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WT/TPR/S/322/Rev.1 • Cabo Verde
- 11 1.14. Cabo Verde hosts an off-shore banking sector. The prudential regime for domestic and offshore banks was harmonized in 2014 and oversight by the Banco de Cabo Verde (BCV)
strengthened (section 4.5.2). The domestic banking sector is well capitalized, according to the
IMF, despite an increase in non-performing loans. Around 40% of bank deposits are emigrant
deposits. The capital market is small, corresponding to around 30% of GDP.
Table 1.2 Duty collection ratio, 2010-13
(CVEsc million)
2010
Customs duties
Import value of goods
Duty collection ratio (customs
duties/import value of goods in %)
Source:
2011
n.a.
n.a.
2012
2013
5,516.0
5,434.0
61,839.0
75,149.9
65,710.8
60,201.0
-
-
8.4
9.0
Ministry of Finance and Planning, Budget Proposal 2015.
1.15. The CVEsc is pegged to the euro at a fixed exchange rate of €1 to CVEsc 110.265. The peg
is secured through a credit facility granted by the Government of Portugal.18 According to the IMF,
"the peg has served the economy well, given Cabo Verde's strong trade and financial ties to the
euro area."19 With the euro exchange rate fixed, monetization of the public debt is not feasible.
It is also prohibited by law. Scope for exchange rate flexibility is provided through the cross-rates
with non-euro currencies.
1.16. Monetary policy is geared to protect foreign currency reserves and thereby defend the
credibility of the euro peg. By 2014, international reserves recovered to five months of imports
(Table A1.1). The minimum reserve requirement for banks was set at 15% in 2015. With inflation
under control20, the monetary stance of the BCV has been "moderately accommodating".21
In March 2015, the policy rate was further reduced to 3.5%.
1.17. Foreign exchange controls on current payments and transfers were liberalized in 1998
(except for transactions exceeding CVEsc 1 million connected to travelling).22 Transfer operations
that could be subject to prior verification by the BCV are transactions exceeding CVEsc 1 million
falling under the heading "private unilateral transfers"; transfers exceeding CVEsc 5 million as
revenues or as payment for services rendered (except for interest payments on previously
authorized loans); and the pre-payment or final settlement of current transactions more than
three months in advance when the instalment exceeded CVEsc 1,000,000 (and 35% of the
contractual value). Foreign residents leaving the country with over CVEsc 1 million in foreign
currency require proof of acquisition from a regulated institution (e.g. bank) or proof of entry into
the country with the same or higher amount. Residents are subject to prior verification by the BCV
for amounts greater than CVEsc 1 million in foreign currency. There are no restrictions for
residents or foreign investors on opening bank accounts in foreign currency.23
1.18. Capital operations, with the exception of those executed in the stock market or through duly
authorized brokers, are also subject to prior verification from the BCV. The Investment Code
allows foreign investors to convert all income from investments that are duly registered with BCV
through Cabo Verde Investimentos (CVI) (including dividends, interest, royalties, income from sale
of shares or investment, compensations) to any convertible currency and repatriate all income
from investments (section 2.4).24 Transfers are authorized by BCV within 30 days, unless the
18
The fixed exchange rate arrangement is managed by the joint Comissão do Acordo de Cooperação
Cambial (COMACC).
19
IMF (2014).
20
Administered prices for some goods and services (including inter-urban passenger road transport,
fuel, electricity, and water) account for approximately 2% of the Consumer Price Index.
21
BCV (2014a), p. 19.
22
Decree-Laws No. 25/98 and 26/98 of 29 June 1998, and the BCV Notice No. 4/98 of
21 December 1998.
23
BCV Notice No. 3/98 of 18 August 1998.
24
Law No. 13/VIII/2012 of 11 July 2012, amended by Decree-Law No. 34/2013 of 24 September 2013.
For income from services rendered to companies financed with resources from abroad, foreign employers and