AfDB President Applauds Cape Verde’s Graduation to Middle Income Country and MDG Achievements Despite Hostile Initial Conditions
Praia, 30 April 2010 – Cape Verde, with little natural resources, goes against all odds in Africa by becoming the first case of “policy induced graduation” on the continent, as opposed to natural resources driven graduation. A resource-poor country characterized by an arid Sahelian climate and little arable land has witnessed steady rising living standards and is on the way to achieve most of the Millennium Development Goals (MDGs).
Good governance and sound economic policies have been key to Cape Verde’s graduation from a low income to a middle income country since 2008. According to the African Development Bank (AfDB) Group President, Donald Kaberuka, “rich natural resources endowment does of course help, but here is evidence that no matter how bad the initial conditions, with good governance, solid institutions, and a peaceful political and social climate, take off is possible.” Mr. Kaberuka made the statement while on an official visit to the country.
The country’s level of absolute poverty has, over the last years, declined. In 2006, the absolute poverty level was estimated at 26%. One of the main drivers of the country’s growth has been migrant remittances, estimated at 132 million Euros in 2009. Cape Verde has managed to maintain close social and economic links with its Diaspora which is estimated at more than one million people. The population’s vulnerability has been substantially reduced due to steady and reliable remittances from the country’s migrant workers to their families. These funds have strongly benefitted women, children and the elderly, and have certainly contributed to the country’s transition to a middle income country. By combining attractive monetary policies and adequate administrative services, Cape Verde was able to attract about 12.3% of GDP from remittances from its Diaspora between 1999 and 2008.
Along with migrant remittances, other factors have been key to Cape Verde’s continued economic growth, such as the tourism industry, high investment rate which rose to 48% of GDP in 2008 and effective use of Official Development Assistance (ODA). Cape Verde, a ten-island state, water-scarce archipelago, should be an inspiring example to other low-income countries.
“Cape Verde is going through a special and crucial moment. We are making a leap towards the economic transformation of the country …. We expect that the AfDB will play a catalytic role in the resource mobilization process and will continue to help us in the transformation process of the country,” José Maria Neves, Cape Verde’s Prime Minister, said.
As a middle income country, Cape Verde has now greater access to all AfDB windows which will help the country continue with the implementation of its Economic Transformation Strategy (ETS). The sustainable ceiling of funding to which the country is entitled from the AfDB non-concessional window for the 2010-2013 period is currently estimated at UA 98 million (around €110.38 million). At the same time, the country maintains full access to the current balance of UA 7 million (around €7.88 million) from its allocated amount of UA 12 million (around €13.2 million) from the ADF XI concessional window.
The country still has a few challenges to deal with. Foremost among these challenges is its insularity and archipelagic configuration. This has caused specific technical and financial problems to the development of energy, water and sanitation, as well as transportation. Its unique geographic situation is driving up production costs. Other challenges relate to declining water resources and gradual salination of groundwater in coastal areas, attributable to climate change.
Despite these challenges, “Cape Verde is currently heading to become a maritime and air transportation hub in the region based on its competitive advantages, namely; political stability, macroeconomic stability and consolidation, institutional maturity, skilled human resources, a state-of-the-art ICT sector, among others,” the country’s finance minister, Cristina Duarte, said
Being a middle-income country brings new challenges and expectations. Cape Verde is expected to consolidate its achievements and successfully move from an economy based on aid and remittances to self-sustained growth economy, which should lead to transformations based on the country’s competitive advantages.