of observation and analysis (SOA) comprising the INE, the DGP/STAD (Technical Secretariat for Development Support), the Departments of Studies and Planning (GEP) of the sector ministries and the General Directorate of Budget (DGO); and (iii) the Regional Councils on Poverty Reduction (CRRP).4 The INE is the central body for the technical coordination of

4 The CNRP, jointly chaired by the Minister of Finance and Planning (MFP) and the Minister of Labour and Solidarity (MTS), comprises the ministries and organizations directly involved in the GPRSP, representatives of municipalities, the private sector, associations (women, youth, farmers, pensioners), NGOs and trade unions. At the local level, the Regional Councils for Poverty Reduction (CRRP) are chaired by the Mayors.

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the national statistical system, responsible for the collection, production, validation, dissemination of official data and the BDEO, the DGP/STAD is responsible for the overall technical coordination of the monitoring-evaluation system, responsible for the BDMP, the choice and specification of indicators, data analyses, macroeconomic model and annual progress report of the GPRSP. The GEPs are responsible for sectoral statistics, analyses and indicators. The DGO supervises the development of MTEFs and provides budgetary information on the GPRSP. The GEPs must prepare their performance reports that are subjected to analysis and synthesis by the DGP, for the preparation of the annual progress report of the GPRSP. The NOSI provides technological support. A set of 37 major monitoring indicators of the GPRSP were defined and used as reference by the partners (cf. Annex IX).

Box 1 Summary of Major Elements of Government Programme and Expected Results

Principal Major Quantitative Objectives of Programme and Expected Outcomes 2004 2007

Real GDP growth Rate of inflation Overall budget deficit excluding grants (% of GDP) External current account deficit, including transfers (% of GDP) Domestic debt (% of GDP) Percentage of poor population Share of education in Government budget Share of health in Government budget

4.5% -1.9% 14.9% 20.1% 35.0% 37% 20% 6.3%

6.0% 0.2%

13.2% 16.4% 25.1% < 37% 23% 7%

Themes and Sector Goals of Programme Major Outcomes 1. Promoting good governance: Modernize the administration by improving procedures, institutions, effectiveness of

expenditure, and participation of communities. Four reform components: (i) public administration: formulate a Government national reform plan, adopt the principles of planning by objective and result-based management, rationalize services; (ii) judicial system: involve local authorities, NGOs in putting in place alternative conflict resolution centres, improve the knowledge of citizens on rights and obligations; create regional legal assistance funds; (iii) Government financial management: implement CFAA and CPAR action plans, lay focus on completion of programme budget; (iv) decentralization: increase powers of local authorities and the community participation through local/regional elected bodies, empower private sector and civil society, adopt laws on decentralization, strengthen local finances, execute the training plan for town halls and Government employees as well as the computerization plan for municipalities.

- Government employees are motivated and administration services are streamlined and effective to the benefit of the communities;

- Access by businesses and citizens to legal services is widened and improved;

- Macroeconomic stability is assured; - By 2007, the sectoral MTEFs are established in the 4

priority ministries; - By 2007, the main reforms of the CPAR action plan

are implemented; - By 2009, municipalities have an appropriate legal

framework, stable resources, qualified staff and improved management capacities.

2. Promoting competitiveness to boost economic growth and employment creation: Apart from maintaining macroeconomic stability through good governance as well as the accumulation of human and physical capital, it would be essential to place emphasis on increased productivity through structural measures: enhance competition and the regulation function of Government, develop the financial sector, ensure the flexibility of the labour market, improve the qualification and the integration of labour; create favourable conditions for profitable private sector activities; promote national and foreign private investments, SMEs and income-generating activities (IGA) and exports in the high growth potential and job creation sectors, namely agriculture, fisheries, tourism and light processing industry.

- rate of unemployment reduces significantly and falls below the current level of 17.3%;

- the liquid value of FDIs increases from 1.5 to over US$ 6 million between 2004-2007;

- the amount of investment and number of jobs created by SMEs is on the increase;

- umber of IGAs rises significantly - average growth rate: agriculture 4.5%, fisheries

8.8%, industry 10.4%, building 7.1%, hotels 10.1%; transport and telecoms 7.4%.

3. Developing and enhancing human capital: Education: (i) improve the quality of education and internal efficiency of the system through teacher training; (ii) improve access to pre-school education and access by the poor to secondary education; (iii) reduce regional disparities in access to quality education; (iv) strengthen the educational system - labour market linkages through a balance between training and needs of the economy, and (iv) develop higher education and research in science and technology. Health: (i) extend health services to disadvantaged areas; (ii) reduce health evacuations abroad by developing local alternatives; (iii) improve management of health workers; (iv) strengthen the system of information, decentralization and participation of communities in prevention efforts and financing of the sector; and (v) develop public-private partnership (PPP).

- of qualified teachers (general and technical): 80% in 2007 and 100% in 2010

- ate of repetition below 8% and dropout rates below 2% in 2007/2008

- of students in technical secondary education increases from 4.6% in 2004 to 7% in 2007

- accination coverage rate for children below 1 year increases from 74% to 90%;

- he annual health debt of ENPS decreases from CVE151 million to CVE 40 million between 2004 and 2005.

4. Improving and developing basic infrastructures, promoting regional development, land management and environmental protection: contribute to the efficient management of land and natural resources and the provision of basic amenities to support private sector activities and ensure the environment-friendly and sustainable socioeconomic development as well as improved quality of life; (i) develop electricity, water, sanitation, transport and NICT infrastructure; (ii) develop PPPs and seek external financing; (iii) enhance electricity and water production and distribution; (iv) open up specific islands and put in place an efficient multi-modal transport system; (v) develop air and maritime transport infrastructure to sustain tourism and exports; and (vi) implement the NEAP II (2004-2014).

- reate conditions for improving competitiveness and promote the private sector, by improving access to affordable inputs;

- ate of access to electricity from 58.5% to 78%; - ate of access to water supply from 25% to 50%; - ate of access to sewerage from 11.5% to 30%; - 5% of the NEAP II reforms are implemented.

5. Improving the social protection system, strengthening its effectiveness and guaranteeing sustainability: ensure appropriateness of social protection policies to other poverty reduction policies (health, education, vocational training, food security, sanitation and housing. It entails five themes: (i) developing institutional capacities in social protection, notably the Social Security Institute; (ii) strengthening and widening programmes for vulnerable groups, including social pensions, social assistance and health insurance; (iii) promoting local initiatives and community development; (iv) promoting children’s right; and, (v) strengthening food security and improving mechanisms for prevention and management of food crises.

- umber of beneficiaries of minimal social pension: from 6,514 in 2004 to 8,614 in 2007

- umber of beneficiaries of social solidarity pension: from 9,373 in 2004 to 13,427 in 2007

- 20 MOUs relating to local development initiatives are signed in 2007 between the MTFS and the NGOs

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3.4 Overall Assessment and Monitoring of Progress he implementation of the GPRSP 2005-2007 started in 2005. The joint review mission of the GCAB of May 2006 assessed progress made in the implementation of the reforms in areas pertaining to budgetary support. The first annual progress report that the Government was expected to produce by May 2006, was delayed and was subsequently completed in July 2006. However, the report does not embody the findings of the CWIQ survey which is currently undergoing finalization. This has not made it possible to ascertain the status of poverty indicators and household living conditions. The status of 37 GPRSP major indicators in 2005 is provided in Annex IX. Box 2 below summarizes the progress and the major results obtained, which are on the whole satisfactory.

Box 2 Implementation of GPRSP: Overall Assessment and Monitoring of Progress Progress/Results Achieved/Problems Assessment Theme 1: Promoting good governance to enhance effectiveness and equity • Attainment of macroeconomic objectives and formulation of MTEFs 4 priority ministries (MEES,

MS, MTFS and MAA); • Education and health expenditures in the budget were in line with objectives; • non-finalization of the CWIQ survey did not make it possible to obtain current data on the

percentage of poor and extremely poor population in 2005-2006; • GPRSP monitoring-evaluation system: delays in execution of reforms, notably completion of the

organizational structure of DGP/STAD and execution of the training programme for workers of structures involved.

• Overall positive assessment; • System of monitoring-evaluation of GPRSP

constitutes the weak link in the reform. Needs to be accelerated.

• Situation of the public finances still fragile. Need to pursue reforms under the CFAA and CPAR;

• Need for donor support. Theme 2: Promoting competitiveness to sustain growth and create employment • Direct investments largely exceeded objectives; • Progress towards creation of the first citizens’ houses by 2006 (Web version) that would help

create businesses in 24 hours and the issue of administrative deeds; • Number of tourists rises from 58,000 in 1998 to 200,000 in 2005; • Number of rooms has increased from 1,460 to 4,400 in 1997-2005; • Employment-training survey carried out in 2006 helped establish the unemployment rate at 24% as

against 17% as initially estimated.

• Overall positive assessment; • Need to pursue reforms (Labour Code, creating

business in 24 hours, reduction in costs of input and credit, training-employment in the growth sectors, regulatory capacity building).

Theme 3: Developing and enhancing human capital • Achievement of objectives: increase in adult literacy rates, enrolment rate in 2nd year of secondary,

ratio of qualified secondary teachers, access to health structures and vaccination coverage rate of children below 1 year;

• Decline in repetition rate in primary education from 11.4% in 2004 to 11.2% in 2005; • The % of qualified primary teachers fell from 27.3% to 22.1%; • The last generation survey (blood sampling) on a sample of 8,000 individuals on HIV/AIDS

prevalence in 2006: rate at 0.8% as against 1% in 2004; • Food security survey 2005 indicates a stabilization of the rate of malnutrition of under-5-year olds

at 22% for several years.

• Overall positive assessment; • Pursue efforts aimed at improving quality and

equity in education and health; • Implement the strategic vocational training plan

and strengthen the training-employment linkage; • Ensure sustainability of financing of health,

notably through the PPP.

Theme 4: Improving basic infrastructure aimed at land management, regional development and environmental protection • Improvement of the % of families with access to electricity, water and sewerage network; • Absence of data on micro-irrigated area; • Ongoing improvement of road, port and airport infrastructure; • Production of municipal development plans and start of institutional and organizational reforms

under NEAP 2; • Adoption in March 2006 of the new act on environmental impact assessment (EIA) of public and

private projects.

• Overall positive assessment; • Efforts need strengthening to enhance the quality

and access to electricity and water at affordable cost, by improving the regulatory framework and investments;

• Pursue efforts to improve economic infrastructure;

• Accelerate implementation of NEAP. Theme 5: Improving the social protection system, improving its effectiveness and ensuring its sustainability • Adoption in December 2005 of the national social protection strategy aimed at the unification of

the two existing systems (contributing and non-contributing) and the sustainability of the system; • Creation in January 2006 of the national pension centre to manage the unified system; • Production in 2005 of the social atlas used for planning and monitoring of social programmes; • Distribution of new social solidarity pension cards to 13,038 beneficiaries compared to the initial

target of 11,427; • Attainment of the objective for beneficiaries of minimal social pension (7.514) and 10% of

population covered by the social protection system.

• Overall positive assessment; • Efforts to be pursued and consolidated.

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IV. CONFORMITY WITH BUDGET SUPPORT 4.1 Political and Economic Stability and Government’s Commitment 4.1.1 At the political level, since the political liberalization that started in 1990, Cape Verde has made progress in the consolidation of democracy and has become one of the most stable countries in the continent, with elections (presidential, legislative and municipal) and smooth and peaceful change of power. State institutions function normally and satisfactorily, with an effective separation of powers. The recent legislative and presidential elections of January and February 2006 went smoothly and once again were judged to be exemplary by the international community. The ruling party, namely the Party for the Independence of Cape Verde (PAICV), obtained the absolute majority in Parliament, with 41 of 72 seats as against 29 seats for the Movement for Democracy (MPD), the main opposition party. The outgoing Prime Minister was re-appointed and a new Government was formed in March 2006. The presidential elections were also marked by the re-election of the outgoing President of the PAICV who won against the MPD candidate. Following the municipal elections of March 2004, the MPD won the majority of seats in the town halls. There is press freedom and efforts have been made to bring the people closer to the administration and widen their access to information through the NITCs. The civil society organizations (CSOs) are involved in decisions relating to economic and social changes in the country, notably through consultative forums and the management of development programmes as well as major initiatives (GPRSP, gender issues, youth, human rights, security, environment, water and sanitation, micro-finance, HIV/AIDS). 4.1.2 At the economic level, macroeconomic management and performance have improved significantly since 2001. Real GDP growth was steady against a background of control over inflation, improved budget deficits and external current account. According to the IMF estimates, the medium-term growth objective is credible and the MTEF underpinning the GPRSP is viable. Furthermore, the debt is sustainable in the medium and long term. Also, the IMF deemed Cape Verde to be eligible for the Policy Support Instrument (PSI), intended for countries that no longer need a PRGF type of financial support. However, such countries decide to maintain close dialogue with the IMF on macroeconomic policy, and this denotes the commitment of the Government to keeps the reforms on track. 4.2 Technical Pre-requisites 4.2.1 Fiduciary Review: With the support of partners, Cape Verde has undertaken various types of fiduciary review (CFAA, PER and CPAR) that have led to the conclusion that the running of the administration, the Government fiscal management and public procurement were satisfactory on the whole. The principles of good governance are well-entrenched in the management of public affairs. Cape Verde is relatively well-rated in terms of governance indicators, particularly with regard to democracy, political stability, rule of law and accountability.5 Reprehensible practices, notably corruption, are limited. Corruption is not perceived by the population to be a scourge in the society. Despite inadequacies in human and financial resources of the internal and external control institutions (IGF and TdC), on the whole the management of public resources is satisfactory. Divergences between figures relating to budget allocation and execution are marginal, the Government accounts, 5 Cf. Kaufmann, D., A. Kraay and M. Mastruzzi, “Governance Matters V: Aggregate and Individual Governance Indicators for 1996-2005”, World Bank Policy Research Paper, September 2006; and Afrobarometer 2005.

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the statement of the Treasury account at the Central Bank (BCV) and the general information collected among public and private operators. Furthermore, noted shortcomings are undergoing reform as part of the CFAA and CPAR action plans, which mainly aim at enhancing transparency, the effectiveness of Government and the fiduciary framework. Notable progress made in the reforms have improved considerably the framework for putting in place budget support, which is now the preferred instrument of donors. Slippages in the preparation of the Government’s general account (CGE) have been absorbed. The Government’s financial operation accounts are now produced on a quarterly basis, and are accessible on the Government’s website (www.minfin.cv). However, efforts need to be made in terms of human and financial resources to enable the TdC to rapidly complete the auditing of the 2001-2003 even 2004 accounts. 4.2.2 In the financial domain, the banking sector entails mainly five banks. A network of bank branches exist on all the islands. The level of monetization of the country is one of the highest in Africa, with the ratio of money supply to GDP amounting to 83.2% in 2005. The BCV has built its capacities and efficiency in international supervision, auditing and prudential management of financial system, including the enforcement of the law on money laundering adopted in 2002. This law is undergoing revision in order to incorporate activities related to terrorism. The reforms have helped restructure the banks, with generally satisfactory prudential ratios, notably in the area of capitalization, liquidity and profitability. There has been a steady decline in bad debts, which averaged 6.3% of credits in 2005. The weaknesses of the system are related to the limited number of financial products tailored to needs, relatively high lending rates and the weak legal and regulatory framework of micro-finance. The opening of the Stock Exchange in 2005 and application of laws on new types of institutions and financial products, passed in February 2005, should foster competition and the widening of the financial market. Moreover, with the recent development of offshore banking, BCV undertook to build its supervision capacities in order to better adapt the institutional framework to the development of the financial sector. 4.2.3 Thus, fiduciary risk is relatively low in Cape Verde. The implementation of the present reform programme, which will significantly contribute to the consolidation of public finance management, will help strengthen the fiduciary framework. 4.2.4 Medium-Term Expenditure Framework (MTEF): To support the setting up of the GPRSP, the Government formulated a MTEF and medium-term sectoral expenditure frameworks in priority ministries. Furthermore, two budget supervision and planning laws were formulated aimed at placing the budget in a multi-annual perspective. Although efforts need to be made to ensure its effective overall establishment, this arrangement has helped improve the programming and allocation of budget resources in a medium-term framework (three years) in accordance with the priorities of the GPRSP. A monitoring-evaluation guide was prepared to strengthen the effectiveness of the arrangement for achieving the GPRSP objectives. However, the implementation of the programme for building the capacities of the monitoring-evaluation system of the GPRSP needs to be accelerated. 4.2.5 Partnership: The GPRSP, backed by the Bretton Woods Institutions, now constitutes the major instrument for channelling the support of the country’s development partners. This partnership, as a concerted means of supporting the Government’s programme contained in the GPRSP is growing. The coordination of budgetary supports is assured within the framework of the GCAB and is based on the national monitoring-evaluation system. Through the MOU, the GCAB is committed to: (i) harmonizing indicators,

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conditions precedent; (ii) undertaking joint reviews; and (iii) synchronizing disbursements with the Government’s budget cycle. Furthermore, the GCAB draws on IMF evaluations for the macroeconomic component, notably under PSI 2006-2009. Two annual joint missions have been planned, the first in May-June and the second generally in the 4th quarter. The first mission will result in a joint aide-mémoire on the programme review, policies and prior actions to be taken by the Government. The conclusion mission will agree on the joint aide-mémoire, confirmation of the amount of the expected resources for the fiscal year and coordination of disbursement. As part of the preparation of PRSSP-I, the Bank participated in the joint mission of May 2006; which helped harmonize the main elements of the programme with other partners. 4.2.6 Institutional Capacity: The institutional framework for implementing the GPRSP is based on national structures (cf. Section 3.3). The latter comprise consultative organs (CNRP and CRRP) and technical bodies, namely: the DGP/STAD, the GEP of ministries and the INE. While the capacities of the INE are relatively acceptable, those of the DGP/STAD and GEP need to be strengthened. The organizational structure of the STAD is to be completed, with the appointment of a coordinator and the recruitment of an economist and an information technologist. The GEPs are affected by the lack of qualified human resources in the areas of planning, data analysis, and information system for the projects and programmes they manage. There is the need to accelerate the implementation of the capacity building programme of structures involved in the GPRSP monitoring-evaluation with a view to enabling them to effectively discharge their missions. The present programme provides targeted institutional support to the GPRSP monitoring-evaluation system. V. BANK GROUP COUNTRY ASSISTANCE STRATEGY 5.1 Priority Areas of CSP and Strategic Context of Programme 5.1.1 The long-term objective of the Government is to reduce by half the proportion of poor people by 2015. To do this, its medium-term strategy is based on the five priority thrusts of the GPRSP 2005-2007 aimed at consolidating past socioeconomic achievements and promoting competitiveness and sector private development in a constraining insular context, and in a bid to sustain growth and create employment. The Bank’s operations strategy for Cape Verde is outlined in the results-based CSP 2005-2007, approved by the Boards in February 2006. It aims at supporting the implementation of the GPRSP and accompanying Cape Verde in its graduation to the MIC group starting from 2008 through the promotion of the competitiveness of the economy and the private sector. In accordance with the Government’s strategy, the Bank is proposing to contribute to it at both the macroeconomic and sectoral levels through three major complementary channels: (i) the stability of the macroeconomic framework and strengthening of the efficiency of the administration, through the consolidation of reforms in the Government’s financial management; (ii) improvement of the competitiveness of economic activities through access to affordable quality factors of production, in particular electricity and water; and, (iii) promotion of SMEs in the growth sectors, such as tourism, fisheries, processing and NICTs, through access to credit. The present reform programme (PRSSP-I) constitutes the first major component of the strategy to promote the competitiveness of the economy and the private sector. Other operations have been lined up in the two other components, notably the project to strengthen the electrical system on the Island of Santiago. Also, under the private sector window, the Bank is exploring the possibility of putting in place an SME assistance operation.

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5.1.2 The PRSSP-I is therefore set within the framework of the CSP, and its objectives and orientations are in line with the priorities of the GPRSP, whose implementation it will participate in through budgetary support to be executed in close coordination with the GCAB. However, the PRSSP-I will specifically focus on the consolidation of public finance (Theme 1 of GPRSP: Promotion of governance) and building of the capacities of the monitoring-evaluation system, which cuts across all the themes of the GPRSP. 5.2 Complementarities and Convergence of the Strategy with Other Donors 5.2.1 The interventions of the major donors, including the budgetary support of the GCAB, are in line with the five priority thrusts of the GPRSP, as indicated in Box 3. In particular, under the CSP 2005-2007, the Bank will contribute to achieving the objectives of thrusts 2 and 4 through the project to strengthen the electricity system on the Island of Santiago and the project of assistance to SMEs under the private sector window. Furthermore, other ongoing projects of the Bank, namely the project for institutional support to the education sector, the catchment area development project and the disadvantaged group promotion project, all contribute to achieving the objectives of thrusts 3, 4 and 5 of the GPRSP. Regarding other partners of the GCAB, the World Bank’s budgetary support highlights the management of public expenditures, reforms of the public administration, the judicial system and social protection. The budgetary support of Netherlands consists of a general part (GPRSP) and a sectoral component targeting the environment (Thrust 4 of the GPRSP). The EU provides general budget assistance to the GPRSP and a specifically targeted fund for technical and institutional support, notably to the control and monitoring-evaluation structures of the GPRSP. Overall, the GCAB partners provide assistance to specific institutional support activities, in the form of technical assistants or fiduciary funds. The joint mission of May 2006 saw the coordination of the institutional support the Bank proposes to provide to the GPRSP monitoring-evaluation system. Besides, Spain has recently confirmed its adherence to the GCAB and for 2007 will provide sectoral budgetary assistance amounting to € 3 million for the environment. Furthermore, Cape Verde has several donors about twelve of whom are classified as major partners, and who provide assistance in the form of investment or technical assistance projects. These donors include agencies of the UN System, the ABEDA and bilaterals such as Portugal, Luxembourg, Austria and France. It is also worth noting the significant financial assistance of the United States who, through the Millennium Challenge Account (MCA), also approved in 2005 an assistance of US $110 million spread over five years to finance rural development, infrastructure and support to the financial and private sector projects.

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Box 3 Cape Verde: Donor Intervention by Sector

Priority Areas of GPRSP GCAB Partners* /Instrument**

Interventions of Other Donors

Thrust I: Governance Management of public expenditures Reform of public administration Reform of judiciary system Decentralization Domestic debt management

- ADB (GBS = UA 3.39 million / PRSSP-I 2006-07) - World Bank (GBS = UA 23.7 million / PRSC 2005-07) - European Union (GBS= € 11.9 million 2005-07) - Netherlands (GBS= € 11 million 2005-07; TF CFAA, TA CPAR) NB: ADB: Support to balance of payments (PARE III) of UA 2.5 million in 2005.

