世界银行-佛得角公共财政审查_面对冲击加强财政可持续性（英）-2025_182页_16mb

Cabo Verde Public Finance Review Summary

Core Content

This report provides an in-depth analysis of Cabo Verde's fiscal challenges and opportunities for reform, focusing on enhancing fiscal sustainability in the face of shocks. It outlines key areas for improvement in revenue mobilization, expenditure efficiency, and state-owned enterprise (SOE) reform.

Main Fiscal Challenges

• High Public Debt: Public debt remains elevated, with debt servicing absorbing over a third of revenues. Although the risk of external debt distress has improved, it is still moderate in 2022 and depends on sustained economic growth.
• Limited Fiscal Space: Cabo Verde has limited fiscal space due to rigid budgets and high debt levels, which restrict the ability to respond to shocks or invest in growth.
• Fiscal Vulnerability: The country is highly vulnerable to climate change, external shocks, and exogenous factors (e.g., tourism demand) that drive growth.
• SOE Fiscal Risks: SOEs contribute to fiscal pressures and risks, with high liabilities and inefficiencies that strain public finances.
• Procyclical Expenditure: Expenditure policy is highly procyclical, reducing its effectiveness as a stabilization tool.
• Tax System Inefficiencies: The tax system is regressive, with high reliance on indirect taxes and significant revenue leakages from tax incentives and exemptions.

Key Findings

1. Macro-Fiscal Context

• Economic growth has been volatile since the global financial crisis.
• Public debt and fiscal deficits have narrowed, but remain high compared to historical levels.
• The country has limited fiscal space and is highly dependent on concessional financing.
• SOE fiscal risks have increased, and their liabilities are a growing concern.

2. Domestic Revenue Mobilization

• Tax Trends and Potential: Total tax revenues increased from 16.9% to 19.3% of GDP (2012–2023), but still fall short of peer averages (~20%).
• Tax Effort and Productivity: PIT productivity is lower than UMICs and SSA peers, while CIT and excise tax productivity are below peers.
• Revenue Leakages: Tax incentives and exemptions account for an average of 5.8% of GDP in revenue forgone.
• VAT and Excise Taxes: VAT remains the largest contributor to tax revenue, but its exemptions and zero-rating have reduced progressivity. Excise taxes on alcohol and tobacco are below regional and international standards.
• Fiscal Gains Potential: The report estimates that Cabo Verde's tax potential is around 30% of GDP, with a tax gap of about 11 percentage points.

3. Expenditure Efficiency

• Public expenditure has declined and remains below peer levels (~28% of GDP).
• Budget rigidity is high, with 70% of the budget considered inflexible, primarily due to wage bill and interest payments.
• Public investment has had a negligible impact on growth, and spending efficiency is a major concern, especially in infrastructure and education.
• Expenditure is heavily skewed toward current spending, with limited allocation to growth-enhancing investments.

4. SOE Reform

• SOEs are a significant source of fiscal pressure, with high liabilities and inefficient operations.
• The SOE sector has a substantial fiscal footprint, equivalent to spending in priority sectors.
• SOE reform is critical to reduce fiscal risks and improve operational efficiency.
• The 2022–2026 SOE reform agenda is underway, but more needs to be done to address the structural issues within the sector.

Policy Recommendations

Revenue Mobilization

• Reduce Tax Exemptions and Incentives: Streamline VAT exemptions and eliminate unnecessary tax incentives to improve tax effort and reduce leakages.
• Improve Tax Productivity: Enhance tax administration, strengthen enforcement, and ensure a more progressive tax structure.
• Implement a Domestic Top-Up Tax: Consider introducing a domestic top-up tax to complement the global minimum tax and ensure tax compliance.
• Align Fuel Taxes with Carbon Content: Increase fuel taxes based on carbon content to improve revenue and reduce emissions, especially for diesel in the power sector.
• Reform Tobacco and Alcohol Taxes: Raise excise taxes on tobacco and alcohol to improve public health and increase revenue.

Expenditure Efficiency

• Reallocate Resources: Shift spending from rigid components to growth-enhancing public investments.
• Improve Public Investment Management: Enhance the efficiency of public investment projects, particularly in infrastructure and education.
• Strengthen Social Protection: Expand and improve the targeting of social assistance programs to ensure they reach the most vulnerable.
• Enhance Gender-Responsive Budgeting: Increase the proportion of public spending targeting gender equality by 30% since 2018.

SOE Reform

• Strengthen Corporate Governance: Improve accountability and governance mechanisms within SOEs.
• Reduce SOE Liabilities: Address the fiscal burden of underperforming SOEs through restructuring and liability management.
• Improve Operational Efficiency: Enhance the efficiency of SOE operations, especially in key sectors like transport, energy, and water services.
• Support SOE Restructuring: Continue efforts to reduce SOE debt and improve their financial sustainability.

Fiscal Gains Potential

• The report estimates that fiscal gains could reach 3.65–4.15% of GDP through reforms in revenue mobilization, expenditure efficiency, and SOE restructuring.
• Key reforms include:
  • Eliminating VAT exemptions and improving tax administration.
  • Reducing the wage bill and increasing the efficiency of public spending.
  • Streamlining SOE operations and reducing fiscal risks.

Conclusion

Cabo Verde needs to implement strategic fiscal reforms to improve revenue mobilization, enhance expenditure efficiency, and accelerate SOE restructuring. These measures are crucial for long-term fiscal sustainability, economic resilience, and growth. While some progress has been made, further action is required to ensure that fiscal consolidation is effective, sustainable, and growth-oriented.