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PROGRAM INFORMATION DOCUMENT (PID)
CONCEPT STAGE
Report No.: AB3450
POVERTY REDUCTION SUPPORT CREDIT IV
Operation Name
AFRICA
Region
Central government administration (35%); Health (20%); SubSector
national government administration (15%); Other social services
(20%); General energy sector (10%)
P106502
Project ID
REPUBLIC OF CAPE VERDE
Borrower(s)
MINISTRY OF FINANCE AND PUBLIC ADMINISTRATION
Implementing Agency
November 12, 2007
Date PID Prepared
May 20, 2008
Estimated Date of
Appraisal Authorization
Estimated Date of Board March 27, 2008
Approval
1. Key development issues and rationale for Bank involvement
Cape Verde’s performance in social indicators outpaces most African nations. The country’s good
economic performance (GDP per capita of US$ 2,100 in 2005) and successful public programs
increased access to education and healthcare, paving the way to Cape Verde’s graduation to middleincome status in January 2008. Cape Verde is considered to be on track to meet the MDGs due to its
high growth and strong performance on several social indicators. Poverty has declined 8 percentage
points between 2001 and 20061, and the human development index has increased from 0.63 in 1990 to
0.72 in 2003. Adult literacy rates are high as 79 percent (97 percent among the youth) and life
expectancy at birth (69) is the third highest in Africa. Political openness has accompanied this
economic and social progress. Since the adoption of a multi-party system in 1991, there have been
three national elections and two orderly changes in government. A free press and media further
support the building of an open society. The last presidential and legislative elections took place in
early 2006.
Cape Verde faces a number of challenges. With the country’s graduation in 2008 to middle income
country, pressures on access to concessional external financing may arise. With regard to remittances,
as the income gap and the ties with the diaspora decrease, remittances may decline over time.
Furthermore, the country is highly dependent on oil imports (including for water desalination, which
accounted for about 75 percent of water production by 2003) which, in a context of a continued
increase in prices may cause some fiscal risks. In addition, income inequality has risen and as rural
populations flee entrenched poverty, urbanization is putting pressure on basic services. Finally, the
capacity of the environment to support large-scale expansion in tourism, industry and construction
may be at risk if not adequately managed.
The PRSC operations are central to the CAS, accounting for about 60 percent of the IDA 14. This
emphasis on programmatic lending is consistent with Cape Verde’s performance in implementing the
previous CAS, its level of institutional, economic and political development, its strong and sustained
performance in recent years, and the recommendations of core diagnostic work (PER, CFAA, CPAR).
The CAS deems the PRSC to be the preferred lending instrument to (a) provide predictable resource
flows, particularly important given Cape Verde’s reliance on donor financing; (b) strengthen public
administration and public expenditure management systems, with spill-over benefits to non-IDA
1
These estimates are based on changes over time between 2001 and 2006 in an asset index of well-being, with corrections for
changes in inequality over time.
resources; and (c) harmonize donors and reduce the potential distortions and transaction costs of
external assistance. IDA’s assistance strategy is also in line with the GPRSP priorities.
2. Proposed objective(s)
The proposed PRSC-4 is a one-off operation that aims to support the last year of implementation of the
Government’s Growth and Poverty Reduction Strategy, as presented in the Growth and Poverty
Reduction Strategy Paper (GPRSP), and to contribute to Cape Verde’s effort to attain its Millenium
Development Goals (MDGs). The proposed PRSC-4 builds on results achieved under the first series and
will continue to engage the Bank in a policy and technical dialogue in three of the five pillars of the
GPRSP, already supported by the first PRSC cycle, based on the division of labor with other IDA and
donor projects. The three pillars to be supported are the following:
(a)
promote good governance –especially effectiveness and equity– through reforms in public
expenditure management, civil service and decentralization;
(b)
develop human capital, with a focus on health; and
(c)
strengthen the effectiveness and sustainability of the social protection system.
Continuing the approach of the three previous PRSCs, this fourth operation is prepared in close
coordination with other budget support partners, following a Memorandum of Understanding signed
with the Government. The design of the proposed PRSC-4, embedded in a 3 year matrix agreed with the
Authorities and donors, was prepared under extensive consultation with the various stakeholders under
the Government’s leadership. This consultative and harmonized approach minimizes the burden on the
limited Government capacity and ensures Government ownership of the supported reforms.
3. Preliminary description
The Fourth Poverty Reduction Support Credit (PRSC-4) will support the last year of implementation of
Cape Verde’s first Growth and Poverty Reduction Strategy (GPRSP). As the second GPRSP is still
under development, this one-tranche operation will be a transitory operation between the first and the
second series. The financial support provided through the fourth PRSC will further narrow the gap
between the cost of implementing key elements of the GPRSP and the resources available from the
Government’s own domestic revenues and other donor support. The policy dialogue and a results-based
framework under PRSC-4 focus on the following pillars of the GPRSP: (i) to promote good
governance; (ii) to develop human capital in the areas of education and health; and (iii) to improve the
effectiveness and sustainability of the social protection system.
4. Environment Aspects
PRSC 4 falls under the DPL OP BP 8.60, and as for PRSC 1, 2, and 3, and therefore no environmental
assessment is required. Due diligence and pro-activity on environment policies have been carried out in
collaboration with the Spanish and Austrian cooperations which targets their budget support towards
environmental issues.
5. Tentative financing
Source:
BORROWER/RECIPIENT
International Development Association (IDA)
Total
6. Contact point
($m.)
0
6.0
6.0
Contact: Manuela Francisco
Title: Country Economist
Tel: (202) 473-8209
Fax:
Email: [email protected]