IMF (PSI 2006-09) UN (TA and institutional support) Portugal (IS and financial; cooperation), Austria (TF domestic debt, decentralization) France (decentralization)

Monitoring-evaluation system - ADB (targeted IS = UA 0.75 million / PRSSP-I 2006-07) - World Bank (GBS/ PRSC 2005-07; TA, TF) - European Union (GBS; TA/IS = € 0.6 million) - Netherlands (GBS; TA/IS)

IMF (TA Statistics) SNU (TA and institutional support), Portugal (IS Statistics)

Thrust II: Economic Growth and Employment Creation Fisheries Rural development Private sector and promotion of SMEs Industry Tourism Micro-credit

This theme is essentially supported by investment projects - ADB: Ongoing operations: Catchment areas development project (agricultural sector); vulnerable group promotion project (employment and micro-credit promotion). Planned operation CSP 2005-07: project of assistance to SMEs (private sector window); - World Bank (private sector support, regulation, administrative barriers, financial sector, agricultural and tourism), - EU (private sector and food security); - Netherlands (multi-sectoral cooperation)

- MCA United States (rural, micro-credit and private sector institutional assistance,), - ADBEA (agriculture) - Portugal (Industrial development) - Luxembourg (TA and training, tourism) - Austria (TA, projects : promotion of SMEs, rural development)

Thrust III: Human Capital Education Vocational training Health / HIV-AIDS

- ADB (GBS = UA 3.39 million / PRSSP-I 2006-07; IS Education to build distance teaching capacities) - World Bank (GBS = UA 23.7 million / PRSC 2005-07: Educational and health system reforms; HIV/AIDS Project) - EU (GBS= € 11.9 million 2005-07) - Netherlands (GBS= € 11 million 2005-07; Health and education, food security)

- SNU (TA, IS, health and education) - Portugal (TA health, vocational training.) - Luxembourg (project, TA and Food assistance) - Austria (TA, projects, scholarships, education, literacy, NGOs) United States (MCA, NGO Projects)

Thrust IV: Basic Infrastructure aimed at Regional Development, Land Use Planning and Environment Environment Water and sanitation Transport Energy

- ADB (GBS = UA 3.39 million / PRSSP-I 2006-07; Ongoing catchment area project (soil conservation and water mobilization component); Operation planned for 2007: electricity strengthening in Santiago) - World Bank (GBS = UA 23.7 million / PRSC 2005-07; Energy, water and sanitation reform project; Road project) - EU (GBS= € 11.9 million 2005-07; Water and sanitation Programme) - Netherlands (SBS Environment = € 10 million 2005-07) - Spain * (ABS Environment = € 3 million in 2007)

- SNU (TA Environment, land use planning) - United States/MCA (TA, IS, irrigation projects, reforestation, energy and distribution of water, air transport infrastructure) - ADBEA (various infrastructure projects), Portugal (TA, Road projects) - Luxembourg (TA, projects: road infrastructure, electrification and sanitation), - Austria (TA, projects: integrated management of water, education infrastructure, IS to urban planning services and supply of water)

Thrust V: Social Protection System Social protection Food security

- ADB (GBS = UA 3.39 million / PRSSP-I 2006-07; Ongoing catchment areas project (micro-credit and agricultural production component); disadvantaged groups promotion project. - World Bank (GBS = UA 23.7 million / PRSC 2005-07) - EU (GBS= € 11.9 million 2005-07) - Netherlands (GBS= € 11 million 05-07; ABS Environment. Food aid)

- SNU (TA) - United States(TA, NGOs, Food aid) - Luxembourg (Food aid) - Austria (Food assistance)

• * GCAB= Budgetary Support Advisory Group (ADB, World Bank, European Union and Netherlands). It is worth noting that Spin has confirmed its adherence to the GCAB in October 2006. For 2007 a sectoral budgetary support for the environment amounting to about 3 million euros. Other measures have been envisaged to support CFAA and CPAR action plans.

• ** GBS = Global budgetary support; SBS = sectoral budgetary support; BPS= balance of payments support; IS = institutional support; TA= Technical Assistance.

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VI. POVERTY REDUCTION STRATEGY SUPPORT PROGRAMME I (PRSSP-I)

6.1 Programme Design, Formulation and Rationale 6.1.1 The design and formulation of PRSSP-I are based on the priorities outlined in the 2005-2007 CSP, and lessons drawn from previous programmes. Indeed, the PRSSP-I is set within the formal framework of coordination with other partners and a reduced number of key components and measures in a results-based matrix. The PRSSP-I takes into account the outcomes of the joint GCAB mission of May 2006 that enabled a review of the progress of the GPRSP, adoption of the principle of, and a joint draft matrix, as well as urgent measures to be implemented by the Government. However, for a closer monitoring and to conform to the initial design of the PRSC, the World Bank will monitor, until 2007, the detailed matrix of PRSC measures, which is consistent with the joint matrix. The triggers established for end 2006 at the latest were discussed with the Government for each of the themes of the GPRSP supported by the budget support programme of the GCAB. The matrix of measures of PRSSP-I is based on the joint draft matrix of the GCAB and the detailed matrix of the PRSC. The disbursement conditions are consistent with the triggers agreed to with the Government. 6.1.2 In the area of governance, it became crucial to accelerate the reforms aimed at consolidating public finances and the fiduciary system, as the major instrument for effectively channeling resources to the priority areas of the GPRSP. Furthermore, in the fixed Cape Verde-euro parity in the country, fiscal policy is the preferred instrument of economic policy, which should help achieve macroeconomic stability needed to improve the general business climate and growth. Indeed, the budgetary adjustment efforts undertaken since 2001 have helped consolidate foreign exchange reserves and strengthen the Government’s credibility thus contributing to the significant increase in private investments and capital inflows, including remittances by non-resident Cape Verdeans. However, despite these efforts, the economy remains vulnerable and the public finance situation, which is exacerbated by the escalation of oil prices, remains fragile particularly in the context of implementation of the GPRSP. There are also grounds for strengthening the effectiveness of public spending in order to consolidate the achievements of past reforms, while creating fiscal space needed to address exogenous shocks and build internal capacities for public investment financing needed for private sector development and poverty reduction. To do this, it is necessary to pursue the public finance reforms, with the support of donors. 6.1.3 Moreover, the evaluation of the first year of the implementation of the GPRSP has revealed the capacity constraints of the monitoring-evaluation system. However, an effective monitoring-evaluation is indispensable for the budgetary support arrangement and will create conducive conditions for achieving the objectives of the GPRSP. This situation calls for the acceleration of the implementation of the monitoring-evaluation strengthening programme of the GPRSP, thanks to the allocation of adequate resource. To this end, while supporting the GPRSP themes backed by the global budgetary support programme of the GCAB, the PRSSP-I will emphasize the following two major challenges: (i) consolidation of public finance reforms; and (ii) building of the capacities of the monitoring-evaluation system of the GPRSP.

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6.2 Programme Objectives and Description 6.2.1 The main objective of the PRSSP-I is to support growth and poverty reduction. The specific objective is to contribute to the competitiveness of the economy and private sector development, through the consolidation of the macroeconomic framework and strengthening the effectiveness of the Government in the area of public finance management. Under this programme, the Bank will provide institutional support to the GPRSP monitoring-evaluation system, with a view to effectively supporting the Government in the implementation of the reforms. The PRSSP-I supports the implementation of the Government’s programme, which falls within the scope of the GPRSP 2005-2007, as described in the Letter of Development Policy presented in Annex II. It is consistent with the overall budgetary support programme of the GCAB, whose themes, measures and indicators are presented in the matrix of measures given in Annex III. 6.2.2 Consequently, as indicated above, the two components of the PRSSP-I are: (i) consolidation of public finance reforms; and, (ii) building the capacities of the GPRSP monitoring-evaluation system. The first component aims to consolidate the budgetary reforms in order to enhance the effectiveness of Government’s interventions and support the macroeconomic stability needed for the competitiveness of the economy and improvement of the private sector activity framework. It will contribute to creating the conditions needed for growth, employment creation and, consequently, poverty reduction. The second component of the PRSSP-I is institutional support aimed at building the capacities of the GPRSP monitoring-evaluation system. It will effectively contribute to implementing the reforms and creating appropriate conditions to guarantee the achievement of the objectives set in the GPRSP in terms of growth and poverty reduction.

A. Consolidation of Public Finance Reforms 6.2.3 The strengthening of public finances aims at: (i) the improvement of results-based budgetary programming; (ii) improvement of budget execution and the fiduciary framework; (iii) improvement of debt management; (iv) strengthening of the internal and external control function; (v) strengthening of decentralization; and, (vi) public administration reform. 6.2.4 Improving Results-based Budgetary Programming: The reforms in programming aim to ensure greater visibility of policies and their medium-term fiscal implications by setting the resource allocation decisions within a multi-year perspective based on a coherent macroeconomic framework. A significant pillar of the budgetary programming is the medium-term expenditure framework (MTEF). The Government will develop the macroeconomic framework model and put in place a macroeconomic analytical unit at the MFAP. Furthermore, the Government is committed to strengthening the planning structures at the central level of the DGP and in the departments of studies and planning of priority ministries. This will entail consolidating achievements and ensuring the effective establishment of MTEFs in general and in the priority sectors, through sustained capacity building efforts. 6.2.5 The Government will also undertake the expansion of the programme budget approach in the administration by including in the capacity building programme four other technical ministries, namely: Ministry of State in charge of Infrastructure, Transport and Maritime Transport (MITM), Ministry of Justice (MJ), Ministry in charge of Training and Employment (MFE) and the Secretariat of State of Public Administration (SEAP). Consistency between the priorities of the GPRSP, the macroeconomic framework and the MTEFs will be strengthened. Furthermore, the PRSSP-I will oversee the effective allocation

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of resources according to GPRSP priorities with a view to achieving the poverty reduction objectives. In particular, the share of education in the budget will increase from 20% in 2004 to 23% in 2007, and that of health from 6.3% to 7% over the period. A joint public expenditure review will be conducted in 2007 with the GCAB, to monitor the effectiveness of the resource allocation mechanism. 6.2.6 Improving Budget Execution and Public Procurement: The introduction of the integrated budget management system (SIGOF) facilitated the preparation of the budget in the ministries as well as the preparation of the budgetary execution report (CGE). The quarterly accounts of the Government financial operations will be prepared in compliance with the 45-day time limit following the end of the quarter. The Government intends to abolish the centralization of expenditures by empowering managers in the sectoral ministries. The bill on budget supervision submitted to Parliament in April 2006 should be examined and approved by the end of the year. The new act aims at: (i) the presentation and mandatory voting of the budget of the following year during the current year; (ii) formalization of the functions of financial comptrollers and commitment officers; (iii) devolving budgetary execution to the sectoral ministries; and (iv) creation of ex-ante and ex-post internal control. It will help empower the sectoral ministries in the management of the budget and improve transparency and effectiveness. 6.2.7 The new act also seeks to foster the setting up of the programmatic approach and programme budgets. Rules establishing the mandate and function of financial controllers will be put in place to enable the deconcentration of the commitment of expenditure at the level of the sector ministries. This empowerment will be in stages beginning with the two pilot ministries, namely that of education and higher education (MEES) and that of health (MS). By 2007, budget execution will be decentralized in six sector ministries, with the setting up of financial comptrollers and delegated commitment officers. The Financial Comptroller will be in charge of the control of the regularity of the expenditure, under the authority of the Director General of Public Accounts (DGCP), and will report to the MFAP on a quarterly basis. Training sessions will be organized for all the stakeholders. The objective is to accelerate budget execution and enable ministries to have better control over their expenditures. A procedures manual will also be developed for budget preparation and execution. Also, the timely auditing of accounts is crucial and will help reduce fiduciary risk. The Government will submit to Parliament reports on budget execution (CGE) within the timeframe set. Proof of the submission to Parliament of the CGE of 2004 and 2005 by end 2006 will constitute a condition precedent to the disbursement of the PRSSP-I. 6.2.8 Furthermore, with the support of its partners, the Government has already undertaken reforms aimed at modernizing the public procurement system as part of the CPAR action plan, including the formulation of the single national code. By end 2007, it will complete the major reforms of the CPAR action plan, namely: (i) adoption of a national public procurement code and promulgation of implementing instruments; (ii) setting up of the regulatory body and an appeal court; (iii) preparation of standard bidding documents and a manual of procedures; (iv) creation of a system of information for public procurement; and, (v) putting in place of a training scheme for participants (TdC, arbitration centres and private sector). Adoption of the national procurement code by the Council of Ministers and its submission to Parliament will constitute a condition precedent to the disbursement of the ADF loan. Also, the Government will extend the policy of publication of tender notices and results of bids to all ministries.

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6.2.9 Improvement of Debt Management: Past reforms have helped improve the debt database, rationalize procedures for granting Government guarantee, reconstituting the list of on-lending agreements and putting in place a three-year debt settlement plan for the cross debt between the Government, the municipalities and the autonomous institutes. Control over the budget deficit has helped reduce significantly Government’s use of bank financing, thereby limiting the progression margins of the domestic debt. Under the PRSSP-I, these measures will be pursued, as well as those aimed at rationalizing the debt management. The objective is eventually reduce the total public debt in relation to the GDP, which will contribute to decreasing interest costs and creating fiscal space needed to absorb exogenous shocks as well as address investment needs. The Government undertook in 2006 to clear a significant portion of the existing debt stock and take necessary steps to avoid the accumulation of arrears, notably through the conditional liabilities of the autonomous institutes. 6.2.10 The Government will rigorously implement the three-year cross-debt clearance plan. To do this, a ceiling on exceptional expenditures will be set at 1.5% of the GDP in 2006-2007 compared to 0.8% in 2004. To avoid the accumulation of arrears and bring the contingent liabilities under control, 90% of the autonomous institutes will be integrated into the general Government budget by 2007, as against 54% in 2005. Furthermore, the appointment of delegated Treasury commitment officers in the autonomous institutions is planned. Besides, measures for streamlining public debt management will be pursued, particularly its integration into the SIGOF budgetary system, formulation of reliable quarterly cash forecasts and adoption of an effective strategy for debt and fund flow analyses. These measures will help reduce the domestic debt stock from 32.7% of the GDP in 2005 to 25.1% in 2007. The external debt will decrease from 55.4% to 52%. The total public debt will thereby decrease from 88.1% of the GDP in 2005 to 77.1% in 2007. A periodic analysis on the sustainability of the debt will be undertaken, in coordination with the BWIs. 6.2.11 Strengthening of the Internal and External Control Function: The PRSSP-I will contribute to improving the quality of the internal and external control function of Government operations that are necessary for budgetary support. To this end, the Government envisages to pursue the building of the capacities of the General Inspectorate of Finance (IGF) and the Court of Auditors (TdC). At the level of internal control, the Government envisages to increase human and budgetary resources of the IGF and ensure that its resources match with the activity programme. Special attention will be paid to priority actions, notably sectors where public finance management risk is high. Regarding external control, the Government will submit to Parliament, the bill on the organization and functions of the TdC to enable it to undertake the wide-ranging reforms. Furthermore, the human and financial capacities of the TdC will be strengthened to enable it to carry out its external control mission that should focus on the central administration as well as the municipalities and autonomous institutions. Efforts will be made to clear the audit backlog of the CGEs of 2001-2003 and possibly that of 2004. 6.2.12 Strengthening of Decentralization: Decentralization constitutes a major area of the Government’s policy on the rationalization of budgetary control. It is designed to foster the delegation of management and decision-making responsibilities. It constitutes a lever for the modernization of public sector management that creates a development process at the local level, enabling the administration to be more effective and be closer to the citizenry. The PRSSP-I will contribute to strengthening the decentralization process, which aims to provide the municipalities with an appropriate legal framework, stable financial resources, qualified and motivated human resources and adequate management capacities to contain the

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impact of town halls on the budget and enable them to effectively undertake the development actions. Measures will be taken for the adoption by Parliament in 2007, of the decentralization bill. Implementing decrees will be passed as well as the approval of protocol agreements on the decentralization of social services in all the municipalities. These measures will help avoid conflict of authority and better clarify the roles between the Government and the municipalities. 6.2.13 To enable municipalities to have adequate resources, the Government will pursue the enforcement of the amended local finance law. In this connection, at least 10% of Government resources transferred to town halls will go through the revised financial equilibrium fund mechanism (FEF). Also, the Government will oversee the execution of the plan for the regularization of cross debts between the Government and the town halls. Human resource capacities will be strengthened with the implementation of the training plan for town halls and Government employees, the civil service statutes for local communities and the incentive law for managerial staff of peripheral municipalities. The management, execution of the budget and auditing of accounts will be improved in municipalities, through the computerization of town halls and the setting up of a new public and patrimonial charter of accounts. The number of computerized town halls will increase and cover at least half of all the hall towns by 2007. 6.2.14 Public Administration Reforms: Progress has been made in improving the reliability of the administrative records. The objective is to move away from a career civil service to a civil service of skilled and motivated workers geared towards development. This will mean: (i) improving the database of the civil service to take into account the implementation of a dynamic human resource policy; (ii) deal with the crucial issue of multiple statutes as well as various institutions and autonomous funds; (iii) institutionalize training in public service; and, (iv) develop career plans and ensure more transparent promotion. Furthermore, the Government will pursue the setting up of the Citizen Houses, in order to bring the administration closer to the communities and businesses in this archipelago country.

B. Building the Capacities of the GPRSP Monitoring-Evaluation System 6.2.15 To effectively implement the reforms and enable the monitoring of progress as well assessment of the performance of the growth strategy and poverty reduction, the Government has formulated, with the support of its partners, an efficient national system of monitoring-evaluation of the GPRSP. In the new configuration, the national systems of planning, budgeting and statistics will be integrated by end 2007 through an information system linking the SIGOF, the BDEO and the BDMP. The capacities of the main actors of the system, namely: the DGP/STAD, the GEPs of technical ministries and the INE must also be strengthened to enable the system to adequately fulfill its main functions, namely: (i) monitoring and analysis of trends growth and poverty reduction-related trends; (ii) monitoring of the implementation of priority programmes and projects; and (iii) assessment of the impact of policies and programmes on growth and living conditions. However, budgetary problems have resulted in significant slippages in the setting up of the monitoring-evaluation system, notably in the establishment of the organizational structure of the STAD, the BDMP and the programme for building the capacities of technical structures involved in the monitoring-evaluation of the GPRSP (DGP/STAD, GEPs of priority ministries and INE). Furthermore, a delay in the finalization of CWIQ survey affected the timely preparation of the first GPRSP progress report in May 2006 as planned.

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6.2.16 Consequently, with the support of some partners, the Government took steps to accelerate the implementation of measures aimed at building the capacities of the GPRSP monitoring-evaluation system. The following urgent measures will be taken by end 2006: (i) putting in place of the planned structure for the STAD, namely: appointment of a coordinator and the recruitment of an economist and an IT specialist; (ii) completion of the CWIQ survey, indispensable for the preparation of the first GPRSP progress report; (iii) finalization of the first GPRSP progress report; and, (iv) acceleration of the setting up of the BDMP, namely completion of two sectoral databases began for the MAA and the MEES and starting of two new sectoral bases for MS and MTFS. 6.2.17 During 2007, the Government will accelerate the implementation of the capacity building programme of the GPRSP monitoring-evaluation system, in order to enable the achievement of the growth and poverty reduction objectives. To this end, the efficiency of the monitoring-evaluation system will be improved by: (i) providing support to strategic and operational planning in the main structures involved in the GPRSP monitoring-evaluation, notably the DGP/STAD and the GEPs in the priority ministries (MEES, MS, MAA and MTFS), through training and equipment needed to establish the MTEF and monitoring-evaluation tools of the priority programmes and projects of the GPRSP. In order to widen the programme budget approach in the administration, the capacity building effort will be extended to four other technical ministries: GEPs of the Ministry of State in charge of Infrastructure, Transport and Sea (MITM), the Ministry of Justice (MJ), the Ministry in charge of Training and Employment (MFE) and the Directorate of Studies and Administrative Reforms (DERA) of the Secretariat of State of Public Administration; (ii) accelerate the setting up of the information system of the GPRSP monitoring-evaluation, by providing technical assistance, in-service training and the necessary computer equipment; and (iii) support the INE by financing the CWIQ-2 survey in 2007. The latter is expected to provide the major poverty indicators and those of the MDGs to be used in assessing the impact and performance of policies on the well-being of the target communities. 6.2.18 The Government will implement the training programme of major monitoring-evaluation technical structures of the GPRSP, namely: the DGP/STAD, the GEPs of eight target ministries and the INE. Emphasis will be placed on in-service training workshops on result-based management (RBM), the MTEFs and operational planning, implementation monitoring and control tools. At the level of the BDMP, the sectoral databases will be completed for four priority ministries by finalizing those of the MS and the MTFS. Furthermore, a link will be established between the BDMP and the BDEO whose third and last phases will be completed in 2007. Concerning the CWIQ-2 survey, its implementation will help prepare in 2007, the annual execution and performance review report of the GPRSP. It will also help initiate studies relating to the formulation of the next GPRSP beginning 2008. Support will be provided to enable the sector ministries to better prepare their performance reports and at the DGP/STAD to undertake an analysis and general synthesis for the preparation of the annual implementation review of the GPRSP. 6.2.19 In order to carry out these activities, the PRSSP-I will include in the programme, institutional support to build the capacities of the monitoring-evaluation system in order to bolster the Government’s efforts for the year 2007. In this regard, it is essential that the 2006 urgent measures be implemented and that the organizational structure of the STAD be put in place. Thus, submission to the ADF of evidence of the completion of the setting up of its organizational structure (appointment of the coordinator and recruitment of an

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economist and information technologist) will constitute a condition precedent to the disbursement. 6.3 Programme Requirements and Financing 6.3.1 Based on the macroeconomic framework of the PSI programme concluded with the IMF, the financing requirements and sources are as follows:

Table 6.3 Financing Requirements of Programme in 2006 and 2007

2006 2007 CVE Billion UA Million CVE Billion UA Million

Total Revenues 24.604 191.974 26.037 203.155 of which tax revenues 21.099 164.626 23.050 179.849

Total Expenditure and Net Lending

40.413 315.325 39.913 311.424

of which current expenditure

22.416 174.902 21.171 165.188

Payment of interest 1.822 14.216 1.888 14.731 Capital expenditure and net

lending 16.290 127.104 16.705 130.342

Miscellaneous (payment of arrears)

1.708 13.327 1.190 9.285

Overall Balance (excluding grants)

-15.809 -123.351 -13.876 -108.268

6.3.2 The overall balance (excluding grants) shows a deficit of CVE 15.81 billion in 2006 and CVE 13.88 billion in 2007. The financing identified amounts to CVE 6.99 billion in 2006 and CVE 4.49 billion in 2007. This indicates a financing gap of CVE 8.82 billion in 2006 and CVE 9.39 billion in 2007, representing a total amount equivalent to UA 142.05 million, to be covered through budgetary support and project support provided by development partners. The cumulative contribution of the GCAB amounts to UA 37.57 million, equivalent to 26.45% of the total financing requirements. The financing of the PRSSP-I of the ADF of UA 4.14 million represents 11.02% of the GCAB contributions.

Table 6.4

Financing of Programme (2006-2007) Sources of Finance 2006 2007 CVE Billion UA Million CVE Billion UA Million Domestic Financing 3.575 27.894 0.950 7.412 of which privatization 1.394 10.877 0.000 0.000 External Financing 3.414 26.638 3.541 27.629 Financing Requirements 8.820 68.819 9.385 73.227 Budgetary support and

projects 8.820 68.819 9.385 73.227

Sources: IMF, MFAP and staff estimates

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VII. POVERTY REDUCTION LOAN AND GRANT 7.1 Purpose of ADF Loan and Grant Through the PRSSP-I, the ADF loan amounting to UA 3.39 million will support, in conjunction with the other GCAB partners (World Bank, EU and Netherlands), the Government’s budget in the implementation of its programme stemming from the GPRSP 2005-2007, and outlined in the Letter of Development Policy (Annex II). The ADF grant of UA 0.75 million will finance the capacity building activities of the GPRSP monitoring-evaluation system. More specifically, the ADF contribution will assist the Government to implement the reforms described in the preceding paragraphs which form an integral part of the Letter of Development Policy and general budget support programme of the GCAB (Annex III). 7.2 Contribution of ADF Loan and Grant 7.2.1 ADF Loan: The ADF loan will support all the measures of the general budget support programme, as indicated in the matrix of measures in Annex III. However, the ADF, in line with orientations of CSP 2005-2007, will pay priority attention to the reforms described in the paragraphs of Section 6.2. 7.2.2 ADF Grant: The ADF grant in the amount of UA 0.75 million is intended to finance the institutional support activities geared towards the monitoring-evaluation system of the GPRSP, as described in the Letter of Development Policy and the preceding paragraphs (Section 6.2).6 It is designed to assist the Government to implement the reforms and create appropriate conditions to ensure the achievement of the growth and poverty reduction objectives of the GPRSP, through the accelerated execution of activities to strengthen the performance of the GPRSP monitoring-evaluation system. On the whole, the PRSSP-I loan and grant will contribute both jointly and specifically to achieving the objectives of the programme, through the consolidation of public finance reforms and the effective implementation, monitoring and assessment of the impact of the priority activities of the GPRSP. 7.2.3 In accordance with the Government programme, the targeted institutional support of the PRSSP-I will consist of two sub-components: (i) support to planning under the GPRSP; and (ii) support to the system of information for the monitoring and evaluation of the GPRSP. The activities will also contribute to the introduction of MTEFs at the global and sectoral level, the setting up of the BDMP, conducting of the CWIQ-2 survey in 2007 and preparation of the annual performance review report of the GPRSP. The total cost of the institutional support of the PRSSP-I, including the management costs, net of taxes and customs duties, will amount to UA 0.856 million, made up of UA 0.514 million in foreign currencies and UA 0.342 million in local currency. The detailed costs are given in Annex XII. Tables 6.1 and 6.2 provide a summary by component and by category of expenditure. The costs include a 5% provision for physical contingencies and 3% for price escalation both in foreign exchange and local currency. The Government will cover expenditure balance in local currency, that is UA 0.107 million representing 12.5% of the cost of institutional support (cf. Table 6.3). Expenses borne by the Government concern wages of the staff of the administration, procurement of a vehicle and miscellaneous management maintenance expenses arising from the institutional support.

6 This allocation is in conformity with the conditions for the use of grant amounting up to 7.5% of the country’s loan allocation, notably for the financing of activities specific to capacity building, cf. the guidelines in the document titled Proposals for access to ADF-X resources as grants for the financing of technical assistance activities”, approved by the Board of Directors on 21/02/2006.

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Table 6.1

Estimated Costs by Component CVE Thousand UA Thousand %

COMPONENT FE LC Total FE LC Total Component A. Support to planning as

part of GPRSP 23,403 15,307 38,711 182.39 119.29 301.68 35.19

B. Support to information system for monitoring-evaluation of GPRSP

27,154 25,366 52,520 211.61 197.68 409.29 47.75

C. Institutional support management

8,190 0 8,190 63.83 0.00 63.83 7.45

Audit 2,422 0 2,422 18.88 0.00 18.88 2.20

Base Cost 61,169 40,673 101,842 476.70 316.97 793.67 92.59

Contingencies (5%) 3,058 2,034 5,092 23.83 15.85 39.68 4.63 Price Escalation (3%) 1,835 1,220 3,055 14.30 9.51 23.81 2.78 Total Cost of institutional support

66,063 43,927 109,990 514.83 342.33 857.17 100.00

Table 6.2

Estimated Costs by Expenditure Category CVE Billion UA Billion EXPENDITURECATEGORY

FE LC Total FE LC Total ADF Govt. A. GOODS 16,369 2,088 18,457 127.57 16.27 143.84 124.36 19.48 of which CWIQ survey: Documentation

0 1,728 1,728 0.00 13.46 13.46 13.46 0.00

B. CONSULTANCY SERVICES

16,780 7,480 24,260 130.77 58.29 189.06 164.61 24.46

of which technical assistance

11,220 7,480 18,700 87.44 58.29 145.73 145.73 0.00

of which CWIQ survey: INE technical assistance

3,138 0 3,138 24.46 0.00 24.46 0.00 24.46

C. TRAINING 23,427 15,798 39,225 182.57 123.11 305.68 305.68 0.00 of which CWIQ survey: INE Training

4,044 2,876 6,920 31.52 22.41 53.93 53.93 0.00

D. OPERATION 4,593 15,308 19,901 34.79 119.30 155.09 100.22 54.86 of which CWIQ survey: 0 8,768 8,768 0.00 68.33 68.33 68.33 0.00

Base Cost 61,169 40,673 101,842 476.70 316.97 793.67 694.87 98.80 Contingencies (5%) 3,058 2,034 5,092 23.83 15.85 39.68 34.74 4.94 Price Escalation (3%) 1,835 1,220 3,055 14.30 9.51 23.81 20.85 2.96 Total Cost of institutional support

66,063 43,927 109,990 514.83 342.33 857.17 750.46 106.71

Table 6.3

Estimated Cost by Source of Finance (in UA Thousands)

Source FE LC TOTAL % Total ADF/Grant 514.83 235.63 750.46 87.55 Government 106.71 106.71 12.45 TOTAL 514.83 342.33 857.17 100.00

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Description of Activities of PRSSP-I Institutional Support 7.2.4 Sub-Component A: Support to Planning under GPRSP: Support will be provided to structures involved in the monitoring-evaluation of the GPRSP: the DGP/STAD, the DGO, the DGT, the GEPs of priority ministries (MEES, MS, MTFS, MAA) and four others target-ministries, namely: the GEPs of the Ministry of State in charge of Infrastructure, Transport and Maritime Affairs (MITM), the Ministry of Justice (MJ), the Ministry in charge of Training and Employment (MFE) and Directorate of Studies and Administrative Reforms (DERA) of the Secretariat of State for Public Administration (SEAP). This support will help build their capacities in the design and management of development programmes and projects and ensure their monitoring-evaluation. Also, the support will enable the managerial staff and technicians of these structures to take ownership of the formulation and implementation of the MTEFs at the central and sectoral levels. 7.2.5 Equipment: The four priority ministries and the four other target-ministries will be supplied with sixteen (16) computers equipped with the necessary software, sixteen (16) computer desks and sixteen (16) UPS. One (1) scanner, one (1) photocopy machine, as well as ten (10) laptops will be used for the training activities and field missions. Furthermore, the DGP/STAD and the four priority ministries will be equipped with six (6) cupboards and five (5) network printers. The equipment provided to these structures will be used for the preparation of overall and sectoral MTEFs, collection and processing of data on projects and computer interconnection in the setting up of the BDMP. 7.2.6 Training: The support will finance the organization of six (6) training workshops in Praia for twenty (20) workers (2 from DGP/STAD, 1 from DGO, 1 from DGT and 2 from each of the 8 target-ministries). The training will consist of: (i) a (2) two-week workshop on MTEFs by two trainers; (ii) a (2) two-week workshop on result-based management (RBM); (iii) a two-week workshop on operational planning, budgeting of programmes and public projects; (iv) a two-week workshop on evaluation of public programmes and projects; (v) a two-week workshop on the monitoring of implementation and performance chart; and, (vi) a two-week workshop on the MS Project for operational planning, monitoring and supervision. Each of these workshops will be conducted by two trainers from one or several consulting firms or specialized training institutions, recruited on a competitive basis. Also, a documentation fund specific to the themes on monitoring-evaluation will be made available to the DGP/STAD for the procurement of publications intended for the structures involved. 7.2.7 Sub-Component B: Support to the Information System for the Monitoring and Evaluation of the GPRSP: The institutional support will contribute to: (i) the conducting of the CWIQ-2 survey in 2007, needed for the preparation of the GPRSP performance and progress report as well as the second GPRSP beginning in 2008; (ii) putting in place of the BDMP, notably the completion of sectoral databases of the MS and the MTFS, computer interconnection; and, (iii) preparation of performance reports in the sector ministries, and formulation by the DGP/STAD of the annual review of the GPRSP implementation. 7.2.8 Computer Equipment: The DGP, which is responsible for the implementation of the BDMP, should have computer equipment to fulfil its role of coordination and sharing of information with structures involved in the BDMP. The support will finance the procurement of computer equipment, in particular appropriate software, cables and accessories.

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7.2.9 Training: The support will finance two training workshops of two weeks duration in Cape Verde, organized by two external trainers on performance indicators and on the management and processing of data for monitoring-evaluation. These training activities will concern about (20) professional staff (2 from DGP/STAD, 1 from DGO, 1 from DGT, 2 for INE and 2 for each of the eight target-ministries). Additionally, it will be used to finance a short-term training (4 weeks) on information system for the monitoring-evaluation outside Cape Verde for three (3) staff of the DGP/STAD and one (1) staff member of INE. Subsequently, these four trainers will in turn lead a two-week workshop in Cape Verde on the same theme for 20 staff member. Moreover, under the CWIQ-2 survey, the support will finance, on behalf of INE, the cost of 15-day training, thirty two (32) interviewers and eight (8) comptrollers in Santiago for a period of 2 weeks; fifty six (56) interviewers on other islands; and fourteen (14) comptrollers on the other islands. In addition, an awareness campaign will be organized for the persons interviewed. These training activities will be conducted by the INE whose capacities have been strengthened, with the support of the World Bank, within the framework of the first CWIQ survey. 7.2.10 Technical Assistance: The support will finance two technical assistants in information system during four months, that is, for a total duration of eight (8) man-months. These technical assistants will assist in the setting up of the BDMP and conduct other training sessions as well. Furthermore, INE will provide technical assistance in the supervision of the CWIQ survey. 7.2.11 Operation: The support provided will entail the financing on behalf of INE, the cost of printing seventy (70) survey manuals, thirty (30) comptrollers manuals, five (5) data keying manuals, ten thousand (10,000) CWIQ questionnaires, seven hundred and fifty (750) copies of the final report of the survey and a CD production. Also, the support will finance various transport expenses of the supervisors, interviewers and comptrollers on the various islands, as well as the supervision trips. Lastly, the support will cover the per diems and benefits of the interviewers, supervisors and comptrollers. Monitoring and Performance Indicators of the PRSSP-I 7.2.12 The PRSSP-I indicators are in line with the outcomes of the CSP 2005-2007 (cf. Annex XI). Also, in accordance with the Guideline on access to ADF-X grants for the technical assistance activities, design and execution of institutional support of PRSSP-I are based on the principles of results-based management. Thus, a specific framework of results together with measurable actions and indicators was designed. These performance indicators, which are consistent with the results of the CSP 2005-2007, are summarized in the table below.

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Table 7.1

Performance Indicators of PRSSP-I Institutional Support Objectives/Activities Outputs Results

Objective: Contribute to achieving the objectives of the GPRSP

37 major indicators of PSCRP produced, monitored and evaluated regularly

No discrepancies between objectives and achievements of PSCRP indicators

Sub-objective 1: Strengthen planning as part of GPRSP

Progress and performance report of PSCRP prepared in 2007

- 6 training workshops: MTEF, GAR, Operational planning and budgeting of public programmes and projects, Evaluation of public programmes and projects, Monitoring of execution and performance chart; and, in MS Project for operational planning, monitoring and supervision

- 16 desktop computers, 16 UPS and 16

computer desks (2 for each of the 8 target-ministries);

- 10 laptops, 1 photocopying machine, 1 scanner, 1 BDMP server/software and laying of cable of network (DGP/STAD);

- 5 printers (1 DGP/STAD and 4 priority ministries (MEES, MS, MTFS, MAA);

- 6 cupboards (2 DGP/STAD and 1 for each of the 4 priority ministries);

- Procurement of publications (DGP/STAD)

- Network cables (DGP/STAD and 4 priority ministries)

- 20 staff trained (2 DGP/STAD, 2 for

each of 8 target-ministries, 1 DGO and 1 DGT) in 6 themes

- DGP/STAD et GEP of 8 target

technical ministries equipped with computer hardware and office furniture as well as publications on monitoring-evaluation

Better monitoring-evaluation of PSCRP indicators and those of MDGs Strengthening of effectiveness of monitoring-evaluation system. Overall MTEF and of priority ministries are formulated in line with the objectives of PSCRP Strengthening of the capacities and skills of structures involved in the implementation of the PSCRP.

Sub-objective 2: Strengthening the information system of the PSCRP monitoring-evaluation

- Finance CWIQ survey in 2007 - Procure and develop BDMP Software - Provide 2 TAs for 4 months - Organize 2 workshops (performance

indicators and management and processing of data) by external resource persons

- Finance short-term training (4 weeks) abroad for 4 staff of DGP/STAD and INE on construction of monitoring-evaluation

- Organize a workshop in Cape Verde on construction of monitoring-evaluation system led by 4 executives of DGP/STAD and INE

- CWIQ-2 survey conducted in 2007 - 4 sectoral bases of BDMP completed

for 4 priority ministries and linked to DGP and BDEO and INE base

- 20 staffs trained in performance indicators and data processing management on monitoring-evaluation (2 DGP/STAD, 1 DGO, 1 DGT, 2 INE and 2 for each of the eight target-ministries)

- 3 staffs of DGP/STAD and 1 from INE have undergone one short-term training abroad

- 20 workers trained in Cape Verde in construction of monitoring-evaluation system

Major indicators of PSCRP and MDG available in 2007 Better monitoring of priority projects and programmes of PSCRP BDMP database operational Improvement of skills and capacities in management of information system

NB: The Government will take the necessary steps to ensure that, as much as possible, the same persons undergo a series of courses to create a critical mass of qualified staff in programme budgeting and monitoring-evaluation. Also, at least half of the trainees will be women in order to keep in line with the gender profile in the current staff composition (56 middle and senior management staff out of a total of 99 workers).

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7.3 Procurement of Goods and Services PRSSP-I Loan 7.3.1 In line with the procedure adopted under the budgetary support, the national rules for the procurement of goods and services will apply, taking into account improvements made to the public procurement system under the CPAR action plan. Adoption of the national public procurement Code by the Council of Ministers and its submission to Parliament will constitute a condition precedent to the disbursement of the ADF loan resources. The Government will pursue the policy of extending the principle of publication of tender notices and results of the bids to all ministries.

PRSSP-I Grant 7.3.2 Arrangements relating to the procurement of goods and services using the ADF grant resources for institutional support to the GPRSP monitoring-evaluation system (UA 0.75 million) are summarized in Table 7.2 below. Procurement of goods and the services of consultants financed by the ADF will be in line with the Bank’s Rules of procedure for the procurement of goods and services or, where applicable, to the Bank’s Rules of procedure for the use of consultants, based on appropriate standard bidding documents.

Table 7.2

Procurement Arrangements In thousands of UA

NCB SL Other *

Financing other than

ADF** Total GOODS 80.19 (80.19 26.62 (26.62) 19.48 126.29 (106.81) Computer equipment 72.71 (72.71) 72.71 (72.71) Office Equipment and material 7.48 (7.48) 7.48 (7.48) Computer software 9.70 (9.70) 9.70 (9.70) STAD and CWIQ Documentation 16.92 (16.92) 16.92 (16.92) Vehicles 19.48 19.48 0.00 SERVICES 387.96 (387.96) 105.25 (105.25) 24.46 517.67 (493.21) Technical Assistance 145.73 (145.73) 145.73 (145.73) INE Technical Assistance 24.46 24.46 0.00 Training workshops in Cape Verde 168.34 (168.34) 46.64 (46.64) 214.98 (214.98) Training abroad of 4 staff 32.10 (32.10) 4.68 (4.68) 36.78 (36.78) INE Training (CWIQ) 53.93 (53.93) 53.93 (53.93) Audit 18.88 (18.88) 18.88 (18.88) Administration and finance officer 22.91 (22.91) 22.91 (22.91) OPERATION 94.85 (94.85) 54.86 149.71 (94.84) Consumables 17.53 (17.53) 17.53 (17.53) Transport (CWIQ) 30.31 (30.31) 30.31 (30.31) Maintenance 8.98 (8.98) 3.90 12.88 (8.98) Benefits & wages 38.02 (38.02) 50.97 88.99 (38.02) Total Base Cost 80.19 (80.19) 387.96 (387.96) 226.72 (226.72) 98.80 793.67 (694.87)

Contingencies and Price Escalation (8%) 6.42 (6.42) 31.04 (31.04) 18.14 (18.14) 7.90 63.50 (55.60)

Total 86.61 (86.61) 419.00 (419.00) 244.86 (244.86) 106.71 857.17 (750.47) Notes: Legend: International Competitive Bidding (ICB); National Competitive Bidding; (NCB) and Shortlists (SL). () The amounts in parenthesis indicate ADF contribution. * National and international shopping and procurement by negotiation with specialized institutions (INE for CWIQ survey and others). ** Procurement funded by the Government using its procedures.

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7.3.3 Goods: Procurement of computer equipment and office equipment amounting to UA 80.190 (thousand) will be by national competitive bidding (NCB), since the quantity and value of the items are such that they are not likely to attract foreign suppliers and since there is a sufficient number of local suppliers to ensure competition. The computer software for the BDMP of UA 9.700 (thousand) will be by international shopping, since it is not available locally. Procurement of documentation for DGP/STAD and for the CWIQ survey amounting to a total of UA 16.920 (thousand) will be by national shopping. 7.3.4 Services: Procurement of technical assistance for the monitoring-evaluation system amounting to UA 145.730 will be in accordance with the Bank’s rules procedures on the use of consultants. A consultancy firm will be commissioned based on a shortlist. The selection procedure will be based on technical evaluation of the proposals with price consideration. A specialized training institution or a consultancy firm selected on the basis of a shortlist will provide training services for the organization of workshops in Cape Verde amounting to UA 168.340. The selection procedure will be based on the comparability of technical proposals and the taking into account of the lowest bid price. Procurement of services relating to the organization of workshops (rental of training rooms, tea breaks, etc.) amounting to UA 46.640 will be by national shopping. Also, a specialized international institution will be selected on the basis of a shortlist to provide training abroad on information system for monitoring-evaluation for a duration of 4 weeks amounting to UA 32.100 for four staffs of the DGP/STAD and the INE. The selection will be based on the comparability of technical proposals and the lowest bid prices. Transportation for the staff (air tickets) amounting to UA 4.676 will be procured by national shopping. Based on a negotiation, the INE will provide training for the interviewers and conduct awareness campaigns as part of the CWIQ survey in the amount of UA 53.930. Indeed, this institution is the only one in Cape Verde capable of providing such service, and it has the necessary qualified staff. Procurement of auditing services amounting to UA 18.880 will be by national shopping based on a shortlist of auditing firms. The selection of the auditing firm will be based on the comparability of the technical proposals and the lowest bid prices. Furthermore, based on a shortlist, an administration and finance officer will be recruited for a period of 14 months and at the cost of UA 22.910, to take charge of the day-to-day management of the institutional support. 7.3.5 Operation: The purchase of computer consumables and office supplies (UA 17.530), various communication and transport expenses (UA 30.310) and the maintenance of the computer equipment (UA 8.980), will be financed by the ADF based on a national shopping. The benefits of the interviewers will be covered through the negotiated services provided by the INE as part of the CWIQ survey. 7.3.6 National Laws and Regulations: National laws and regulations concerning procurement in Cape Verde were examined and deemed to be acceptable. 7.3.7 Executing Agency: The DGP/STAD will be responsible for procurement under the institutional support. To this end, it will be assisted by an administrative and financial officer, recruited on the basis of a shortlist and paid from the ADF resources (cf. paragraph 7.3.4). He will be an expert in procurement (cf. Terms of Reference in Annex XIV).

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7.3.8 General Procurement Notice: The text of the General Procurement Notice (GPN) will be decided jointly with the Cape Verdean Government and issued for publication in the United Nations Development Business Review as soon as the grant proposal is approved by the ADF Board of Directors. 7.3.9 Review Procedures: The following documents will be submitted to the ADF for consideration and approval prior to their publication: (i) Specific Procurement Notices; (ii) shortlists; (iii) bidding documents (BDs) or letters of invitation to consultants; (iv) report on the evaluation of bids by suppliers or on consultants’ proposals including recommendations on contract award; and (v) draft contract in case changes had been made to the modalities indicated in the bidding documents. 7.4 Disbursements 7.4.1 Disbursement of PRSSP-I loan: The PRSSP-I budget support amounting to UA 3.39 million will be disbursed in a single tranche between the end of 2006 and start of 2007 to back the Government’s programme in 2007. The single tranche is justified by the need to follow the Government budgetary cycle and synchronize with other partners. It is further justified by progress made in the implementation of measures that will intensify by end 2006 with the establishment the triggers of PRSC. Furthermore, the experience in single tranche disbursements from two previous programmes (PARE II and PARE III) was satisfactory. Disbursement will not cover specific procurements, provided the list of non-eligible goods is adhered to. As soon as the loan enters into force and the conditions precedent are fulfilled, the ADF will pay the loan amount into a special account to be opened by the Treasury at the BCV. Opening of the special account shall constitute a condition precedent of the disbursement of resources of the ADF loan. 7.4.2 Disbursement of Grant: The institutional support grant of UA 0.75 million, which will specifically target the building of the capacities of the GPRSP monitoring evaluation system, will be lodged in a special account to be opened by the Government at the BCV. Opening the special account shall be a condition precedent to the disbursement of the grant. Disbursements for operating expenses will be through the special account which will be replenished in accordance with the modalities approved by the ADF. Request for the replenishment of the special account must be accompanied by a programme of activities acceptable to the ADF and a summary of the justification of the use of the previous replenishment. Disbursements related to contracts (for goods and services) will be by direct payment to suppliers based on contracts signed following the invitations for bids. Replenishment of the funds will be subject to the use of at least 50% of previous funds. The DGP/STAD will prepare the disbursement request to be sent to the ADF. It will ascertain the conformity of the services of the various suppliers of the institutional support with the terms of reference. Expenditures below UA 20,000 will be from a special account, with the prior approval of the ADF. The national counterpart fund will be paid directly from the Government budget. 7.5 Implementation and Monitoring of PRSSP-I 7.5.1 PRSSP-I Executing Agency: the PRSSP-I will be implemented through the GPRSP national monitoring-evaluation system (cf. Section 3.3), coordinated at the technical level by the DGP/STAD at the MFAP including the INE and the GEPs of sector ministries. On the whole, the national system is expected produce the following monitoring-evaluation

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elements: (i) the annual implementation report of the GPRSP; (ii) periodic reports on the MDGs, with the support of the UN system; (iii) annual monitoring of the budget through expenditure reviews ; (iv) annual statement on execution of sectoral budgets and definition of objectives and targets by the priority technical ministries; (v) periodic INE surveys among households to monitor the trend of poverty and access to services, in particular the CWIQ survey; (vi) surveys among stakeholders, qualitative monitoring of the performance of the Government and an analysis of the impact of poverty, to be carried out by the STAD ; (viii) an analysis of fiduciary performance; and (ix) sectoral studies. In particular, the Government will produce timely quarterly budget execution accounts, annual CGE and progress reports on the PRGSF which will help keep a close watch over the implementation of the programme. 7.5.2 Also, the DGP/STAD will prepare and forward to the ADF specific quarterly reports on the progress of the PRSSP-I institutional support. It will keep an account to monitor and control the proposed expenditures by category and the financial evaluation of the support. The ADF will finance an auditing firm to set up the system of accounting and the auditing for two institutional support audits. The STAD Coordinator will undertake the technical coordination under the authority of the DGP. In discharging its daily duties, the DGP/STAD will be assisted by an administration and finance officer recruited from a shortlist and paid from the ADF resources. The supervision missions will ascertain the smooth operation of activities based on the outputs. 7.5.3 Furthermore, the Bank will monitor the programme through coordination with the GCAB (ADB, World Bank, EU, the Netherlands). In this regard, the measures, performance indicators and conditions precedent to disbursement have been harmonized. The second joint mission of the GCAB is scheduled for December 2006. Disbursement of the PRSSP-I resources will follow this mission. Also, a joint public expenditure review will be conducted in 2007. Furthermore, the GCAB will draw on the IMF’s PSI 2006-2009 reviews, notably with regard to macroeconomic issues. 7.5.4 Audits : The Bank will depend on the annual public account report (CGE), which will be submitted before the end of the year following the execution of the budget. However, the Bank reserves the right to request the auditing of the special account by an independent auditor in order to ensure that the loan resources have been used for the purpose set and in accordance with current rules. The grant resources will be subjected to a specific auditing by an independent firm with terms of reference acceptable to the ADF. 7.5.5 Duration of Programme and Implementation Schedule: The programme covers the 2006-2007 period. However, the ADF financing will cover 18 months beginning from the entry into force in December 2006. The proposed schedule of implementation is as follows:

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Table 7.1 Schedule of Implementation of Programme

Activity Schedule Negotiation of Loan Agreement October 2006 Presentation to Board November 2006 Entry into force December 2006 Annual joint supervision mission December 2006 Invitation for bids of institutional support December 2006 Disbursement of single tranche loan January 2007 Recruitment of administration and finance officer of the institutional support

February/March 2007

Initial disbursement of grant February/March 2007 Start of training March 2007 Joint review mission of programme May2007 Conducting of CWIQ survey June 2007 Delivery of goods July 2007 Second annual joint supervision mission (mid-term) September/October 2007 Annual auditing of institutional support of PRSSP-I January 2008 Final auditing of institutional support of PRSSP-I May 2008 Preparation of borrower’s completion report of June 2008 Preparation of ADF completion report August 2008

7.6 Coordination of Aid With Other Donors 7.6.1 Coordination of aid by the Government is jointly carried out by the Ministry of Finance and Public Administration (MFAP) and the Ministry of Foreign Affairs, Cooperation and Communities (MAECC), which manage the multilaterals and bilaterals respectively. Round table meetings are organized periodically, with the support of the resident mission of the United Nations System (UNS). The last meeting, held in April 2003, marked the beginning of discussions on new modalities of aid, budgetary support, harmonization and the possibility of appointing thematic or sectoral lead organizations. The UNS recently took to steps to hold more frequent and regular donor meetings. Besides, the Government put in place in May 2006 the transition support group (GAT), under the mechanism to enhance dialogue with partners in the implementation of the strategy for the smooth graduation of Cape Verde to the status of a middle income country (MIC), which was presented to the donor community in May 2006. The GAT comprises 12 members namely: ADB, World Bank EC, UNS Austria, Spain, United States, France, Netherlands, Luxembourg, Portugal and People’s Republic of China. 7.6.2 Partnership and harmonization will be strengthened under the framework put in place by the Budgetary Support Advisory Group (GCAB) made up of the Bank, World Bank, EU and Netherlands (cf. paragraphs 4.2.5, 5.2 and 6.1.1). Spain recently confirmed its adherence and other partners have expressed interest in joining the GCAB, notably Austria. Besides, the GCAB uses the IMF’s PSI evaluations for the macroeconomic component of the programme. The completion of the establishment of the GPRSP monitoring-evaluation system will also contribute to the coordination of aid. 8. JUSTIFICATION, IMPACT AND RISKS 8.1 Justification of Programme 8.1.1 The PRSSP-I is geared toward consolidating the satisfactory results obtained in previous efforts in macroeconomic, fiscal, and structural reforms as well as poverty reduction

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actions begun under previous programmes. The PRSSP-I is justified by the need to assist Cape Verde to meet the challenge posed by poverty that still affects 37% of the population, by contributing to improving the competitiveness of the economy and the activities of the private sector aimed at sustained economic growth and employment creation. The PRSSP-I is consistent with the Government’s strategy and the CSP 2005-2007 designed for the implementation of the GPRSP, through a single pillar namely: promoting the competitiveness of the economy and the private sector. By supporting the implementation of the GPRSP, the programme aims to intensify the fight against poverty by strengthening the management of public resources and the monitoring-evaluation system that will lead to equity and effectiveness in the Government’s interventions. 8.1.2 Indeed, in the context of the fixed exchange rate of Cape Verde escudo, budgetary support and improvement of the quality of the Government’s financial management contribute to maintaining macroeconomic stability indispensable for improving the business environment, growth and employment creation needed to reduce poverty. Furthermore, the programme includes institutional support targeted to building the capacities of the GPRSP monitoring evaluation system expected to contribute to creating appropriate conditions for achieving the growth and poverty reduction objectives. It will improve dialogue with the Government as well as the capacities of beneficiary structures in the formulation, planning, budgeting and monitoring-evaluation of programmes and projects, thus contributing to the successful implementation of the PRSSP-I measures. 8.2 Impact of Programme 8.2.1 Macroeconomic Impact: The programme will foster macroeconomic stability and strengthen Government’s effectiveness in supporting the private sector. Thus, it will contribute to improving the business climate, building the confidence of the private sector and sustained growth. It aims at achieving by 2007 a real GDP growth of 6%, an annual average inflation rate of 0.2%, a budget deficit (including grants) of 4.3% of the GDP, a foreign reserve representing 3.2 months of imports of non-factor goods and services, as well as a controlled public debt of 77% of the GDP. However, the current account deficit (including grants) will witness a transient rise from 6.9% in 2006 to 10% in 2007. This is accounted for by the significant increase in the importation of capital goods needed to sustain the increase in private and public investments, particularly as part of the implementation of the GPRSP. Indeed, imports are expected to rise by 9.2% in 2007, compared to 4.8% for exports. Furthermore, recurrent costs of the institutional support of the PRSSP-I, consisting of the maintenance costs of computer and office equipment amounting to UA 9,263 per year, can be easily borne by the Government budget. 8.2.2 Social Impact : By contributing to the implementation and effective monitoring-evaluation of the GPRSP, the PRSSP-I will have a significant impact on poverty reduction. Indeed, the GPRSP is the medium-term instrument of the Government’s long-term strategy aimed at halving poverty by 2015. The implementation of the PRSSP-I will contribute to sustaining the growth of the real GDP through a consolidation of the macroeconomic framework, strengthening of governance and measures geared toward removing the growth constraints. At the macroeconomic level, maintaining inflation at 0.2% in 2007 will safeguard the purchasing power of the people. Also, controlling the budgetary and external current account deficits as well as the consolidation of international reserves will contribute to improving the competitiveness of the economy and the environment of the private sector and SMEs, which constitute factors that promote employment creation. Furthermore, the living

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conditions of the people will improve through substantial budgetary allocations to the priority sectors (Education, Health, Labour, Family and Social Protection and Agriculture). The establishment of MTEFs and the GAR will improve the targeting of the GPRSP priorities and, consequently, contribute to poverty reduction. The decentralization and modernization of Government will bring the people closer to the administration and stimulate their participation in the decision-making and development process. The effectiveness of the GPRSP monitoring-evaluation system will help take appropriate measures to ensure tat the poverty reduction goals will be attained. 8.2.3 Impact on Environment: The PRSSP-I is classified as Category III on the environmental and social impact assessment scale. The implementation of the programme will not produce adverse effects on the environment. The PRSSP-I forms part of the overall programme of budget support that provides significant assistance to the environment sector through the implementation of the NEAP II. 8.2.4 Impact on Gender: In Cape Verde, gender equality has been attained in primary education and virtually attained in secondary education, but this is not the case in social and professional life. Indeed, unemployment, a key determinant of poverty is higher among women (one out of every four women is unemployed), which represents about 51% of the poor. Consequently the PRSSP-I will have positive effects on women, through support to the implementation of the GPRSP and the creation of adequate conditions for achieving its objectives through the enhancement of the monitoring-evaluation system. Also, in accordance with the gender action plan 2005-2009, gender is factored into the design of policies as well as the monitoring-evaluation system and the performance indicators of the GPRSP. Furthermore, at least half of the beneficiaries of the PRSSP-I institutional support training will be women, since they represent about 60% of the number of high and middle-level managers (56 out of 99) targeted by the PRSSP-I institutional support at the monitoring-evaluation structures. 8.2.5 Impact on Governance : The programme will build the capacities of the Government in the matching of programme budgets to the objectives of GPRSP and improving the monitoring-evaluation of budget execution in the ministries. The programme will enhance transparency in the management of public expenditure through the improvement of the SIGOF, management of public procurement, compliance with time-limits for the preparation of accounts and strengthening of control organs. Furthermore, the widening of the areas of competence of municipalities, strengthening of local finances and management of decentralized budget control will contribute to consolidating decentralization. Local communities will be progressively involved and strengthened in economic and financial management in their localities and regions. By facilitating these critical trends, the programme will contribute to a better social cohesion and render Cape Verde more attractive for official development aid and investments. 8.3 Major Risks and Mitigative Factors 8.3.1 Risks that are likely to affect the implementation of the programme are: (i) capacity constraints at the level of the administration; (ii) fiduciary risks; (iii) exogenous shocks, notably the escalation of petroleum prices and the decline of private capital and non-resident remittances; and, (iv) the non-retention of trained workers of the beneficiary structures of the PRSSP-I institutional support monitoring system.

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8.3.2 The first risk can be attenuated through assured ownership and determination of the Government to see the reforms through. The programme also entails institutional supports provided by the Bank and other partners aimed at enhancing institutional and technical capacities as well as human resources of the administrations involved in the implementation of the reforms. Regarding the fiduciary risk inherent to any budgetary support, this will be attenuated with the satisfactory implementation of the action plans of the CFAA and CPAR. The programme will also provide adequate resources to consolidate these reforms of the fiduciary framework. Regarding the third risk, namely the exogenous shocks to which the country’s economy is subjected, it is worth pointing out in general that the programme contains several mitigative measures geared toward consolidating exchange reserves and creating budgetary margins notably through a reduction of the debt stock and control of the conditional liability. The financial assistance of donors is also crucial. The Government’s commitment to implementing the reforms, dialogue particularly under the IMF’s PSI 2006-2009 and budgetary supports, will contribute to mitigating possible external shocks. These factors will contribute to rendering credible and viable the macroeconomic framework, which is a key determinant of the inflow of private capital and remittances by non-residents. Lastly, with regard to the risk of the non-retention of trained workers in the monitoring-evaluation structures, it is worth recalling that the major cause of the significant fluctuations of the administration staff resides in the multiplicity of the peculiar statutes that fosters the granting of leave of absence in the structures governed by the said statutes. This issue is taken into account in the component of the programme on the reform of the public administration that aims at the unification of the statutes and motivation of workers. 9 CONCLUSION AND RECOMMENDATIONS 9.1 Conclusion The PRSSP-I is a follow-up of previous reform programmes. By supporting the implementation of the GPRSP 2005-2007, it aims to support growth and intensify the fight against poverty that affects 37% of the population. The PRSSP-I measures aim at the promotion of governance aimed at equity and effectiveness in the action of the Government, through the enhancement of public finance and the GPRSP monitoring-evaluation system. These measures will contribute to assuring the quality of public expenditure, maintaining the stability of the macroeconomic framework and promoting the competitiveness of the economy, key factors for improving the private sector environment and employment creation and, consequently, poverty reduction. 9.2 Recommendations 9.2.1 In light of the foregoing, it is recommended that a loan of UA 3.39 million in the form of budgetary support be granted to the Government of Cape Verde and a grant of UA 0.75 million for institutional support to the GPRSP monitoring-evaluation, to support the implementation of reforms as outlined in the present report and reflected in the Government’s Letter of Development Policy contained in Annex II. ADF Loan: Conditions Precedent to Effectiveness and Disbursement 9.2.2 Conditions precedent to loan effectiveness: The implementation of the Loan Agreement will be subject to the fulfilment by the Borrower of conditions set out in Section 5.01 of the General Conditions applicable to loan agreement and guarantee agreements.

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9.2.3 Conditions precedent to loan disbursement: The disbursement of the loan into a single tranche of UA 3.39 million will be subject to the entry into force of the Loan Agreement, maintenance by the Borrower of an appropriate macroeconomic framework, smooth running of the programme and fulfilment by the Borrower of the specific conditions below:

- Show proof of the opening of a special account at the Central Bank (BCV) to receive the ADF resources (paragraph 7.4.1);

- Provide evidence to the ADF of the submission to the National Assembly

of the General Government Account (CGE) 2004-2005 (Paragraph 6.2.7) ; and,

- Provide evidence to the ADF of the approval of the Procurement Code by

the Council of Ministers and its onward transmission to Parliament (Paragraphs 6.2.8 and 7.3).

ADF Grant : Conditions precedent to effectiveness and disbursement 9.2.4 Conditions precedent to grant effectiveness: The Grant Memorandum of Understanding, in the amount of UA 0.75 million will enter into force upon its signature. 9.2.5 Conditions precedent to the first disbursement: In addition to the entry into force of the Grant Memorandum of Understanding, the first disbursement of the grant will be subject to the fulfilment by the Donee of the following specific conditions :

- Provide evidence to the ADF of the opening of a special account at the Central Bank (BCV) to receive only ADF resources in conjunction with the institutional support to the GPRSP monitoring-evaluation system (Paragraph 7.4.2) ; and,

- Provide evidence to the ADF of the completion of the setting up of the

organizational structure of the Technical Secretariat for Development Support (STAD), namely the appointment of the coordinator and recruitment of an economist and a computer expert (Paragraphs 6.2.15, 6.2.16 and 6.2.19).

ANNEX I

CAPE VERDE

ADMINISTRATIVE MAP

This map is intended exclusively for the use of the readers of the report to which it is attached. The names used and borders shown do not imply on the part of the Bank and its members any judgment concerning the legal status of a territory nor any approval or acceptance of these borders.

LETTER OF DEVELOPMENT POLICY

ANNEX II Page 1 of 11

REPUBLIC OF CAPE VERDE Ministry of Finance and Public Administration

Date : Dr. Donald KABERUKA President of African Development Bank Group (ADB) Temporary Relocation B.P 323 TUNIS Tunisia Subject : Letter of Development Policy 1. This letter of development policy summarizes our reform programme aimed at implementing the growth and poverty reduction strategy (GPRS) as outlined in the Growth and Poverty Strategy Paper (GPRSP) for the 2005-2007 period adopted by the Government in September 2004. The GPRSP is based on the National Development Plan (PDN) 2002-2005 and is a follow-up of the interim PRSP aimed at maintaining macroeconomic stability, strengthening and consolidating structural reforms, developing the competitiveness of the economy and promoting growth and employment. This letter also describes the major economic and financial orientations for the 2006-2007 period. Consequently, it reaffirms the commitment of the Government of Cape Verde to consolidate the reforms initiated for several years. 2. The GPRSP was adopted by the donors of Cape Verde who henceforth set their actions within this framework. The GPRSP is already backed by budgetary supports by the World Bank through the Poverty Reduction Support Credit (PRSC), Netherlands and the EU which have put in place the Budgetary Support Advisory Group (GCAB), whose instrument is the memorandum of understanding (MOU). We salute/commend the participation and formal adherence of the ADB to the GCAB in 2006. The IMF also approved in August 2006 a new medium term 2006-2009 programme supported by its new non-financial instrument, namely the Policy Support Instrument (PSI). The present budgetary support requested by the ADB will enable Cape Verde to have the necessary resources to finance the implementation of the GPRSP. 3. This letter describes the actions the Government intends to take in the medium term to implement the PRSC by focusing on measures that will help enhance the effectiveness and the impact of public spending on the objectives of the GPRSP. The matrix of policies and measures with precise indicators of outcomes is appended to this letter. This matrix, which is based on that of the PRSC, has been prepared in collaboration with other partners of the GCAB, including the Bank. The matrix of policies and measures reflects the definition of priorities that takes into account budgetary and institutional constraints identified. The implementation and achievement of the outcomes indicated in bold in the matrix are considered to be essential for the success of the reform programme.


Context and Recent Trend 4. Cape Verde is a small country both geographically and economically. It also has to cope with its constraining insularity. In recent years, the country’s economic performance has improved substantially. Per capita GDP, estimated at US$ 1,800 in 2004 shows a significant improvement compared to the level that has obtained since independence in 1975, when it was US$190, or compared to that of 1990 when it was US$ 902. Over the 2001-2005 period, real GDP growth averaged 5.6%. This strong and sustained economic growth was driven by the development of the private sector and the integration of Cape Verde into the global economy. Foreign private investments have played a major role in the process by substituting for public investment which was until then predominant. 5. Inflation as well as budgetary deficits and those of the external current account have been brought under control. The annual rate of inflation was 0.4% on average, resulting from the pursuit of a prudent monetary policy, diversification of import sources, decrease in foodstuff prices and customs tariffs as well as the successful introduction of the VAT in January 2004 in replacement of various consumer taxes. This level of inflation is largely below the threshold of 2.5% -3% deemed necessary to maintain stable prices and the competitiveness of the economy vis-à-vis partner countries of the euro zone. The overall budgetary deficit (including grants) averaged 3.5% of the GDP in 2002-2004, as against 4.5% in 2001. In 2005, it rose to 5.1% of the GDP due to the lower than expected increase in grants, rise in public investments and the exceptional transfer expenditures of the Government. The continued budgetary adjustment efforts and external supports will be necessary to reduce the vulnerability of public finance. The current account deficit (excluding grants) improved significantly from 17.2% of the GDP in 2002 to 9.3% in 2005, driven by the growth in fishery exports and tourism. Net inflows from tourism that increased from CVE 6,881 to 9,566 million sustained the average 12.8% growth of exports. Conversely, imports grew by an average of 8.1% over the period. 6. With regard to the level of the external debt, its ratio to the GDP fell from 56.4% in 2002 to 55.4% in 2005. The debt service ratio fell to 8.8% of the export of non-factor goods and services in 2005, compared with 15.6% in 2002. Also, the domestic debt was brought under control thanks to better control over Government’s banking credit. It fell from 29.2% of the GDP in 2002 to 27.3% in 2003, before rising back to 35% in 2004 as a result of the inventory of the domestic debt that helped recognize a substantial portion of the outstanding debt stock. In 2005, the level declined to 32.7% of the GDP. However, although it is within sustainable thresholds, the total public debt ratio of 88.1% of the GDP in 2005 remains high. The significant reduction of domestic debt stock constitutes a priority for guaranteeing the sustainability of public finances. 7. These overall satisfactory economic results are accompanied by an improvement of most social indicators. The human development index (HDI0 rose from 0.587 to 0.21 between 1990 and 2003. life expectancy at birth is 68 years and 74 for women and men respectively. Furthermore, the human poverty index, which reflects deficiencies in terms of life expectancy, income, education, literacy and other factors improved from 28.8% in 1990 to 18.7% in 2005. Thus, the UN adopted in December 2004 Resolution 59/209 on the graduation of Cape Verde from the group of least developed countries (LDC) to that of middle income countries (MIC) starting from 2008. However, Cape Verde must address challenges such as the continued vulnerability of the economy, its constraining insularity as well as the worrying level of unemployment and poverty that affects 37% of the population. 8. The causes of poverty are mainly related to living conditions in rural areas and lack of skilled labour particularly among the poor. An estimated one-quarter of the working population depends on agriculture for its livelihood. The high population growth rate, climatic and ecological


constraints such as the lack of water and soil erosion are factors that account for the stagnation and low incomes in the rural world. To remedy the lack of resources, the population has traditionally turned to emigration or the informal sector. In view of the increased restrictions in the host countries, migratory movements from the hinterland to urban areas are on the increase. This has increased the population of the city of Praia in turn resulting in increased pressure on health, housing, education and health infrastructure. Labour-intensive works (FAIMO) have become the main safety net in the rural areas. Subsistence livestock rearing also plays a key role in the rural areas, in so far as it represents a safety factor during the dry season. Informal activities have grown sharply in the urban areas. The large proportion of women in this sector accounted for the reduction of female poverty in the 1990’s. 9. Furthermore, economic growth in the last decade has resulted in increased inequality in income distribution as indicated by the Gini coefficient which rose from 0.51 at the end of the 1980’s to 0.57 in 2002. The excessive concentration of wealth is illustrated by the fact that 10% of the extremely poor population, accounts for only 1% of total incomes, while 10% of the extremely rich account for 47%. Economic growth was accompanied by a profound structural change. The tertiary sector has become dominant in productive structures. It is supported by high growth in the tourism sector as well as in transport, banking and trade. The primary sector grew slowly. The weak performance of the primary sector has a negative impact on incomes and the risk of poverty which workers in the rural world must grapple with. 10. This situation has a significant impact on the allocation of resources between the sectors and factors of production and, consequently, on incomes and the distribution of wealth both nationally and on each island. Moreover, the steep growth in incomes in sectors such as tourism and other services deepened inequalities in income distribution. Increased population pressure, combined with the erosion of farmlands has had a negative impact on rural per capita incomes, thus contributing to inequalities in income distribution. The island of Sao Vicente has the highest concentration of wealth with a Gini coefficient of 0.60, compared to the national average of 0.57. The islands of Santo Antao, Sao Nicolau and Santiago have a coefficient of 0.56. Overview of Programme 11. The 2001-2002 household survey shows that 37% of the population is poor, 62% of whom live in the rural areas. About 54% of the poor population is considered to be extremely poor. Besides, about 51% of the poor are women. 12. The Government’s growth and poverty reduction strategy is contained in the GPRSP 2005-2007, which was prepared with the support of the partners based on a successful participatory process. Its main objective is to substantially reduce absolute poverty through the adoption of a series of measures aimed at macroeconomic policy and public administration policies as well as pro-poor sectoral and macroeconomic policies.


13. The GPRSP is set within the general context of the planning process implemented in Cape Verde for several years. Its major elements/antecedents include the Major Planning Options (GOP) 2002-2005 and the National Development Plan (NDP) 2002-2005. The link between the NDP and the GPRSP guarantees the consistency between growth and the poverty reduction objectives on the one hand and the sectoral policies on the other. 14. The overall objective of the GPRSP is to reduce poverty through the implementation of a set of policies including the consolidation of macroeconomic stability, decentralization of decision-making powers as well as employment promotion through the development of agriculture and other productive sectors. To these policies may be added those relating to the distribution of incomes, social protection and the environment. 15. Based on the above-mentioned polices, the Government has organized the programmes and measures around five strategic aims that comprise interventions both at the central and decentralized levels. The five aims are : (i) promote good governance, its effectiveness and guarantee equity.; (ii) promote competitiveness in order to boost economic growth and job employment creation; (iii) develop and enhance human capital; (iv) improve and develop basic infrastructure, promote land management, regional development and environmental protection; and, (v) improve the effectiveness and sustainability of the social protection system. The 2005 budget adequately financed these five areas. The 2006 Budget Act also takes into account priorities defined under the GPRSP. A. Promote Good Governance, Enhance its Efficacy and Guarantee Equity 16. The Government is convinced that the success of the GPRSP will depend on good governance that highlights the efficacy of economic policies, particularly pro-poor policies. This major aim comprises four components: (i) public administration reform; (ii) the judicial system; (iii) Government fiscal management ; and, (iv) decentralization. To set the programme in motion, the Government will undertake a public administration reform by introducing capacity building programmes for civil servants and by improving management capacities. Emphasis will be placed on information systems, communication technologies and human resource planning. The Government has recently completed the development a civil service personnel database, which started in 2004. 17. Secondly, the judiciary will be strengthened through the implementation of several measures including: (i) the effective enforcement of laws; (ii) improvement of the knowledge of the citizenry on fundamental rights; (iii) setting up of a legal assistance fund for vulnerable population groups; and, (iv) the creation of centres for conflict resolution. To achieve these objectives, the Ministry of Justice was instructed to coordinate the activities of major national stakeholders such as the National Human Rights Committee, the Constitutional Court, the Office of the Attorney General and the Bar Association of Cape Verde. 18. Thirdly, the Government hopes to pursue reforms aimed at consolidating the Government fiscal management based on improved effectiveness, transparency and participation. The implementation of recommendations stemming from the country financial accountability assessment (CFAA), public expenditure review (PER) and country procurement assessment review (CPAR) is progressing smoothly. These reforms aim at budgetary programming and preparation, management and control of Government revenues, management of the treasury and the Government debt, conditions of budget execution, management of local finances, building the capacities of the General Inspectorate of Finance (IGF), management of State assets, management of food aid, auditing of accounts and, lastly, the introduction of a national procurement code. The CPAR action plan has already been endorsed by the Government. With the support of partners, the measures are undergoing implementation.


19. Backlogs in the auditing of Government General Accounts (GCE) have been cleared for the 1998-2003 period and the reports forwarded to the Court of Auditors (TdC) for consideration and approval. The 2004 CGE was prepared in June 2006 and that of 2005 will be finalized by September 2006. Thus the reduction of the backlog to less than one year marks a clear improvement compared to the situation in 2003-2004 with a backlog of five years. The Government quarterly financial operations are prepared on time. Furthermore, the implementation of the settlement of the cross-debts between the Government, municipalities, autonomous and para-statal institutions has been initiated. The plan entails the clearance of arrears over the next five years. Regarding tax reform, customs tariffs have been rationalized and the VAT successfully introduced in January 2004. The VAT has enabled the streamlining of the tax system and the promotion of the collection of additional revenues. The aim is to increase available resources for poverty reduction. 20. Fourthly, the Government hopes to strengthen the decentralization programme aimed at increasing decision-making and execution powers at the local level, specifically among the poor. The reforms will also guarantee the equitable distribution of resources, especially with the setting up of a financial equilibrium fund (FEF). The amended local finances act was approved in September 2005, with the setting up in 2006 of new modalities for calculating transfers from the Government budget through the financial equilibrium fund (FEF). The revised formula, based on equity and effectiveness in the allocation of resources to town halls has resulted in a 60% increase in the FEF amount in 2006. Thus, Government revenues transferred rose from 7 to 10%. Also, the reform aims to coordinate more effectively the actions of civil society organizations (CSOs) and NGOs involved in building the capacities of municipalities in the areas of education, health, environment, land management and service delivery. Lastly, special effort is being made to pursue the computerization of municipalities and to put in place the new public chart of accounts and patrimonial plan.

B. Promoting Competitiveness in to order to Boost Growth and Employment creation

21. In addition to maintaining macroeconomic stability through good governance as well as the accumulation of human and physical capital targeted by other major areas, the objective is to create conditions for the profitability of the private sector and emphasize productivity gains through structural measures. These are: (i) reduce administrative bottlenecks in business registration, by reducing the time required to 24 hours; (ii) enhance competition and the regulatory function of Government; (iii) develop the financial sector; (iv) ensure the flexibility of the labour market by implementing the new labour code; (v) strengthen the capacities of private sector support institutions; and, (vi) promote foreign and national private investments, SME’s and income-generating activities (IGAs) as well as exports in growth potential and job creation areas namely, agriculture, fisheries, tourism and light processing industries. 22. The Government is pursuing its efforts in the development of market economy by encouraging the establishment of local large, medium and small-scale businesses as well as partnership with foreign investors. Public-private partnership (PPP) has been introduced. To that end, the Government launched a competition policy that encouraged the creation and improvement of institutional conditions to enable new firms to enter all the sectors of the economy. 23 To ensure the efficient supply of goods and services, the Government will continue to strength regulatory agencies and will complete the privatization programme. This will translate into a reduction of the budget deficit consequential to the elimination of subventions, and an


increase in resources in the form tax revenue and profits from the sale of state enterprises under the privatization programme. Furthermore, the process will contribute to achieving the Government’s ambition to provide varieties of goods and services to the poor at affordable prices.

C. Developing and Enhancing Human Capital 24. Unemployment constitutes a major concern, particularly for the poor. The employment-training survey conducted in 2006 established the rate of unemployment at 24% for the entire country. Furthermore, the household survey carried out in 2001-2002, shows that about 33% of the labour force is poor. About 20% of the poor population has been unemployed for over 12 months, while only 10% of non-poor have been exposed to unemployment beyond the survey period. This means that unemployment affects the poor population profoundly. On the whole, the rate of unemployment of the poor population is 33% and that of the non-poor is 16%. 25. To address the problem, the Government initiated an employment policy intended to create more jobs and generate incomes for the poor. Focus was given to programmes such as labour-intensive works (FAIMO) that provide temporary employment in infrastructure projects such as road construction, soil conservation and re-afforestation programmes. However, the labour-intensive programmes do not entail strategies for developing the skills of the poor that would enable them overcome their poverty in a sustainable manner. 26. At the same time, the Government has been coordinating through the ministries of labour, and education, the various skills development programmes designed to assist the poor to safeguard their jobs and increase their incomes. This has led to the introduction of employment and vocational training policies under the supervision of the two ministries. Special focus will be given to the strengthening of the organizational structure of civil society organizations with the aim of supplanting labour-intensive works. Additionally, a new ministry of vocational training and employment was created in March 2006, to better coordinate the actions of the Government in this area. 27. Furthermore, the Government has been lending support to the reform relating to the right of enjoyment and to property to encourage employment in the agricultural sector. The Government is committed to providing technical assistance through the Ministry of Agriculture to support the reform. Also, the strategic expansion of the tourist industry will increase employment and the incomes of the poor, particularly on the islands of Sal, Boa Vista and Maio. 28. The development of human capital depends on two key factors, namely education and health. Impressive progress has been made but much still remains to be achieved, particularly with regard to gender disparities in urban and rural areas. For example, Cape Verde has achieved the universal primary education objective. However, it is necessary to improve the quality of the educational system. Priorities in the training of teachers have been identified and an action plan drawn up to that effect. Also, pupils are being encouraged to complete secondary and vocational education in order to enhance their chances on the labour market. The literacy rate has improved significantly over the last ten years and this trend will improve in the coming years. Education and vocational training objectives are designed to: (i) improve the quality of education and the internal efficiency of the system through the training of teachers; (ii) improve access to pre-school and by the poor to secondary education; (iii) reduce regional disparities in access to quality education; (iv) strengthen the education system – labour market linkages by matching training to the needs of the economy, and (v) develop higher education and research in science and technology.


29. In the area of health the objectives are as follows: (i) extend health services to poorly served areas ; (ii) reduce evacuations abroad by developing local alternatives; (iii) improve health personnel management ; (iv) strengthen the information system, decentralization and participation of the communities in prevention and financing efforts in the sector; and, (v) develop public-private partnerships (PPP). A key health indicator is reduced infant mortality. The Government hopes to reduce infant mortality by two-thirds by 2015 if past policies that have produced the current results are strengthened. To achieve this, the Government has already undertaken the analysis of human resources and prepared as well as adopted a strategy for increasing the ratio of the number of physicians per capita. The challenge facing the Government is the specialization of health professionals. The Government is committed to improving the reforms to ensure the sustainability of health service delivery. Furthermore, the fight against HIV/AIDS is increasing household and individual health costs. Given the current prevalence rate, the Government is committed to pursuing efforts to ensure behaviour change. Cases of tuberculosis and attendant deaths also declined between 1989 and 2002. Furthermore, malaria has been brought under control.

D. Improving and Developing Basic Infrastructure, Promoting Land Management and Environmental Protection

30. The chief objective is to contribute to the efficient management of land and natural resources and the provision of basic infrastructure to support the private sector activities and ensure a sustainable and environment-friendly socioeconomic development and improvement of the quality of life. The Government is aware of the importance of the development of basic infrastructure, that include health facilities, water supply and the construction and maintenance of roads. With regard to health infrastructure, the Government’s strategy is to strengthen the collection of wastewater in the cities of Praia and Mindelo and subsequently extend it to other cities. There is a serious drainage problem that threatens the sanitary conditions of the poor and constitutes a major source of pollution. 31. The current land management policy is obsolete. Consequently, the Government is in the process of implementing global municipal urbanization plans to replace the obsolete land management plans. The Government hopes to undertake a reform of the current mapping and cadastral system to enhance the right to land ownership and determination of the boundaries of municipalities in order to develop other infrastructure and enable the collection of property taxes. 32. The most common environmental disasters such as soil erosion, degradation of coastlines, water and air pollution, accumulation and dispersal of wastes are of concern to the Government. To remedy the situation, the Government approved in 2004 and initiated the implementation of the second ten-year national environmental action plan (NEAP 2) 2004-2014. The NEAP provides a strategic framework for the rational and sustainable management of natural resources and economic activities for combating poverty. Its priority areas are: (i) sustainable management of water resources; (ii) basic sanitation; (iii) biodiversity; and, (iv) land management. It is in line with the MDGs, namely environmental protection, water supply, employment creation and food security. 33. The infrastructure development policy also covers roads, maritime transport and airport infrastructure. Inter-city road transport has been completely liberalized. The maritime transport liberalization policy has led to the liquidation of the state shipping line Arca Verde and the aviation code defines rules and procedures for the participation in the international civil aviation industry. This has led to the signing of international freight agreements. It shows that the Government is deeply committed to introducing reforms and restructuring the transport industry, which is the key to the reduction of costs and ensuring the effective supply of goods and services to the poor.


34. Moreover, despite the privatization in 1998, the water and electricity sector is faced with serious economic, financial and production deficits resulting in high costs that hamper the competitiveness of the economy and, consequently growth and employment creation as a means of combating poverty. Indeed, the limited access and the high cost of electricity and water are major constraints to business development. State subventions on fuel designed to maintain electricity rates at reasonable levels, particularly for the vulnerable groups, have weighed heavily on the Government budget. The Government and municipalities have accumulated sizable arrears to Electra, the privatized electrical company. The ARE was created in 2003 for the economic regulation of the electricity, water and fuel sectors. It developed a model for electricity and water tariff adjustment in 2004 whose implementation has fallen behind schedule. In April 2006, the Government took significant steps to ensure the sustainability of public finance as well as the economic and financial equilibrium of the sector. 35. Subventions on petroleum products were abolished, resulting in a significant rise in electricity and water rates in June 2006. Measures were taken to settle the arrears owed to Electra and oil companies, starting with the payment of a significant portion from the 2006 budget. Also, the main stakeholders of the sector agreed to apply an automatic mechanism for adjusting water rates depending on costs and efficiency gains. In July 2006, the Government and Electra, the strategic partner, agreed that the State should buy back the majority shares of the company. The effective application and strengthening of measures are necessary to ensure the sustainability of public finance, economic and financial equilibrium of the sector and create conditions for indispensable investments to increase production capacities and the quality of services as well as reduce the costs of electricity and water. In this connection, steps will be taken to improve the institutional framework of the regulation, enhance dialogue between the major stakeholders (Government, Municipalities, ARE, and Electra), clear the arrears of the Government and municipalities and thereby pave the way for the much-needed public and private investments. 36. Thus, the specific objectives of Thrust 4 of the GPRSP are : (i) develop electricity, water, sanitation, transport and NICT infrastructure; (ii) develop PPPs and find external financing; (iii) increase electricity and water production and distribution capacities; (iv) open up some islands and put in place an effective system of multi-modal transport; (v) develop air and maritime transport facilities to support tourism and exports ; and, (vi)implement the NEAP II (2004-2014).

E. Improving the Effectiveness and Sustainability of the Social Protection System

37. The current social protection system continues to suffer from its inability to cater adequately for the vulnerable section of the population. This constitutes a challenge to the Government to put in place a strategy providing protection and assistance mechanisms to needy households that are vulnerable to risks and social exclusion. 38. To address this situation, efforts have been made to establish a financially sustainable social security system. However, it is worth ensuring that social protection transfers target the poor, if they are to have the desired impact on poverty reduction. More specifically, the Government is committed to unifying the existing systems which procure jobs such as the redefinition of the incentives of labour-intensive workers and building of the capacities of the National Social Security Institute (INPS). 39. Alternatively, the Government grants loans to support the poor by enabling them to participate in the production process. However, the Government acknowledges that there is a critical need to improve the targeting the poor. The aim is to promote self-employment through


micro-credit which constitutes a major source of capital and a factor for increasing the income generation capacities. This policy translated into wider financial intermediation to ensure greater coverage of poor areas and needy families. 40. By the same token, the Government is encouraging the development of sustainable agriculture in which the main initiatives are based on the improvement of agricultural resources and the generalization of micro-irrigation systems. In the area of food security, the Government is ensuring food availability and stability in supply in markets in urban centres and their peripheries which are supplied by private operators. 41. On the whole, the specific objectives of Thrust 5 of the GPRSP are to : (i) develop institutional capacities in the area of social protection, notably the social Security Institute; (ii) strengthen and broaden programmes aimed at disadvantaged groups, including social benefits, social assistance and health insurance; (iii) promote local initiatives and community development ; (iv) promote rights of children; and, (v) strengthen food security and improve mechanisms for the prevention and management of food crises. Expected Outcomes 42. The programme will support macroeconomic stability and growth. It aims at a real GDP growth of 6% by 2007, an average annual inflation of 0.2%, a budget deficit (excluding grants) of 4.3% of the GDP; a current account deficit (including grants) of 10%, a level of international reserves representing 3.2 months of non-factor goods and services imports, as well as a controlled public debt of 77% of the GDP. Growth will be essentially driven by private and public investments and exports. On the supply side, sectors deemed to be more dynamic are hotel business, industry, energy, fisheries and construction. 43. Tax policy will be guided by prudence to maintain the macroeconomic stability, sustained growth and poverty reduction. Thus it is expected that the primary current balance surplus will rise from 2.2% of the GDP to 4.6% in 2007. 44. Monetary policy will be consistent with economic activity as well as, the stable price and foreign exchange policy as well as private sector support. International reserves in months of imports of goods and services are therefore expected to rise. This policy is also consistent with the principle of mobilization of internal resources to support development efforts. Thus, credit to the economy as a percentage of total credit is expected to grow. 45. The current account balance (including official transfers) will rise in relative terms, resulting in a significant reduction of the deficit resulting from a relative stabilization of imports and an increase in exports over the period. Implementation of Programme 46. The GPRSP will be implemented through national planning and budgeting systems whose reforms are underway. The implementation will entail a high-level participation by communities, decentralized entities and private sector representatives. 47. To support the process, the Government decided to formulate a medium-term expenditure framework (MTEF) beginning with the 2005 budget and sector MTEFs in the priority ministries (Education, Health, Agriculture and Environment and Social Protection). This instrument will improve: (i) the definition of priority programmes and projects that directly contribute to sector goals and the GPRSP; (ii) budgeting of programmes and projects in relation to mobilizable resources; and, (iii) medium-term allocation (over three years) related to priorities, with a view to achieving the development objectives set.


8. To implement these guidelines, the Government undertook a number of reforms designed to render the system more effective, credible and transparent. To this end, a number of measures were taken to pursue the recommendations of the PER, CFAA and CPAR.

49. The institutional framework for implementing the GPRSP depends on the existing administrative structures due to undergo necessary restructuring. The National Poverty Reduction Council (CNRP) is an advisory body made up of structures in the administration, private sector and the civil society. At the central level, the General Directorate of Planning (DGP) supported by a technical secretariat for development support (STAD) will be responsible for coordination and technical assistance. At sector level, the Directorates of Studies and Planning of each ministry will prepare, monitor and evaluate programmes and projects embodied in their strategies. At the local level, the Regional Poverty Reduction Council (CRRP), an advisory body, will cater for the contribution of stakeholders. Monitoring –Evaluation of Programme 50. The Government has put in place a monitoring-evaluation system for the GPRSP to guide the actions of the various actors involved in the implementation of growth and poverty reduction strategy. In addition to the Government’s structures, the system includes civil society organization as well as development partners.

51. The Government hopes to undertake the following functions as part of the monitoring-evaluation: (i) monitoring and analysis of growth, poverty, vulnerability and inequality; (ii) monitoring of the implementation of programmes and projects that contribute to improving growth and poverty reduction ; and (iii) assessment of the impact of policies and programmes on growth and poverty reduction. 52. The system will be based on a network established by the Information Society Operational Nucleus (NOSI). This consists of three components and two sub-components. The main components are: (i) trend monitoring and analysis; (ii) execution; and, (iii) impact assessment. The sub-components comprise : (i) the creation of a physical, technical, institutional and human environment for a better dissemination of data and information and results between producers and users ; and (ii) improvement of the dissemination of information to foster participatory dialogue between the various parties concerned and , ultimately, contribute to a better design and execution of public policies. 53. In order to guarantee the smooth and effective operation of the GPRSP, the Government has decided to put in place the following three structures:

National Poverty Reduction Council (CNRP) : The National Poverty Reduction

Council is a broad-based structure with responsibilities for the monitoring and support to policy decisions relating to the growth and poverty reduction strategy. It has 17 members from structures pertaining to the administration, civil society, NGOs and private sector representatives ;

Observation and Analysis System (SOA) : The observation and analysis system

comprises two modules: the national statistical and planning system. These cover most of the observation and analysis component by providing the CNRP contributions (notably studies) for the monitoring and formulation of growth and poverty reduction policies. The SOA will cover statistical observation and indicators information, including monitoring of relative result and impact indicators for the sector objectives; and,


Regional Poverty Reduction Councils (CRRP) : The mandate of these structures

is also advisory. As a first step, it will essentially approve actions to be embodied in the GPRSP and in the validation of the GPRSP annual progress report.

Conclusion 54. The Government remains committed to its overall objective of poverty reduction through a steady economic growth for the implementation of the GPRSP. To do this, the Government intends to revitalize the reforms in order to render them technically and administratively feasible and consistent with the overall objective proposed. The Government considers that these policies and measures constitute a key step to achieving the medium-term goals of the GPRSP. Consequently, it is requesting the financial support of the Bank for its poverty reduction strategy. Please accept, Mr. President, the assurance of my highest and fraternal esteem.

Cristina DUARTE Minister of Finance and Public Administration

ANNEX III Page 1 of 7

MATRIX OF PROGRAMME MEASURES (Priority measures of PRSSP-I are indicated in bold-italics)

Policy Measures and Actions Base (Year 2004)

Target Indicators Objective/Outcomes 2005 2006 2007

Indicators

2005 2006 2007

Responsible Body

Thrust I : Improving governance and strengthening of effectiveness and equity

Budget Programming

The 2005 Budget Act 2005 takes into account priorities of the GPRSP Formulation of MTEF : Budget Act 2006 is prepared on the basis of the unified budget classification and adoption by the Council of Ministers of the budget supervision and planning act Formulation of MTEF: Projection of incomes over three years and formulate for at least two sector ministries MTEFs containing the operating and capital budgets Include in the budget the INPS and other autonomous institutions

Execution of Budget Act 2006 is in line with Budget Act 2006 Budget Act 2007 takes into account priorities of GPRSP Circular 2007 takes into account capital and operating budgets of all ministries with ceilings and priorities of GPRSP

Execution of Budget Act 2007 is in line with Budget Act passed in 2007 Budget Act 2008 reflects priorities of GPRSP Include grants of development partners in 2008 budget Create a macroeconomic analysis

Education % of budget Health % of budget Number of ministries that have comprehensive or partial MTEFs % of institutions whose budgets appear in the Government general budget

20 % 6.3 % 0 54 % (20/37)

22 % >6.5 % 0 54 %

22.5 % >7.0 % 0 >67 %

23 % >7.0 % 0 >90 %

MFP, Council of Ministers

Liability and debt clearance plan approved by the MF

Implementation of recommendations of plan as follows: - payment of 35 % of total

arrears in 2006, - adjustment electricity

rates to reflect abolition of fuel subsidies

- implementation of mechanism for the adjustment of electricity tariffs

Make provision to guarantee medium term clearing of cross debt

Exceptional expenditures % of GDP

0.8 % (2003)

1.5 %

1.5 %

1.5 %

MFP (studies)

Budget Execution

Deconcentrate the commitment and liquidation of the debt through the SIGOF in three ministries at least

Deconcentrate commitment and liquidation of expenditures through the SIGOF in at least three ministries

Deconcentrate commitment and liquidation of expenditure through the SIGOF in at least six ministries

Number of ministries operating with deconcentrated system of budget execution

>3

>6

>6

NOSI, MFAP, sector ministries




Indicators

2005 2006 2007

Responsible Body

Debt and treasury management

Incorporate SIGOF in treasury and budget management Initiate treasury management

Incorporate debt into budget management Increase the number of autonomous institutions having accounts at the treasury

Carry out management of treasury including funds of autonomous institutions

Number of autonomous institutions participating in the consolidation of the treasury accounts

0

2

>15

Improvement of internal and external control

The CGE 2000-2002 is presented to Parliament

The CGE 2003-2004 is presented to Parliament Presentation to Parliament of bill and decree on organization and competence of TdC IGF implements its plan of activities in line with its budget

The CGE 2005- and 2006 are submitted to Parliament The municipalities and autonomous institutions are audited on time. The IGF implements its work programme based on its resources..

Number of days preceding the presentation to Parliament of the budget execution of the previous year Number of IGF missions

6 months

< 6 months 35

< 6 months 40

< 6 months 42

MFP, Council of ministries

Procurement

The national procurement code is approved by the council of ministers and submitted to Parliament

i) Adoption of procurement code; ii) Promulgate the application

decrees iii) Establishment of a new

institutional framework iv) Use of standard bidding

document and preparation of a manual of procedures

Initial training modules provided at INAG for procurement agents The first procurement modules were provided by INAG The TdC is equipped and trained in ex-post control The appeal system is operational The regulation authority is operational

Number of ministries publishing their bids Number of contracts submitted for ex-post control

0 0

3 0

9 0

15 +20

MFP, MIT, (admin. Docs)

Decentralization

Approval by Parliament of the blue print law decentralization

NA

NA

NA

NA

NA

MAI, Municipalities




Indicators

2005 2006 2007

Responsible Body

Prepare enabling legislation on decentralization for the transfer of powers to municipalities Table the new law on local finances and implementing decrees before Parliament Protocol between NOSI, ANMCV and DGCL for the computerization of municipalities Diagnose the need to computerize municipalities

Over 10 % of Government resources are transferred to municipalities through FEF At least five municipalities are linked to SIGOF

Carry out transfer of powers Revise current protocols based on the enabling legislation on decentralization Over 10 % of Government resources are transferred to municipalities through FEF Increase the number of municipalities linked to SIGOF

% of Govt resources transferred to municipalities through the FEF

<7 %

Idem

>10 %

>10 %

MAI, Municipalities

Improving GPRSP monitoring-evaluation system

Creation of a database for agriculture and education ; training in result-based management Put in place basic instruments for monitoring poverty such as : BDEO, QBS and production of indicators on poverty: CWIQ, statistical agenda, training in data analysis on poverty

Creation of sectoral database on health and social protection Training of STAD on monitoring-evaluation Evaluation of sectoral monitoring-evaluation system GPRSP progress report Implement STAD programme of activities satisfactorily in 2006 Creation of sectoral database at ministries of health and social protection CWIQ survey is carried out

Database extended to other sectors, training in monitoring-evaluation of DGP sectors, update the GPRSP, rapid assessment of monitoring-evaluation system Develop basic instruments for poverty monitoring such as : BDEO, QBS and production of indicators on poverty : CWIQ, statistical agenda

Number of staff trained in the DGPOGs Number of training workshops organized GPRSP progress report is produced annually BDMP is operational Number of workers trained at STAD in monitoring-evaluation Number of workers at ministries trained in monitoring-evaluation

0 0

2 2

2 4

20 8 1 4 4 16

STAD, DGP, IDEA, NOSI, Sectors INE

Public Administration

Put in place operational mechanisms for the coordination and implementation of the reform of the public sector Define post of “public manager” and initial training

Public administration training scheme is adopted and the financing assured and the selection process completed

An operational mechanism for the coordination and implementation of the public sector reform is fully operational Agenda of administrative reforms is

Updating of database procedures (%)

10

50

100

100

MFPA and all ministries




Indicators

2005 2006 2007

Responsible Body

Database of FP is operational and deconcentrated for a regular update by sectors and used as a basis for the diagnosis of human resources and formulation of the reform

An operational mechanism for the coordination and implementation of the public sector reform is fully operational The FP database and payroll are used for the payment of civil service wages The inter-ministerial working group reform is operational Unify the CSR and database for the civil service payroll, operationality of inter-ministerial working group The internet platform will provide a number of on-line services: register a business in 24 hours or birth certificate

finalized The new career and wages system is implemented The first group of public administrators trained assumes duty Increase the number of products/services available on the internet

Number of public administrators in place Number of days needed to register a business Number of services that can be obtained on the site daily

0

0

0 1 8

20 1 15

Justice

Application of decree on legal assistance to the poor

6 MOUs between the Ministry of Justice, Municipalities and other stakeholders The legal assistance fund is operational Decree on mediation approved and published Law on arbitration submitted to Parliament

17 MOUs signed with 17 regions The legal assistance fund continues to function normally Formulate a training programme for mediators The arbitration and mediation centres are operating The training programme for arbitrators and mediators is implemented

Number of beneficiaries of the services

MJ

Thrust 3 : Developing human capital

Education

Revision of curricula at the first cycle of basic education ( YP1

Revision of curricula at the second cycle of basic

Revision of curricula at the 3rd cycle of basic ( Y5 and Y6)

Basic education repetition rate

12.6 %

<12 %

<11 %

<10 %




Indicators

2005 2006 2007

Responsible Body

and Y 2) Implement basic education training programme Extend coverage of pre-school Implement secondary education training programme Continue to implement programmes aimed at strengthening technical secondary Expand student assistance programme for poor families Formulate and publish a vocational training strategic plan First year of implementation of secondary construction programme First year of action plan for the training of basic education teachers is implemented

education ( Y3 and Y4) Put in place the training programme for basic education teachers Continue promoting pre-school education Execute secondary education training programme Continue implementing programmes aimed at strengthening technical secondary Second year of action plan for the training of basic education teachers is implemented Second year of implementation of secondary construction programme Prepare action plan for the implementation of strategic plan for vocational training

Implement training programme for basic education teachers Continue promoting pre-school education Implement secondary education training programme Continue implementing programmes aimed at strengthening technical secondary education Continue implementing vocational training strategic plan Third year of implementation of secondary construction programme

% of primary education teachers without vocational qualification Number of vocational training structures accredited % of pupils enrolled at secondary technical education

23 % (2003/04) 0 4.6 % (2003/04)

22 % 1 5.0 %

15 % 3 6.0 %

10 % 6 7.0 %

MOE and teachers’ college

Health

Publish the 2004 statistical data The information system action plan completed ( 1st quarter 2005) and start of implementation Priority health programmes implemented Plan activities of NCD for 2005 (including studies) Implement HRH strategy Introduce reforms to reduce INPS expenditures

Publish 2005 statistical data Start implementation of health system information action plan 70% of priority health programmes implemented in relation to budget estimate Studies on NCD’s are completed and outcomes published and an action plan developed Continue implementing human resource strategy

Publish statistical data for 2006 Continue implementing health information action plan 80% of priority health programmes implemented in relation to budget estimate NDCs implemented Continue implementing human resource strategy Pursue INPS reforms

Annual publication of health statistical directory Annual % of children below 1 year fully immunized Number of nurses per capita Number of doctors per capita

0 73,7 % (2003) 1/1170 (2003) 1/2744 (2003)

1 80 % 1/110 1/2500

1 85 % 1/1050 1/2200

1 90 % 1/100 1/2000

MOH, INE




Indicators

2005 2006 2007

Responsible Body

Pursue INPS reform Pursue INPS reforms: extension of coverage and establishment of special regimes

INPS annual debt reduced

151 millions ECV

115 millions ECV<

<80 millions ECV

<40 millions ECV

Council of ministers, INPS (annual financial reports)

Thrust 4 : Improving basic infrastructures, promoting land management and conserving environment

Environment

Implement recommendations of National Environment Committee on NEAP II Implement institutional and organizational reform of environmental action plan

Evaluation of implementation of NEAP II Proper implementation of institutional and organizational reform of the environmental action plan

% of recommendations implemented % of reforms implemented

NA NA

<75 % <25 %

<75 % <50 %

<75 % <75 %

DGA (MAA), NEAP II Management Committee DGA and DGPOG (MAA), NEAP II management committee

Thrust 5 : Improving the social protection system, strengthening its and guaranteeing its sustainability

Social Protection and Integration

Approve a social protection strategy by the Government Publish data on social mapping Approval by the MTS of final plan of administration programme of non-tax payers Implement and monitor service contracts between MTS and NGOs for local development initiatives

Implement the social protection strategy by the Government Amend and implement the new MOU of decentralization of social services in all municipalities Update the social mapping The national pensions centre is established and is operating

Annual joint review of implementation of social protection strategy Monitor the implementation of MOUs Update social map data Carry out monitoring Assign 20 MOU between the MTS and NGOs for local development initiatives

Number of agreements revised and signed

0

0

22

22

MTS, municipalities (annual report)




Indicators

2005 2006 2007

Responsible Body

Create a database and validate the current list of beneficiaries of Social Pension and issue new identification cards

Develop a database of NGOs Sign 15 MOUs between MTS and NGOs for local development initiatives Definition and reform of legal and institutional framework of rights of the child Approval of a new statutes of Cape Verdean Institute of Children’s Rights Assess capacity of installation and use of services and identification of self-sustaining mechanisms

Implement strengthening mechanisms

# Number of social pension beneficiaries Number of beneficiaries of solidarity social pension

6.514 7.932

+15% +22%

+7% +9%

+6% +8%

MTS, MOF (annual report and budget monitoring)

ANNEX IV

Cape Verde: Main Macroeconomic Indicators 2002 - 2009

2002 2003 2004 2005 2006 2007 2008 2009

Annual Percentage Change National Accounts and Prices GDP at constant Prices 5.3 4.7 4.4 5.8 5.5 6.0 6.3 6.6 GDP at constant Prices (per capita) 3.4 2.8 2.5 3.8 3.5 4.1 4.3 4.6 Consumer Price Index (average) 1.9 1.2 -1.9 0.4 6.2 0.2 0.3 2.1 Consumer Price Index (end of period) 3.0 -2.3 -0.3 1.7 5.5 -1.1 1.3 2.5 Government Budget Total Revenue (excluding grants) 12.3 5.1 8.7 10.2 17.3 5.8 9.7 12.2 Total Expenditure 13.4 -1.4 26.5 1.2 27.8 -1.2 9.1 8.3 Non-capital Expenditure 6.2 8.6 -0.7 7.9 20.7 -3.8 9.5 6.7 Capital Expenditure 27.8 -18.0 45.8 3.9 40.1 2.5 8.6 10.6

Money and Credit Net Foreign Assets 18.6 -7.7 31.9 58.8 19.0 9.6 9.6 9.4 Net Domestic Assets 13.2 13.2 5.7 3.4 11.2 6.4 6.8 9.5 Of which: Net Claims on Central Government 23.1 3.4 1.4 -4.3 6.9 -11.7 -15.2 -4.0 Credit to Economy 12.0 15.2 9.3 9.2 13.7 13.9 13.8 12.9 Broad Money (M2) 14.3 8.6 10.5 15.5 13.6 7.4 7.7 9.5 Income Velocity (GDP/M2) 1.48 1.46 1.37 1.29 1.27 1.23 1.23 1.24

External Sector Exports of Goods and Services 14.1 6.1 5.2 20.5 8.9 4.8 6.1 6.2 Imports of Goods and Services 15.3 7.5 6.5 0.5 14.6 9.2 8.9 8.9 Terms of Trade (- = deterioration) -0.7 1.9 -2.8 -3.3 -0.5 1.4 1.3 0.9 Real Effective Exchange Rate (annual average) 0.5 1.8 -2.9 -2.1 -- -- -- --

Percent of GDP Saving –Investment Balance Gross Capital Formation 35.8 31.0 36.8 37.9 38.7 41.2 43.8 45.0 Government 9.2 6.4 9.8 11.6 14.4 13.8 13.9 14.0 Non-Government 26.7 24.7 27.0 26.3 24.2 27.5 29.9 30.9 Gross National Savings 24.4 20.0 22.4 33.3 31.8 31.3 32.8 33.5 Of which: Government 5.7 5.3 7.4 7.2 9.0 10.5 11.1 12.1 External Current Account (including grants) -11.4 -11.1 -14.4 -4.6 -6.9 -10.0 -11.0 -11.5

Government Budget Total Revenue 22.9 22.0 23.2 24.1 25.1 24.7 25.2 25.8 Total Grants 8.7 5.5 10.9 7.1 9.0 8.9 9.2 9.3 Total Expenditure 34.4 31.1 38.1 36.3 41.2 37.9 38.4 38.0 Overall Balance (excluding grants) -11.5 -9.1 -14.9 -12.2 -16.1 -13.2 -13.2 -12.2 Overall Balance (including grants) -2.9 -3.5 -4.0 -5.1 -7.1 -4.3 -4.0 -2.9 Net External Financing -1.3 1.8 0.9 3.2 3.5 3.4 3.3 2.4 Net Domestic Financing 6.5 2.0 3.8 1.7 3.6 0.9 0.7 0.5 Nominal Government Debt 85.7 84.8 89.0 88.1 79.6 77.1 74.3 69.8 External Government Debt 56.4 57.5 54.0 55.4 52.4 52.0 51.4 49.3 Domestic Government Debt 29.2 27.3 35.0 32.7 27.2 25.1 23.0 20.5

External Sector Current Account (excluding offic. current transfers) -17.1 -17.1 -20.1 -9.3 -14.4 -16.4 -17.3 -17.7 Balance of Payments (overall balance) 6.3 -0.7 4.1 5.7 2.2 2.2 2.4 1.9 Gross International Reserves (in months of prospective imports of goods and services)

1.9 1.7 2.4 3.0 3.1 3.2 3.3 3.4

External Debt Service ( % of exports of goods and services)

12.4 10.5 11.3 8.8 8.2 7.9 7.6 8.6

Memorandum Items Nominal GDP (CVE Billion) 72.8 79.5 82.1 87.2 98.1 105.4 113.6 124.3 GDP per capita (millions of current US $) 1.304.5 1648.5 1914.7 2.065.6 2.174.3 2.296.6 2.435.9 2.621.6

Sources : Cape Verdean authorities and IMF (staff estimates and projection)

ANNEX V

Table of Central Government Fiscal Operations 2002- 2009

2002 2003 2004 2005 2006 2007 2008 2009 In Billions of CVE

Total Revenue (including grants and lending)

23.0 21.9 28.0 27.2 33.44 35.42 38.98 43.61

Domestic Revenues 16.7 17.5 19.0 20.98 24.60 26.04 28.56 32.04 Tax Revenue 14.7 15.5 16.6 18.60 21.10 23.05 25.23 28.31 Income and Profit Taxes 5.1 5.3 5.4 5.82 6.95 7.37 8.08 9.09 Consumption Taxes 2.5 2.5 6.3 7.4 8.35 9.35 10.26 11.54 International Trade Taxes 6.1 6.8 3.9 4.2 4.50 4.87 5.27 5.87 Other Taxes 0.9 0.9 1.0 1.16 1.29 1.47 1.61 1.81 Non Tax Revenue 1.8 1.5 1.9 2.21 3.51 2.78 3.12 3.49 Expenses and Penalties 0.3 0.4 0.5 1.2 - - - - Profit Transfers 0.8 0.3 0.0 0.03 0.56 0.03 0.10 0.10 Equity 0.0 0.0 0.2 0.17 0.26 0.21 0.22 0.24 External Grants 6.3 4.4 8.9 6.21 8.83 9.38 10.41 11.57 Capital Grants 5.2 3.6 7.7 5.66 7.0 8.56 9.70 10.84 Of which: MCA - - - 0.66 0.33 1.39 2.0 2.46 Budgetary Support 1.2 0.8 1.2 0.55 1.83 0.83 0.72 0.74 Net Lending 0.2 0.0 0.1 0.3 - - - -

Total Expenditure 25.1 24.7 31.3 31.62 40.42 39.91 43.56 47.19 Recurrent Expenditure 15.5 16.4 16.9 18.27 22.42 21.17 22.41 23.88 Primary Recurrent Expenditure 13.3 14.4 14.9 16.34 20.59 19.28 20.40 21.73 Wages and Salaries 7.1 9.4 9.8 10.73 12.71 13.25 14.02 15.19 Goods and Services 0.6 1.3 1.0 1.16 1.86 2.02 2.18 2.43 Transfers and Subsidies 4.9 3.0 3.0 3.15 5.15 3.09 3.21 3.03 Transfers - - - 2.62 3.92 3.06 3.18 3.0 Subsidies - - - 0.53 1.23 0.03 0.03 0.3 Petrol Price Subsidies - - - 0.45 1.2 0.0 0.0 0.0 Other Primary Expenditures 0.7 0.8 1.1 1.3 0.87 0.93 0.99 1.09 Interest Payment (External Debt) 0.7 0.5 0.5 0.55 0.52 0.66 0.75 0.85 Interest Payment (Domestic Debt) 1.4 1.5 1.5 1.38 1.3 1.23 1.26 1.29

Capital Expenditure 9.4 7.7 11.2 11.62 16.29 16.70 18.15 20.07 Foreign-financed 8.6 6.9 10.3 9.76 12.53 13.52 14.71 15.81 Domestically Financed 0.7 0.8 0.9 1.87 3.76 3.18 3.44 4.26 Unspecified Expenditures (fiscal space)

-

-

-

-

-

0.85

1.81

2.05

Arrears clearance 0.78 1.71 1.19 1.19 1.19

Overall Deficit (including grants) -2.1 -2.8 -3.3 -4.43 -6.98 -4.49 -4.58 -3.58

Financing 2.1 2.8 3.3 4.43 6.98 4.49 4.58 3.58 Net External Financing -1.0 1.4 0.7 2.78 3.41 3.54 3.78 2.98 Total Drawings 2.8 3.5 2.9 4.83 5.53 5.73 5.93 5.62 Amortization -2.2 -2.1 -2.4 -2.04 -2.12 -2.19 -2.15 -2.64 Net Domestic Financing 4.7 1.6 3.1 1.46 3.57 0.95 0.80 0.60 Net Lending 1.21 0.83 0.95 0.80 0.60 Accrual of Accounts Payable 0.94 - - - - Payment of Accounts Payable -1.51 -0.94 - - - Privatization Revenue - 1.39 0.0 0.0 0.0 Net sale of financial assets 0.52 - - - - Net sale of non-financial assets 0.29 2.29 - - - Net Errors and Omissions -1.6 -0.3 -0.6 0.18 0.0 0.0 0.0 0.0

Memorandum Item Overall Balance (excluding grants) -8.4 -7.2 -12.2 -10.64 -15.81 -13.88 -14.99 -15.15 Domestic Debt (including arrears) 28.52 26.70 26.46 26.06 25.47 External Debt Service (% of domestic debt)

21.3 14.9 15.0 12.3 10.7 10.9 10.1 10.9

Sources : MFAP and IMF (Staff estimates and projections)

ANNEX VI

Monetary Survey 2002-2009

2002 2003 2004 2005 2006 2007 2008 2009 In millions of CVE

Net Foreign Assets 11,331 10,456 13,787 21,889 26,056 28,555 31,307 34,257 Foreign Assets 13,841 13,434 16,912 27,549 31,716 34,197 36,881 39,698 Of which foreign reserves 8,391 8,173 11,296 16,260 18,356 20,639 23,177 25,702 Foreign Liabilities -2,511 -2,978 -3,125 -5,660 -5,660 -5,642 -5,574 -5,441

Net Domestic Assets 41,027 46,428 49,082 50,755 56,456 60,076 64,172 70,258 Net Domestic Credit 49,916 54,503 57,319 59,404 65,127 68,769 72,886 78,996 Net Claims on Government 24,790 25,561 25,684 24,863 25,854 24,051 21,985 21,521 Of which: Central Government 14,368 14,858 15,066 14,418 15,406 13,602 11,533 11,067 Local Government 8 67 75 -24 -22 -19 -17 -15 Credit to the Economy 25,126 28,943 31,635 34,541 39,273 44,718 50,901 57,475 Of which : Public Enterprises 230 180 161 476 497 519 542 566 Private Sector 24,890 28,726 31,430 34,040 38,751 44,173 50,334 56,882 Other Net Items -8,889 -8,075 -8,237 -8,648 -8,671 -8,693 -8,715 -8,737

Broad Money (M2) 52,358 56,884 62,870 72,644 82,511 88,631 95,479 104,515 Currency Outside Banks 6,459 6,516 6,765 7,634 8,464 8,873 9,346 10,022 Demand Deposit 16,162 16,474 17,661 21,086 24,156 26,166 28,400 31,298 Quasi-money 27,636 31,662 35,762 40,566 46,076 49,493 53,317 58,364 Of which: Time Deposits 25,857 29,983 34,313 38,390 43,605 46,839 50,458 55,233 Foreign Currency Deposits 2,101 2,232 2,682 3,359 3,815 4,098 4,414 4,832

Change in Percent Net Foreign Assets 3.9 -1.7 5.9 12.9 5.7 3.0 3.1 3.1 Net Domestic Assets 10.5 10.3 4.7 2.7 7.8 4.4 4.6 6.4 Net Domestic Credit 12.7 8.8 5.0 3.3 7.9 4.4 4.6 6.4 Net Claims on the Central Government

5.9 0.9 0.4 -1.0 1.4 -2.2 -2.3 -0.5

Credit to the Economy 5.9 7.3 4.7 4.6 6.5 6.6 7.0 6.9 Public Enterprises 0.0 -0.1 0.0 0.5 0.0 0.0 0.0 0.0 Private Sector 5.9 7.3 4.7 4.1 6.5 6.6 7.0 6.9 Net Other Items -2.3 1.6 -0.3 -0.7 0.0 0.0 0.0 0.0

Memorandum Velocity of Money 1.48 1.46 1.37 1.29 1.27 1.23 1.23 1.24 Emigrant Deposits 19,042 22,153 25,091 28,318 31,339 33,663 36,264 39,697 Credit to the Economy (rate of growth)

12.0 15.2 9.3 9.2 13.7 13.9 13.8 12.9

Sources: BCV and IMF (staff projections)

ANNEXE VII

Balance of Payments 2002-2009 (Millions of CVE, unless otherwise indicated)

2002 2003 2004 2005 2006 2007

Proj 2008 Proj

2009 Proj

Current Account Balance (including official transfers) -8,328 -8790 -11799 -3980 -6,725 -10,499 -12,463 -14,260 Trade Balance 1/ --27693 -30065 -33656 -30960 -37,178 -42,114 -46,683 -51,328 Exports FOB 4,909 5,150 5,170 7,891 8,862 8,556 8,883 9,180 Imports, f.o.b. -32,602 -35215 -38749 -38,851 -46,040 -50,681 -55,516 -60,508 Services (net) 1,285 1,347 2743 5,149 5,782 6,322 6,707 6,798 Credit 18554 19,736 21,096 23,668 25,513 27,468 29,399 31,428 Of which: tourism 6,881 8,306 8,496 9,566 10,327 11,128 11,922 12,757 Debit -17270 -18,389 -18353 -18,519 -19,731 -21,146 -22,692 -24,630 Income (net) -1,701 -1,258 -1,570 -2,966 -2,905 -2,829 -2,836 -2,950 Of which interest on official debt -719 -514 -549 -551 -713 -661 -751 -849 Current Transfers (net) 19,782 21,187 20,685 24,797 27,577 28,123 30,349 33,219 Government Transfers 4,159 4,776 4,697 4,090 7,404 6,832 7,154 7,735 Other 15,623 16,411 15,989 20,706 20,173 21,291 23,195 25,484

Capital and financial account 12,233 7,204 9,584 7,173 8,900 12,827 15,137 16,627

Capital Transfers 1,824 2,481 2,089 1,821 1,420 2,554 3,259 3,837 Government 244 2,071 1,629 1,831 1,420 2,554 3,259 3,837 Of which: MCA 665 333 1,386 2,001 2,460 Direct Investment (net) 1,126 1,531 1,812 1,708 2,110 3,543 4,498 5,421 Net Official Flows 647 1,448 517 1880 3,431 3,541 3,781 2,977 Drawings 4,144 4,099 3,068 4,314 5,531 5,726 5,926 5,615 Amortization -2,182 -2,101 -2,403 -2 234 -2,101 -2,185 -2145 -2,639 Other Capital 8,085 2,281 5,166 1,763 1,939 3,189 3,600 4,393 Commercial Banks 15 -602 -536 -2,696 -2,071 -198 -146 -292 Emigrant Deposits 3,457 3,111 2,938 3,227 3,021 2,324 2,601 3,432 Commercial Credit 2,577 -603 203 564 0 0 0 0 Other 2,036 375 2561 669 989 1,063 1,145 1,253

Errors and Omissions 685 1,052 5,541 1,808 0 0 0 0

Overall Balance 4590 -534 3,327 5,000 2,175 2,328 2,674 2,367 Financing -4590 534 -3,327 -5,000 -2,096 -2,283 -2,538 -2,525 Net Foreign Assets (- accumulations) -2,792 102 -3,338 -4,964 -2,096 -2,283 -2,538 -2,525 Of which net IMF drawings 354 291 127 380 0 -19 -68 -132 Exceptional Financing -1,798 432 11 -36 0 0 0 0 Financing Gap 0 0 0 0 -80 -45 -136 158

Memorandum Current Account (including official transfers) In % of GDP -11.4 -11.1 -14.4 -4.6 -6.9 -10.0 -11.0 -11.5 Current Account (excluding off. transfers) In % of GDP -17.2 -17.1 -20.1 -9.3 -14.4 -16.4 -17.3 -17.7 Overall Balance (in % of GDP) 6.3 -0.7 4.1 5.7 2.2 2.2 2.4 1.9 Gross International Reserve 8,391 8,173 11,296 16,260 18,356 20,639 23,177 25,702 Gross International Reserve (in months of imports of goods and services) 1.9 1.7 2.4 3.0 3.1 3.2 3.3 3.4 External Public Debt 41,068 45,724 44,362 48,303 51,463 54,958 58,404 61,337

Sources: BCV and IMF (staff projections).

ANNEX VIII

List of Non-eligible Goods (i) Military and paramilitary goods; (ii) Luxury products and goods; (iii) All types of industrial waste; and (iv) Expenses relating to the goods which form part of groups or sub-groups of the Standard International Trade Classification (SITC) or other groups or sub-groups under SITC future review framework, are excluded from the list of eligible imports.

Goods Classification 112 Alcoholic beverages; 121 Raw or non-manufactured tobacco, tobacco waste; 122 Manufactured tobaccos (even containing tobacco substitutes); 525 Radioactive and associated products;

667 Natural or cultured pearls, similar, raw or cultured stone gems; 718 Nuclear reactors and their parts and spare parts, unspent combustible

products (nuclear reactor cartridges);

897 Gold, silver, platinum group metal jewellery (excluding watches and watch

cases) and related articles (including set precious stones); and

971 Non-commercial gold (excluding mineral or concentrated gold).

ANNEX IX

Monitoring of GPRSP : Situation in 2005 THRUST 1 : PROMOTE GOOD GOVERNANCE, ENHANCE ITS EFFICACY AND GUARANTEE EQUITY

PROJECTIONS Macroeconomic Indicators 2004 Objectives

2005 Actuals

2005 2006

1 Per Capita GDP Growth Rate 2.7% 4.5% 3.8 5.0% 2 Real GDP Growth Rate 4.5% 6.3% 5.8 7.0% 3 Rate of Inflation -1.9% 0.8% 0 .4 2.0% 4 Public Deficit (% of GDP) -1.5 -2.8 -5.1 -3.1 5 International Reserves in months of imports of goods and services 2.6 2.7 3.4 2.8

GOALS Other indicators of good governance Base 2005 2005 2006

6 Percentage of poor population 36.7 - - 7 Percentage of extremely poor population 19.7 - - 8 MTEF formulated and approved (number of ministries) 3 4 4 5 9 Environmental expenditure in Government budget 3% - 4% 10 Weight of education in Government budget 20% 22% 22% 22.5%% 11 Weight of health in Government budget 6.3% 6.5% 8.2% 7%

GOALS THRUST 2 : PROMOTE COMPETITIVENESS IN ORDER TO BOOST ECONOMIC GROWTH AND CREATE JOBS Base 2005 2005 2006 12 Direct investment (liquid) (Millions of US$) 1.484 3.648 19.8 24.5 13 Unemployment Rate 17.3 - 24% < 24% 14 Percentage of coverage in household electrification 70% 70% 75% 15 Number of nights/tourist 832,000 -

GOALS THRUST 3 : DEVELOP AND ENHANCE HUMAN CAPITAL Education Base 2005 2005 2006 16 Number of persons with vocational training 7,453 7841

17 Literacy rate of adults aged from 15 to 49 years MF 86.4% 88.5% 88.5% 89.2% Female 83.4% 85.5% - 86.2%

18 Early childhood coverage rate (3-5 years) MF 57.2% 58% - 59% Female 52% 59% - 63.5%

19 Proportion of children completing basic education in 6 years 39.6% 41.2% 96% 43.6% 20 Gross to secondary education intake rate 81.9% 82% 86% 82.5% 21 Proportion of secondary students in technical training 4.6% 5.0% 5.2% 5.6%

Health 22 % of population with access to health structures 35% 47% 47 76% 23 Infant and juvenile mortality rate (5MT) (per 1000) 28.2 - 24 Maternal mortality rate (per hundred thousand) 7.6 7.6 25 % of children with less than one year full immunization coverage 80% 80% 85% 26 Variation of rate of incidence of infectious and parasitic diseases (-) 3% - 6% 27 HIV/AIDS prevalence rate among receiving assistance 1.1% 0.8% 1.1% 28 Proportion of children (0-5 years) suffering from malnutrition (per 10,000) 55.4% 22%

GOALS THRUST 4 : IMPROVE AND DEVELOP BASIC INFRASTRUCTURE, PROMOTE LAND MANAGEMENT AND CONSERVE THE ENVIRONMENT

Base 2005 2005 2006

29 Proportion of families with access to clean water supply 25% 50% 50% 65% 30 Percentage of families with access to electricity 58.5% 70% 31 Proportion of women with access to sewerage network 11.5% 30% 30% 50% 32 Population benefiting from system of solid waste evacuation 40% - 50% 33 Area with micro irrigation, in relation to total irrigated area 15% - 20% 34 Number of watersheds with development plan 5% - 10%

GOALS THRUST 5 : IMPROVE THE SOCIAL PROTECTION SYSTEM, STRENGTHEN ITS EFFECTIVENESS AND GUARANTEE ITS SUSTAINABILITY

Base 2005 2005 2006

35 % of the population covered by a social protection system 10% - 20% 36 Number of beneficiaries of Minimum Social Pension 6,514 7,491 7,514 8,014 37 Number of beneficiaries of Solidarity Pension 9,373 11,427 13,038

12,427

Source: Growth and Poverty Reduction Strategy of Cape Verde, September 2004, Joint Budgetary Advisory Group Review Mission (May 2006) and GPRSP (July 2006)

ANNEX X

CAPE VERDE: PRSSP-I INFORMATION SYSTEM OF GPRS MONITORING-EVALUATION SYSTEM

Monitoring of GPRS

Monitoring of

PRSC

Monitoring of GCAB Programme

Monitoring of Sectoral Plans

Monitoring of MCA

Monitoring Other Donors

Main Component of System

Database Database of official statistics

(BDEO)

Administrator : National Institute of Statistics (INE)

Database Database of programmes and projects

(BDMP)

Administrator : General Planning Directorate (DGP)

IT Network (NOSI)

Datamart

General Directorate of Planning; General

Directorate of Operations and Management/NOSI

Ministry of Agriculture

and Environment (MAA)

Datamart



Ministry of Education and Higher Education (MEES)

Datamart



Ministry of Health (MS)

Datamart



Ministry of Labour,

Family and Solidarity (MTFS)

Datamart



Other

Ministries

Système de gestion

financière (SIGOF) du

MFAP Administrateur

general directorate of

operations/NOSI

ANNEX XI

Framework of Results-Based CSP 2005-2007 Pillar : Promoting competitiveness of economy and private sector

Long Term Outcomes/Higher Level Expected by Cape Verde

Expected Outcomes of CSP (2005-2007)

Linkages between CSP

and priorities of

GPRSP

Consolidate improvement of macroeconomic framework and modernizing the administration Maintaining stable macroeconomic framework - macroeconomic objectives of GPRSP are achieved in 2005-2007 - debt management is streamlined and fully integrated into the budget management system in 2007 - external debt ratios are maintained within sustainable thresholds in 2005-07 ; - domestic debt is brought under control and decreases from 31.8% in 2004 to about 24% in 2007 ; - oil imports for energy production decreases in 2007.

Pillars 1 to 5 of GPRSP

Improving allocation and effectiveness of public spending - amended budget supervision and manual of procedures for budget preparation and execution are adopted in

2006 ; - the macroeconomic framework is formulated and effectively used by 2007 ; - MTEF 2007-09 and the SMTEF of 5 priority ministries (MEAP, MEVRH, MS, MTS and MIT) are produced - budget allocations follow the GPRSP priorities in 2005-2007 ; - the share of education in budget increases from 20% in 2004 to 23% in 2007 ; - the share of health in the budget increases from 6.3% in 2004 to 7% in 2007.

Pillars 1, 3 and 5 of GPRSP

Strengthen the control function of government operations and regulatory capacities - the new basic laws of the Audit Court (TdC) are passed in 2006 and implementing decrees are issued and

disseminated in 2007 ; - time for examining Government general accounts (CGE) by the TdC is reduced in 2007 ; - capacities of IGF are strengthened and the number of inspection missions in technical ministries, autonomous

institutes and municipalities increases from 32 in 2004 to over 40 in 2007 ; - capacities of ARE are strengthened and the electricity and water tariff model is effectively applied in 2007

Pillar 1 of GPRSP

Improve the capacities and management of municipal finances - daft bills on the blue print law on decentralization and decentralized cooperation are adopted in 2007 ; - the regulatory framework of the Budget Act is in place and the financing fund for municipalities (FFM) is

operating effectively in 2006-2007 ; - cadastres and land management master plans are formulated in 2007 ; - the regularization plan for cross debts between the Government and Municipalities is applied in 2006-2007 ; - at least half of town halls are computerized in 2007 ; - Number of workers in town halls and Government employees trained increases in 2007 (at least 100).

Pillars 1 and 3 of GPRSP

1. Promote good governance to ensure stabile macroeconomic framework and enhance effectiveness and equity

1.1 Improve the

Government’s financial management

1.2 Strengthening

decentralization 1.3 Put in place and

integrated and effective monitoring-evaluation system

Improve the GPRSP monitoring-evaluation system - the monitoring-evaluation system is incorporated into the planning, budgeting and statistical systems in 2007 ; - official database of statistics (BDEO) and that of the management of priority investment programmes and

projects are operative in 2007; - employment statistics and other GPRSP indicators are produced, analyzed and disseminated on a regular

basis ; - price indicators are harmonized, with wider coverage and greater reliability in 2007; - annual progress report of the GPRSP are prepared in 2006-2007.

Pillars 1 to 5 of GPRSP

Improve the competitiveness of economic of private sector activities in a sustainable manner Improve the quality and access to affordable electricity and water supplies - intensity of oil in total energy consumption falls below 93% in 2007 ; - rate of electricity coverage in rural areas increases to over 50% on the island of Santiago) in 2007; - number of socioeconomic activities connected to the electrical network (schools, health centres, SMEs,

IGAs, etc.) increases in the island of Santiago in 2007; - water supply on the island of Santiago improve in 2007.

Pillars 2 and 4 of GPRSP

2. Halve the proportion of poor persons by 2015, notably by promoting competitiveness to support growth and create employment : 2.1 Improve basic infrastructures - rate of coverage of electricity increases to at least 80% ; - % of population with household connection to water at over 25% 2.2 Promoting private sector

Promote SMEs and IGAs - the amount of direct financing to SMEs increases in 2007 ; - The number of SMEs created increases in 2007 ; - The financial system support capacities and the Chambers of Commerce at SMEs increases in 2007; - The number of IGAs created, including women increases in 2007 ; - The number of jobs created in the private sector including SMEs increases in 2007.

Pillars 2 of

GPRSP

* Notes : Pillar 1 : Promoting good governance ; Pillar 2 : Promoting competitiveness to support growth and create employment; Pillar 3 : Develop and Improving human capital; Pillar 4 : Improving basic infrastructure, regional development, land management and environmental protection; and, Pillar 5 : Improving the effectiveness and sustainability of the social protection system.

ANNEX XII Page 1 of 8

Cape Verde Institutional Support to GPRSP monitoring-evaluation system

Detailed Costs

5.5

In Thousands of ESCUDO In Thousands of UA

Total 2007 2008 Financing Total 2007 2008 Financing

Code Component Unit Qty UP F.E. L.C. Total F.E. L.C. F.E. L.C. ADF Gvt F.E. L.C. Total F.E. L.C. F.E. L.C. FAD Gvt

A Support to planning system in multi-year programming based on outcomes of GPRSP

23 403 15 307 38 711 17 504 11 375 5 899 3 933 32 171 6 540 182,4 119,3 301,7 136,4 88,6 46,0 30,6 250,7 51,0

A1 Goods 9 876 360 10 236 9 876 360 0 0 10 236 0 77,0 2,8 79,8 77,0 2,8 0,0 0,0 79,8 0,0

A11 Computer Equipment 8 832 0 8 832 8 832 0 0 0 8 832 0 68,8 0,0 68,8 68,8 0,0 0,0 0,0 68,8 0,0

PC (PIV, 1Ghz, 1G RAM Mo, 80Go HD) PC 16 220 000 3 520 3 520 3 520 3 520 27,4 0,0 27,4 27,4 0,0 0,0 0,0 27,4 0,0

Notebook (PIV, 1Ghz, 1G RAM, 80G HD) N/Bk 10 250 000 2 500 2 500 2 500 2 500 19,5 0,0 19,5 19,5 0,0 0,0 0,0 19,5 0,0

UPS (700 VA) PC 16 15 000 240 240 240 240 1,9 0,0 1,9 1,9 0,0 0,0 0,0 1,9 0,0

Network printer Prnt 5 430 000 2 150 2 150 2 150 2 150 16,8 0,0 16,8 16,8 0,0 0,0 0,0 16,8 0,0

Scanner Scan 1 150 000 150 150 150 150 1,2 0,0 1,2 1,2 0,0 0,0 0,0 1,2 0,0

Computer desk Tab 16 17 000 272 272 272 272 2,1 0,0 2,1 2,1 0,0 0,0 0,0 2,1 0,0

A12 Office Equipment and Furniture 600 360 960 600 360 0 0 960 0 4,7 2,8 7,5 4,7 2,8 0,0 0,0 7,5 0,0

High speed photocopying machine 30 copies per mn Phot 1 600 000 600 600 600 600 4,7 0,0 4,7 4,7 0,0 0,0 0,0 4,7 0,0

Cupboard Arm 6 60 000 360 360 360 360 0,0 2,8 2,8 0,0 2,8 0,0 0,0 2,8 0,0

A13 Documentation 444 0 444 444 0 0 0 444 0 3,5 0,0 3,5 3,5 0,0 0,0 0,0 3,5 0,0

Documentation stock on monitoring evaluation of DGP/STAD and GEPs

Forf 1 444 448 444 444 444 444 3,5 0,0 3,5 3,5 0,0 0,0 0,0 3,5 0,0

A2 Services 12 611 8 407 21 018 6 712 4 475 5 899 3 933 21 018 0 98,3 65,5 163,8 52,3 34,9 46,0 30,6 163,8 0,0

A21 Training workshop - 20 workers comprising 8 from 4priority ministries, 8 from 4 other technical ministries, 2 from the DGP/STAD, 1 from DGO, 1 from DGT

12 611 8 407 21 018 6 712 4 475 5 899 3 933 21 018 0 98,3 65,5 163,8 52,3 34,9 46,0 30,6 163,8 0,0

A211 Training workshop on implementation monitoring and performance chart (2 weeks for 2 trainers)

1 775 1 184 2 959 1 775 1 184 2 959 13,8 9,2 23,1 0,0 0,0 13,8 9,2 23,1 0,0

Fees of 2 trainers (€ 300x 10d x 2) Nb 20 33 080 397 265 662 397 265 662 3,1 2,1 5,2 0,0 0,0 3,1 2,1 5,2 0,0

Per Diem of 2 trainers (€200 x 14d x 2) Nb 28 22 053 370 247 617 370 247 617 2,9 1,9 4,8 0,0 0,0 2,9 1,9 4,8 0,0

Transport of 2 trainers Nb 2 515 000 618 412 1 030 618 412 1 030 4,8 3,2 8,0 0,0 0,0 4,8 3,2 8,0 0,0

Rental of room with teaching aids (CVE 3000 x 10 d)

Jour 10 3 000 18 12 30 18 12 30 0,1 0,1 0,2 0,0 0,0 0,1 0,1 0,2 0,0

Tea break (CVE 500 / person / break - 2 breaks / day) - 30 persons for 10 days

Nb 600 500 180 120 300 180 120 300 1,4 0,9 2,3 0,0 0,0 1,4 0,9 2,3 0,0

Lunch (CVE 1000 / person / day) - 30 persons for 10 days

Nb 300 1 000 180 120 300 180 120 300 1,4 0,9 2,3 0,0 0,0 1,4 0,9 2,3 0,0

Training kit (CVE 800 / person) - 25 trainees Kit 25 800 12 8 20 12 8 20 0,1 0,1 0,2 0,0 0,0 0,1 0,1 0,2 0,0

A212 Workshop on evaluation of public programmes and projects (20 workers for 2 weeks for 4 trainers)

3 161 2 107 5 268 3 161 2 107 5 268 24,6 16,4 41,1 24,6 16,4 0,0 0,0 41,1 0,0

Fees of 4 trainers (€ 300x 10d x 4) Nb 40 33 080 794 529 1 323 794 529 1 323 6,2 4,1 10,3 6,2 4,1 0,0 0,0 10,3 0,0

Per Diem of 4 trainers (€200 x 14d x 4) Nb 56 22 053 741 494 1 235 741 494 1 235 5,8 3,8 9,6 5,8 3,8 0,0 0,0 9,6 0,0

Transport for 4 trainers Nb 4 515 000 1 236 824 2 060 1 236 824 2 060 9,6 6,4 16,1 9,6 6,4 0,0 0,0 16,1 0,0

Rental of teaching aids (CVE 3000 x 10 d) Day 10 3 000 18 12 30 18 12 30 0,1 0,1 0,2 0,1 0,1 0,0 0,0 0,2 0,0


Nb 600 500 180 120 300 180 120 300 1,4 0,9 2,3 1,4 0,9 0,0 0,0 2,3 0,0

Lunch (CVE 1000 / person / day) - 30 persons for 10 days)

Nb 300 1 000 180 120 300 180 120 300 1,4 0,9 2,3 1,4 0,9 0,0 0,0 2,3 0,0


5.5




Training Kit (CVE 800 / person) - 25 trainees Kit 25 800 12 8 20 12 8 20 0,1 0,1 0,2 0,1 0,1 0,0 0,0 0,2 0,0

A213 Workshop on evaluation of public programmes and projects (20 trainees for 2 weeks for 4 trainers)

1 775 1 184 2 959 1 775 1 184 2 959 13,8 9,2 23,1 13,8 9,2 0,0 0,0 23,1 0,0




Rental of room with teaching aids (CVE 3000 x 10 d)

Day 10 3 000 18 12 30 18 12 30 0,1 0,1 0,2 0,1 0,1 0,0 0,0 0,2 0,0


Nb 600 500 180 120 300 180 120 300 1,4 0,9 2,3 1,4 0,9 0,0 0,0 2,3 0,0


Nb 300 1 000 180 120 300 180 120 300 1,4 0,9 2,3 1,4 0,9 0,0 0,0 2,3 0,0


A214 Workshop on result-based management (RBM) - 2 weeks for 2 trainers 1 775 1 184 2 959 1 775 1 184 2 959 13,8 9,2 23,1 0,0 0,0 13,8 9,2 23,1 0,0




Rental of room with teaching aids (CVE 3000 x 10d) Day 10 3 000 18 12 30 18 12 30 0,1 0,1 0,2 0,0 0,0 0,1 0,1 0,2 0,0


Nb 600 500 180 120 300 180 120 300 1,4 0,9 2,3 0,0 0,0 1,4 0,9 2,3 0,0


Nb 300 1 000 180 120 300 180 120 300 1,4 0,9 2,3 0,0 0,0 1,4 0,9 2,3 0,0


A215 MS Project for operational planning, monitoring and supervision (3 weeks - 2 trainers) 2 348 1 565 3 914 2 348 1 565 3 914 18,3 12,2 30,5 0,0 0,0 18,3 12,2 30,5 0,0






Nb 900 500 270 180 450 270 180 450 2,1 1,4 3,5 0,0 0,0 2,1 1,4 3,5 0,0


Nb 450 1 000 270 180 450 270 180 450 2,1 1,4 3,5 0,0 0,0 2,1 1,4 3,5 0,0


A216 Training workshop on MTEFs (2 weeks - 2 trainers) 1 775 1 184 2 959 1 775 1 184 2 959 13,8 9,2 23,1 13,8 9,2 0,0 0,0 23,1 0,0




Rental of room with teaching aids (CVE 3000 x 10d) Jour 10 3 000 18 12 30 18 12 30 0,1 0,1 0,2 0,1 0,1 0,0 0,0 0,2 0,0


Nb 600 500 180 120 300 180 120 300 1,4 0,9 2,3 1,4 0,9 0,0 0,0 2,3 0,0


5.5





Nb 300 1 000 180 120 300 180 120 300 1,4 0,9 2,3 1,4 0,9 0,0 0,0 2,3 0,0


A3 Environment 916 6 540 7 456 916 6 540 0 0 916 6 540 7,1 51,0 58,1 7,1 51,0 0,0 0,0 7,1 51,0

A31 Administration Staff 0 6 540 6 540 0 6 540 0 0 0 6 540 0,0 51,0 51,0 0,0 51,0 0,0 0,0 0,0 51,0

STAD Economist Month 12 150 000 1 800 1 800 1 800 1 800 0,0 14,0 14,0 0,0 14,0 0,0 0,0 0,0 14,0

STAD Coordinator Month 12 200 000 2 400 2 400 2 400 2 400 0,0 18,7 18,7 0,0 18,7 0,0 0,0 0,0 18,7

STAD Computer Expert Month 12 150 000 1 800 1 800 1 800 1 800 0,0 14,0 14,0 0,0 14,0 0,0 0,0 0,0 14,0

STAD Secretary Month 12 45 000 540 540 540 540 0,0 4,2 4,2 0,0 4,2 0,0 0,0 0,0 4,2

A32 Maintenance 916 0 916 916 0 0 0 916 0 7,1 0,0 7,1 7,1 0,0 0,0 0,0 7,1 0,0

Maintenance of Computer Equipment 0,10 1 856 000 856 856 856 856 6,7 0,0 6,7 6,7 0,0 0,0 0,0 6,7 0,0

Maintenance of Office Equipment 0,10 1 60 000 60 60 60 60 0,5 0,0 0,5 0,5 0,0 0,0 0,0 0,5 0,0

Base Cost of Component A 23 403 15 307 38 711 17 504 11 375 5 899 3 933 32 171 6 540 182,4 119,3 301,7 136,4 88,6 46,0 30,6 250,7 51,0

Physical contingencies 5 % 0.05 1 170 765 1 936 875 569 295 197 1 609 327 9,1 6,0 15,1 6,8 4,4 2,3 1,5 12,5 2,5

Price escalation 3 % 0.03 702 459 1 161 525 341 177 118 965 196 5,5 3,6 9,1 4,1 2,7 1,4 0,9 7,5 1,5

Total Cost of Component A 25 276 16 532 41 807 18 905 12 284 6 371 4 247 34 744 7 063 197,0 128,8 325,8 147,3 95,7 49,6 33,1 270,8 55,0

B Support to information system for monitoring-evaluatin of programmes and projects 25 366 52 520 23 213 22 739 3 941 2 627 49 382 3 138 0,0 197,7 409,3 180,9 177,2 30,7 20,5 384,8 24,5

B1 Goods 1 743 1 728 3 471 1 743 1 728 0 0 3 471 0 13,6 13,5 27,0 13,6 13,5 0,0 0,0 27,0 0,0

B11 Computer equipment 498 498 498 498 3,9 0,0 3,9 3,9 0,0 0,0 0,0 3,9 0,0

Cables and accessories for network FS 1 498 000 498 498 498 498 3,9 0,0 3,9 3,9 0,0 0,0 0,0 3,9 0,0

B12 Software 1 245 0 1 245 1 245 0 0 0 1 245 0 9,7 0,0 9,7 9,7 0,0 0,0 0,0 9,7 0,0

Operative system - Development of software for web-site

Log 1 1 245 000 1 245 1 245 1 245 1 245 9,7 0,0 9,7 9,7 0,0 0,0 0,0 9,7 0,0

B13 CWIQ Survey: Documentation 0 1 728 1 728 0 1 728 0 0 1 728 0 0,0 13,5 13,5 0,0 13,5 0,0 0,0 13,5 0,0

Printing of Interviewer Manual (170 manuals of 36 pages each at CVE 7 per page)

Nb 6 120 7 43 43 43 43 0,0 0,3 0,3 0,0 0,3 0,0 0,0 0,3 0,0

Printing of Controller manual (30 manuals of 20 pages each at 7 CVE 7 per page)

Nb 600 7 4 4 4 4 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

Printing of Entry Manual (5 manuals of 15 pages each at 7 CVE 7 per page)

Nb 75 7 1 1 1 1 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

Printing of CWIQ Questionnaires (10,000 questionnaires de 9 pages each at 7 CVE 7 per page)

Nb 90 000

7 630 630 630 630 0,0 4,9 4,9 0,0 4,9 0,0 0,0 4,9 0,0

Printing of National Report (750 copies at CVE 1,000 each)

Nb 750 1 000 750 750 750 750 0,0 5,8 5,8 0,0 5,8 0,0 0,0 5,8 0,0

CD Reproduction FS 1 300 000 300 300 300 300 0,0 2,3 2,3 0,0 2,3 0,0 0,0 2,3 0,0


5.5




B2 Services 25 174 14 871 40 045 21 233 12 243 3 941 2 627 36 907 3 138 196,2 115,9 312,1 165,5 95,4 30,7 20,5 287,6 24,5

B21 Assistance technique 11 220 7 480 18 700 11 220 7 480 0 0 18 700 0 87,4 58,3 145,7 87,4 58,3 0,0 0,0 145,7 0,0

Experts (2) in Monitoring Formulation (software design)

Nb 2 9 350 000 11 220 7 480 18 700 11 220 7 480 18 700 87,4 58,3 145,7 87,4 58,3 0,0 0,0 145,7 0,0

B22 CWIQ Survey: Technical Assistance (INE) 3 138 0 3 138 3 138 0 0 0 0 3 138 24,5 0,0 24,5 24,5 0,0 0,0 0,0 0,0 24,5

Coordinator (1 for 5 months) Month 5 115 754 579 579 579 579 4,5 0,0 4,5 4,5 0,0 0,0 0,0 0,0 4,5

Statisticians (4 for 5 months) Month 5 115 754 579 579 579 579 4,5 0,0 4,5 4,5 0,0 0,0 0,0 0,0 4,5

Demographer (1for 5 months) Month 5 115 754 579 579 579 579 4,5 0,0 4,5 4,5 0,0 0,0 0,0 0,0 4,5

Economist (1 for 5 months) Month 5 115 754 579 579 579 579 4,5 0,0 4,5 4,5 0,0 0,0 0,0 0,0 4,5

Computer Expert (1 for 3 months) Month 3 150 330 451 451 451 451 3,5 0,0 3,5 3,5 0,0 0,0 0,0 0,0 3,5

Senior technician in geography (1 for 3 months) Month 3 94 000 282 282 282 282 2,2 0,0 2,2 2,2 0,0 0,0 0,0 0,0 2,2

Typist (2 for 1 month) Month 2 45 000 90 90 90 90 0,7 0,0 0,7 0,7 0,0 0,0 0,0 0,0 0,7

B23 Training 7 085 4 903 11 988 6 695 4 643 390 260 11 988 0 55,2 38,2 93,4 52,2 36,2 3,0 2,0 93,4 0,0

B231 Training of 20 persons in building of information system for the monitoring-evaluation of GPRSP and MDGS in Praia ( 2 weeks - 3 trainers)

390 260 650 390 260 650 3,0 2,0 5,1 0,0 0,0 3,0 2,0 5,1 0,0



Transport of 3 trainers Nb 0 515 000 0 0 0 0 0 0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0



Nb 600 500 180 120 300 180 120 300 1,4 0,9 2,3 0,0 0,0 1,4 0,9 2,3 0,0


Nb 300 1 000 180 120 300 180 120 300 1,4 0,9 2,3 0,0 0,0 1,4 0,9 2,3 0,0


B232 Advanced short course for 4 managerial staff of INE and DGP/STAD on building of information system for the monitoring-evaluation of the GPRSP (Abroad - 4 weeks)

2 831 1 887 4 718 2 831 1 887 4 718 22,1 14,7 36,8 22,1 14,7 0,0 0,0 36,8 0,0

Per Diem of 4 trainees (€200 x 28d x 4) Nb 112 22 053 1 482 988 2 470 1 482 988 2 470 11,5 7,7 19,2 11,5 7,7 0,0 0,0 19,2 0,0

Transport of 4 trainees Nb 4 150 000 360 240 600 360 240 600 2,8 1,9 4,7 2,8 1,9 0,0 0,0 4,7 0,0

Training Cost (€3250 +15% / pers) Nb 4 412 115 989 659 1 648 989 659 1 648 7,7 5,1 12,8 7,7 5,1 0,0 0,0 12,8 0,0

B233 CWIQ Survey: Training 3 864 2 756 6 620 3 864 2 756 0 0 6 620 0 30,1 21,5 51,6 30,1 21,5 0,0 0,0 51,6 0,0

56 interviewers other islands for 15 days Nb 840 4 000 2 016 1 344 3 360 2 016 1 344 3 360 15,7 10,5 26,2 15,7 10,5 0,0 0,0 26,2 0,0

14 controllers other islands for 15 days Nb 210 4 000 504 336 840 504 336 840 3,9 2,6 6,5 3,9 2,6 0,0 0,0 6,5 0,0

32 interviewers Santiago hinterland for 15 days Nb 448 4 000 1 075 717 1 792 1 075 717 1 792 8,4 5,6 14,0 8,4 5,6 0,0 0,0 14,0 0,0

8 controllers Santiago hinterland for 15 days Nb 112 4 000 269 179 448 269 179 448 2,1 1,4 3,5 2,1 1,4 0,0 0,0 3,5 0,0

Rental of training room for 12 days Day 12 15 000 180 180 180 180 0,0 1,4 1,4 0,0 1,4 0,0 0,0 1,4 0,0


5.5




B24 Workshops 3 551 2 367 5 918 0 0 3 551 2 367 5 918 0 27,7 18,4 46,1 0,0 0,0 27,7 18,4 46,1 0,0

B241 Workshop on performance indicators (20 workers for 2 weeks for 2 trainers) 1 775 1 184 2 959 1 775 1 184 2 959 13,8 9,2 23,1 0,0 0,0 13,8 9,2 23,1 0,0


Per Diem of 2 trainees (€200 x 14d x 2) Nb 28 22 053 370 247 617 370 247 617 2,9 1,9 4,8 0,0 0,0 2,9 1,9 4,8 0,0




Nb 600 500 180 120 300 180 120 300 1,4 0,9 2,3 0,0 0,0 1,4 0,9 2,3 0,0


Nb 300 1 000 180 120 300 180 120 300 1,4 0,9 2,3 0,0 0,0 1,4 0,9 2,3 0,0


B242 Workshop on management and processing of data on monitoring-evaluation (20 agents for 2 weeks for 2 trainers)

1 775 1 184 2 959 1 775 1 184 2 959 13,8 9,2 23,1 0,0 0,0 13,8 9,2 23,1 0,0


Per Diem of 2 trainees (€200 x 14d x 2) Nb 28 22 053 370 247 617 370 247 617 2,9 1,9 4,8 0,0 0,0 2,9 1,9 4,8 0,0




Nb 600 500 180 120 300 180 120 300 1,4 0,9 2,3 0,0 0,0 1,4 0,9 2,3 0,0


Nb 300 1 000 180 120 300 180 120 300 1,4 0,9 2,3 0,0 0,0 1,4 0,9 2,3 0,0


B25 CWIQ Survey : Seminars 180 120 300 180 120 0 0 300 0 1,4 0,9 2,3 1,4 0,9 0,0 0,0 2,3 0,0

Awareness FS 1 300 000 180 120 300 180 120 300 1,4 0,9 2,3 1,4 0,9 0,0 0,0 2,3 0,0

B3 Operation 237 8 768 9 005 237 8 768 0 0 9 005 0 1,8 68,3 70,2 1,8 68,3 0,0 0,0 70,2 0,0

B31 Maintenance 237 237 237 237 1,8 0,0 1,8 1,8 0,0 0,0 0,0 1,8 0,0

Software 0.15 1 186 750 187 187 187 187 1,5 0,0 1,5 1,5 0,0 0,0 0,0 1,5 0,0

Equipment 0.10 1 49 800 50 50 50 50 0,4 0,0 0,4 0,4 0,0 0,0 0,0 0,4 0,0

B32 CWIQ Survey: Transport 0 3 889 3 889 0 3 889 0 0 3 889 0 0,0 30,3 30,3 0,0 30,3 0,0 0,0 30,3 0,0

Transport (1 trip) for 56 interviewers and supervisors on other islands

Agent 56 15 000 840 840 840 840 0,0 6,5 6,5 0,0 6,5 0,0 0,0 6,5 0,0

Transport (1 trip) for 40 interviewers and supervisors in Santiago hinterland

Agent 40 600 24 24 24 24 0,0 0,2 0,2 0,0 0,2 0,0 0,0 0,2 0,0

12 Transportation for 10 interviewers and supervisors in Praïa

Nb 120 500 60 60 60 60 0,0 0,5 0,5 0,0 0,5 0,0 0,0 0,5 0,0

16 supervision trips on other islands Trip 16 15 000 240 240 240 240 0,0 1,9 1,9 0,0 1,9 0,0 0,0 1,9 0,0

Local transport of supervisors on other islands Day 48 5 000 240 240 240 240 0,0 1,9 1,9 0,0 1,9 0,0 0,0 1,9 0,0


5.5




Local transport for internal supervisors in Santiago hinterland

Day 20 5 000 100 100 100 100 0,0 0,8 0,8 0,0 0,8 0,0 0,0 0,8 0,0

Transport for supervision in Praia Day 20 1 000 20 20 20 20 0,0 0,2 0,2 0,0 0,2 0,0 0,0 0,2 0,0

Transport for 95 interviewers and comptrollers for 22 days (Excl Sal SV et PRAIA) - 95 x 22 j = 2.090

Nb 2 090 1 000 2 090 2 090 2 090 2 090 0,0 16,3 16,3 0,0 16,3 0,0 0,0 16,3 0,0

Transport for 25 interviewers and supervisors for 22 days (Excl Sal SV and PRAIA) - 25 x 22 j = 550

Nb 550 500 275 275 275 275 0,0 2,1 2,1 0,0 2,1 0,0 0,0 2,1 0,0

B33 CWIQ Survey: Benefits and Per Diem of Interviewers 0 4 879 4 879 0 4 879 0 0 4 879 0 0,0 38,0 38,0 0,0 38,0 0,0 0,0 38,0 0,0

Per diem for supervisors on other islands Day 64 5 000 320 320 320 320 0,0 2,5 2,5 0,0 2,5 0,0 0,0 2,5 0,0

Per diem for supervisors Santiago hinterland Day 20 2 500 50 50 50 50 0,0 0,4 0,4 0,0 0,4 0,0 0,0 0,4 0,0

Benefits for interviewers (1 Month for 96 persons) Month 96 35 000 3 360 3 360 3 360 3 360 0,0 26,2 26,2 0,0 26,2 0,0 0,0 26,2 0,0

Benefits for controllers (1 month for 24 persons) Month 24 45 000 1 080 1 080 1 080 1 080 0,0 8,4 8,4 0,0 8,4 0,0 0,0 8,4 0,0

Communication expenses of 6 supervisors for 1 month

Month 6 3 450 21 21 21 21 0,0 0,2 0,2 0,0 0,2 0,0 0,0 0,2 0,0

Communication expenses of 6 controllers for 1 month

Month 24 1 725 41 41 41 41 0,0 0,3 0,3 0,0 0,3 0,0 0,0 0,3 0,0

Communication expenses of 1 coordinator for 2 months

Month 2 3 450 7 7 7 7 0,0 0,1 0,1 0,0 0,1 0,0 0,0 0,1 0,0

Base Cost of Component B 27 154 25 366 52 520 23 213 22 739 3 941 2 627 49 382 3 138 211,6 197,7 409,3 180,9 177,2 30,7 20,5 384,8 24,5

Physical Contingencies ( 5 %) 0.05 1 358 1 268 2 626 1 161 1 137 197 131 2 469 157 10,6 9,9 20,5 9,0 8,9 1,5 1,0 19,2 1,2

Price Escalation ( 3 %) 0.03 815 761 1 576 696 682 118 79 1 481 94 6,3 5,9 12,3 5,4 5,3 0,9 0,6 11,5 0,7

Total Cost of Component B 29 326 27 395 56 721 25 070 24 558 4 256 2 837 53 332 3 389 228,5 213,5 442,0 195,4 191,4 33,2 22,1 415,6 26,4

C Institutional Support Management 0 10 612 6 960 0 3 652 0 7 612 3 000 0,0 0,0 82,7 54,2 0,0 28,5 0,0 59,3 23,4

C1 Goods 4 750 0 4 750 4 750 0 0 0 2 250 2 500 37,0 0,0 37,0 37,0 0,0 0,0 0,0 17,5 19,5

C11 Vehicle 2 500 0 2 500 2 500 0 0 0 0 2 500 19,5 0,0 19,5 19,5 0,0 0,0 0,0 0,0 19,5

STAD Vehicle FS 1 2 500 000 2 500 2 500 2 500 2 500 19,5 0,0 19,5 19,5 0,0 0,0 0,0 0,0 19,5

C12 Consumables 2 250 0 2 250 2 250 0 0 0 2 250 0 17,5 0,0 17,5 17,5 0,0 0,0 0,0 17,5 0,0

Computer Consumables Yr 2 220 000 440 440 440 440 3,4 0,0 3,4 3,4 0,0 0,0 0,0 3,4 0,0

Office supplies and consumables Yr 2 500 000 1 000 1 000 1 000 1 000 7,8 0,0 7,8 7,8 0,0 0,0 0,0 7,8 0,0

Miscellaneous transport costs Month 18 25 000 450 450 450 450 3,5 0,0 3,5 3,5 0,0 0,0 0,0 3,5 0,0

Miscellaneous communication costs Month 18 20 000 360 360 360 360 2,8 0,0 2,8 2,8 0,0 0,0 0,0 2,8 0,0

C2 Services 2 422 0 2 422 0 0 2 422 0 2 422 0 18,9 0,0 18,9 0,0 0,0 18,9 0,0 18,9 0,0

C21 Audit 2 422 0 2 422 0 0 2 422 0 2 422 0 18,9 0,0 18,9 0,0 0,0 18,9 0,0 18,9 0,0

Auditing of institutional support Yr 2 1 211 100 2 422 2 422 2 422 2 422 18,9 0,0 18,9 0,0 0,0 18,9 0,0 18,9 0,0


5.5




C3 Operation 3 440 0 3 440 2 210 0 1 230 0 2 940 500 26.8 0.0 26.8 17.2 0.0 9.6 0.0 22.9 3.9

C31 Maintenance 500 0 500 250 0 250 0 0 500 3.9 0.0 3.9 1.9 0.0 1.9 0.0 0.0 3.9

Vehicle

0.1 2 250 000 500 500 250 250 500 3.9 0.0 3.9 1.9 0.0 1.9 0.0 0.0 3.9

C32 Benefits & Wages 2 940 0 2 940 1 960 0 980 0 2 940 0 22.9 0.0 22.9 15.3 0.0 7.6 0.0 22.9 0.0

Administration and Finance Officer Month 14 210 000 2 940 2 940 1 960 980 2 940 22.9 0.0 22.9 15.3 0.0 7.6 0.0 22.9 0.0

0 0 0 0 0 0 0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Base Cost of Component C 10 612 0 10 612 6 960 0 3 652 0 7 612 3 000 82.7 0.0 82.7 54.2 0.0 28.5 0.0 59.3 23.4

Physical Contingencies (5 %) 0.05 531 0 531 348 0 183 0 381 150 4.1 0.0 4.1 2.7 0.0 1.4 0.0 3.0 1.2

Price Escalation (3 %) 0.03 318 0 318 209 0 110 0 228 90 2.5 0.0 2.5 1.6 0.0 0.9 0.0 1.8 0.7

Total Cost of Component C 11 461 0 11 461 7 517 0 3 944 0 8 221 3 240 89.3 0.0 89.3 58.6 0.0 30.7 0.0 64.1 25.2

A Support to planning system in multi-year programming based on GPRSP outcomes 15 307 38 711 17 504 11 375 5 899 3 933 32 171 6 540 0.0 119.3 301.7 136.4 88.6 46.0 30.6 250.7 51.0

A1 Goods 9 876 360 10 236 9 876 360 0 0 10 236 0 77.0 2.8 79.8 77.0 2.8 0.0 0.0 79.8 0.0

A2 Services 12 611 8 407 21 018 6 712 4 475 5 899 3 933 21 018 0 98.3 65.5 163.8 52.3 34.9 46.0 30.6 163.8 0.0

A3 Operation 916 6 540 7 456 916 6 540 0 0 916 6 540 7.1 51.0 58.1 7.1 51.0 0.0 0.0 7.1 51.0

Base Cost of Component A 23 403 15 307 38 711 17 504 11 375 5 899 3 933 32 171 6 540 182.4 119.3 301.7 136.4 88.6 46.0 30.6 250.7 51.0

Physical Contingencies (5 %) 0.05 1 170 765 1 936 875 569 295 197 1 609 327 9.1 6.0 15.1 6.8 4.4 2.3 1.5 12.5 2.5

Price Escalation (3 %) 0.03 702 459 1 161 525 341 177 118 965 196 5.5 3.6 9.1 4.1 2.7 1.4 0.9 7.5 1.5

Total Cost of Component A 25 276 16 532 41 807 18 905 12 284 6 371 4 247 34 744 7 063 197.0 128.8 325.8 147.3 95.7 49.6 33.1 270.8 55.0

B Support to information system for monitoring-evaluation of programmes and projects 25 366 52 520 23 213 22 739 3 941 2 627 49 382 3 138 0.0 197.7 409.3 180.9 177.2 30.7 20.5 384.8 24.5 B1 Goods 1 743 1 728 3 471 1 743 1 728 0 0 3 471 0 13.6 13.5 27.0 13.6 13.5 0.0 0.0 27.0 0.0

B2 Services 25 174 14 871 40 045 21 233 12 243 3 941 2 627 36 907 3 138 196.2 115.9 312.1 165.5 95.4 30.7 20.5 287.6 24.5

B3 Operation 237 8 768 9 005 237 8 768 0 0 9 005 0 1.8 68.3 70.2 1.8 68.3 0.0 0.0 70.2 0.0

Base Cost of Component B 27 154 25 366 52 520 23 213 22 739 3 941 2 627 49 382 3 138 211.6 197.7 409.3 180.9 177.2 30.7 20.5 384.8 24.5

Physical Contingencies (5 %) 0.05 1 358 1 268 2 626 1 161 1 137 197 131 2 469 157 10.6 9.9 20.5 9.0 8.9 1.5 1.0 19.2 1.2

Price Escalation (3 %) 0.03 815 761 1 576 696 682 118 79 1 481 94 6.3 5.9 12.3 5.4 5.3 0.9 0.6 11.5 0.7

Total Component B 29 326 27 395 56 721 25 070 24 558 4 256 2 837 53 332 3 389 228.5 213.5 442.0 195.4 191.4 33.2 22.1 415.6 26.4

C Management of Institutional Support 0 10 612 6 960 0 3 652 0 7 612 3 000 0.0 0.0 82.7 54.2 0.0 28.5 0.0 59.3 23.4

C1 Goods 4 750 0 4 750 4 750 0 0 0 2 250 2 500 37.0 0.0 37.0 37.0 0.0 0.0 0.0 17.5 19.5

C2 Services 2 422 0 2 422 0 0 2 422 0 2 422 0 18.9 0.0 18.9 0.0 0.0 18.9 0.0 18.9 0.0

C3 Operation 3 440 0 3 440 2 210 0 1 230 0 2 940 500 26.8 0.0 26.8 17.2 0.0 9.6 0.0 22.9 3.9

Base Cost of Component C 10 612 0 10 612 6 960 0 3 652 0 7 612 3 000 82.7 0.0 82.7 54.2 0.0 28.5 0.0 59.3 23.4


5.5




Physical contingencies (5 %) 0.05 531 0 531 348 0 183 0 381 150 4.1 0.0 4.1 2.7 0.0 1.4 0.0 3.0 1.2

Price escalation (3 %) 0.03 318 0 318 209 0 110 0 228 90 2.5 0.0 2.5 1.6 0.0 0.9 0.0 1.8 0.7

Total Cost of Component C 11 461 0 11 461 7 517 0 3 944 0 8 221 3 240 89.3 0.0 89.3 58.6 0.0 30.7 0.0 64.1 25.2

Base Cost of Institutional Support 61 169 40 673 101 842 47 677 34 113 13 492 6 560 89 164 12 678 476.7 317.0 793.7 371.6 265.9 105.1 51.1 694.9 98.8

Physical contingencies (5 %) 0.05 3 058 2 034 5 092 2 384 1 706 675 328 4 458 634 23.8 15.8 39.7 18.6 13.3 5.3 2.6 34.7 4.9

Price escalation (3 %) 0.03 1 835 1 220 3 055 1 430 1 023 405 197 2 675 380 14.3 9.5 23.8 11.1 8.0 3.2 1.5 20.8 3.0

Total cost of Institutional Support 66 063 43 927 109 990 51 491 36 843 14 572 7 085 96 298 13 692 514.8 342.3 857.2 401.3 287.1 113.6 55.2 750.5 106.7

ANNEX XIII

Item 11 12

Workshop on IGA (Result-Based Management - 06/02/2007 to 17/02/2007 - 2 weeks)Training workshop on MTEF (Medium-Term Expenditure Framework - 27/02/2007 to 10/03/2007 - 2 weeks)Workshop on public programme and project evaluation (19/03/2007 to 30/03/2007 - 2 weeks)

Training workshop for 20 trainees on building of information system for the monitoring-evaluation of PRGSP in Praia (16/04/2007 to 28/04/2007 - 2 weeks)Short professional course for 4 managers (1 from INE and 3 from DGP/STAD) on building of information system for PRGSP monitoring-evaluation (Abroad) Training workshop on monitoring-evaluation and performance chartWorkshop on operational planning, budgeting of public programmes and projects (07/08/2007 to 18/08/2007 - 2 weeks)MS Project for operational planning, monitoring and supervision (01/10/2007 to 20/10/2007 - 3 weeks)Workshop on performance indicators (04/02/2007 to 16/02/2007 - 2 weeks)Workshop on computerized management and processing of data on monitoring-evaluation (03/03/2007 to15/03/2007 - 2 weeks)

CWIQ: Revision of methodologyCWIQ: Printing of sampleCWIQ: Recruitment of field workersCWIQ: Training of field workersCWIQ: Collection of dataCWIQ: Processing of dataCWIQ: Publication of final resultsCWIQ: Preparation of analytical reportCWIQ: Publication of analytical report

Presentation to BoardEntry into forceSecond annual joint and supervision missionFirst disbursement of grantRecruitment of administration & finance officerInvitation for bids for goodsInvitation for bids and recruitment for Technical AssistanceInvitation for bids for training workshopsSupply of goodsFirst annual joint mission and reviewAuditing of institutional supportPreparation of borrower's completion reportPreparation of ADF completion report

CAPE VERDE :INSTITUTIONAL SUPPORT TO MONITORING - EVALUATION

No Chrono

2006

IMPLEMENTATION SCHEDULE

01 02 03 04 11 1205 06 07 08 05 0620082007

01 02 03 0409 10

ANNEX XIV

PRSSP-I : Institutional Support to Monitoring-evaluation of GPRSP

Terms of Reference Administration and Finance Officer

Objective :

1. Placed under the authority of the General Director of Planning (DGP), the Administration and Finance Officer will be responsible, under the supervision of the Coordinator of the Technical Secretariat for Development Support (STAD), for monitoring the activities of the institutional support to the monitoring-evaluation system under the Poverty Reduction Strategy Support Programme. He/she must produce all the documents relating to the project operation (progress reports, management and procurement procedures, bid evaluation reports, request for disbursement, reports and any other document requested by the DGP/STAD).

Missions 2. His/her tasks will be as follows:

(i) Manage the day-today activities of the institutional support of PRSSP-I and coordinate actions with other structures involved;

(ii) Submit to DGP/STAD and Coordinator of STAD all the problems encountered in the execution of the institutional support and eventually propose concrete solutions;

(iii) Carry out all the tasks relating to procurement;

(iv) Verify the conformity with the Bank’s rules and procedures and procurement of goods/works and services on behalf of the Government under this institutional support;

(v) Verify conformity of the services of the various suppliers and service providers of the institutional support with the terms of reference;

(vi) Prepare requests for disbursement to be submitted to the Bank;

(vii) Prepare quarterly reports to be submitted to the Bank and the DGP/STAD reviewing the progress of the institutional support; and,

(viii) Participate in any meeting or work session convened or required by DGP/STAD.

Skills Required

3. The incumbent must be a holder of a university degree in economics, finance or accounting and have a sound experience in the area of institutional development and project management. He/she must have an excellent knowledge of procurement procedures and have worked for at least 5 years in/with the administration or international organization. In addition to Portuguese he/she must also have a good command of both spoken and written French.

Duration of Contract and Duty Station:

4. Fourteen months (14), Praia, Cape Verde.

ANNEXE XV Page 1 de 2

Summary of Bank Group Portfolio *

Projects by Sector Window Approval Date

Signature Date

Effectiveness Date

Date of Closure

Gross Amount

Amount Cancelled

Net Amount

Amount Disbursed

Rate of Disbursement

Situation of Audits

A. Agriculture 30.02 7.03 22.98 17.54 76.33 Assomada Integrated Agricultural Development ADF 19/10/78 27/11/78 30/04/80 cancelled 3.22 1.30 1.92 1.92 100.00 Completed Agricultural Revitalization Programme ADF 18/12/86 10/6/1987 12/8/1988 cancelled 4.79 2.67 2.11 2.11 100.00 Completed Artisanal Fisheries Development ADF 17/09/87 20/11/78 23/05/89 30/09/00 6.63 1.30 5.33 5.33 100.00 Completed Study on Industrial Fisheries Restructuring TAF 17/10/89 5/12/1989 8/8/1990 30/06/94 0.25 0.00 0.25 0.25 100.00 Completed Development of Industrial Fisheries ADF 24/10/93 21/12/93 24/04/95 31/12/04 6.50 0.84 5.66 5.66 100.00 Completed MADINA Agricultural Study 13/12/93 29/05/95 - cancelled 0.62 0.62 0.00 0.00 Cancelled Watersheds Study TAF 14/05/97 28/05/97 17/08/98 completed 0.65 0.27 0.38 0.38 100.00 Completed Fishing Quay TAF 9/5/1997 28/05/97 15/07/98 completed 0.32 0.03 0.29 0.29 100.00 Completed Food security programme pilot project TAF 18/04/02 29/05/00 17/04/02 31/12/04 0.74 0.00 0.74 0.74 100.00 Completed Watersheds Development and Management Project ADF 18/09/02 20/12/02 12/08/04 31/12/08 5.96 0.00 5.96 0.52 8.72 ongoing recruitment of firm for

2005-2007 audits. Drought Victims Emergency Aid SRF 29/10/03 12/12/2003 - 31/12/06- 0.34 0.00 0.34 0.34 100.00 Report to be submitted in 2007

by FAO on completion of the project

B. Public Utilities 19.76 0.42 19.34 19.34 100.00 ADF 1.84 0.01 1.83 1.83 100.00 Completed Extension and modernisation of Telecommunications Networks

NTF

16/08/77 25/10/77 31/12/78 31/12/96

1.60 0.00 1.60 1.60 100.00 Completed Supplementary Lending ADF 24/02/86 17/03/86 4/7/1986 31/12/94 1.38 0.14 1.24 1.24 100.00 Completed Study on Water Supply and Sanitation in Mindelo ADF 19/10/78 27/11/78 7/8/1979 30/06/81 0.23 0.15 0.08 0.08 100.00 Completed Mindelo Water Supply and Sanitation Phase I ADF 30/10/81 19/01/82 30/05/83 30/06/97 6.08 0.12 5.96 5.96 100.00 Completed

Second Mindelo Water Supply and Sanitation Project ADF 15/03/90 30/11/90 2/1/1992 31/12/95 7.86 0.00 7.86 7.86 100.00 Completed

Study on Water Supply and Sanitation for Secondary Urban Centres TAF 20/11/90 4/2/1991 4/2/1991 31/12/97 0.77 0.00 0.77 0.77 100.00 Completed C. Transport 37.86 3.22 34.64 31.47 90.85 Sao Vicente Shipyard BAD 26/08/82 16/01/82 30/04/82 31/12/83 10.00 0.00 10.00 10.00 100.00 Completed Supplementary Loan BAD 22/08/83 24/04/84 24/04/84 6/10/1986 2.05 0.00 2.05 2.05 100.00 Completed Maio Port Development ADF 19/11/84 20/12/84 22/03/85 cancelled 2.76 2.26 0.50 0.50 100.00 Cancelled Study for Improving operating conditions of the Sao Vicente shipyard TAF 17/09/87 30/09/87 1/6/1989 30/06/94 0.53 0.00 0.53 0.53 100.00 Completed

Improving operating conditions for Mindelo shipyard ADF 18/03/91 14/05/92 21/10/92 31/12/96 4.60 0.96 3.64 3.64 100.00 Completed

ADF 19/11/91 31/03/05 8.42 0.00 8.42 6.54 77.67 Completed Construction of New Praia Airport

NTF 19/11/91

14/05/92 10/8/1992

31/03/05 6.00 0.00 6.00 4.97 82.83 Completed

ANNEXE XV Page 2 de 2

Projects by Sector Window Approval Date

Signature Date

Effectiveness Date

Date of Closure

Gross Amount

Amount Cancelled

Net Amount

Amount Disbursed

Rate of Disbursement

Situation of Audits

Road Programme ADF 25/05/97 9/10/1997 5/7/1998 31/03/05 3.50 0.00 3.50 3.24 92.57 Completed D. Industrial Sector 11.39 10.41 0.98 0.98 100.00 Salt operation of Maio 15/03/90 30/11/90 cancelled 10.31 10.31 0.00 0.00 Cancelled Institutional Support to Ministry of Industry and Energy TAF 28/01/91 26/11/91 2/1/1992 31/12/98 1.08 0.10 0.98 0.98 100.00 Completed E. Social Sector 29.12 1.22 27.90 26.46 94.84

Training of staff and development of health services

ADF 29/12/81 19/01/82 19/01/84 31/12/97 7.36 0.00 7.36 7.36 100.00 Completed Education Project Study TAF 24/08/84 24/10/84 31/05/86 31/12/95 1.11 0.18 0.93 0.93 100.00 Completed Education system restructuring and expansion project ADF 27/05/88 19/10/89 5/2/1990 31/12/96 10.22 0.37 9.85 9.85 100.00 Completed Study on health sector ADF 9/3/1993 12/5/1993 15/02/94 cancelled 0.43 0.43 0.00 0.00 Cancelled Education II ADF 6/5/1997 28/05/97 29/10/97 completed 4.00 0.24 3.76 3.76 100.00 Completed Education sector institutional support project ADF 29/9/2004 11/10/2004 11/10/04 31/12/07 1.00 0.00 1.00 0.03 3.10 Ongoing recruitment of firm for

2005-2006 audits Project for the socioeconomic promotion of disadvantaged groups ADF 22/03/00 26/07/00 15/06/01 31/12/06 5.00 0.00 5.00 4.53 90.60 ongoing. Audits carried out up

to 2004. firm being recruited for 2005 audit

F. Multi-sector 12.33 1.09 11.24 11.19 99.57 TAF 18/04/90 30/05/90 4/1/1991 31/01/06 3.33 1.03 2.30 2.25 97.91 Completed Institutional support to Ministry of Finance and Planning

ADF 18/04/90 30/11/90 31/08/91 31/12/03 1.00 0.06 0.94 0.94 100.00 Economic reform support programme I (PARE I) ADF 28/09/98 12/1/1999 20/05/99 31/12/00 3.00 0.00 3.00 3.00 100.00 Completed Economic reform support programme II (PARE II) ADF 4/9/2002 20/12/02 21/05/02 24/06/03 2.50 0.00 2.50 2.50 100.00 Completed Economic reform support programme III (PARE III) ADF 6/10/2004 11/10/2004 26/01/05 31/12/05 2.50 0.00 2.50 2.50 100.00 Completed Grand Total 140.48 23.39 117.08 106.98 91.38 Gross disbursement rate 76.15%

Disbursement rate net of cancellation 91.38%

Active Projects

Total commitments 12.30 0.00 12.30 5.42

44.07%

Disbursement rate 44.07%

* Active operations are indicated in bold.

Documents

REPUBLIQUE OF CAPE VERDE POVERTY REDUCTION STRATEGY