BLUE ECONOMY: THE LATENT POTENTIAL OF FISHERIES AND AQUACULTURE IN CABO VERDE CABO VERDE | ECONOMIC UPDATE - MARCH 2024 Blue Economy: The Latent Potential of Fisheries and Aquaculture in Cabo Verde  1 © 2024 The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved This work is a product of the staff of The World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Attribution—Please cite the work as follows: “World Bank. 2024. Blue Economy: the latent potential of fisheries and aquaculture in Cabo Verde. Cabo Verde Economic Update. © World Bank.” All queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. BLUE ECONOMY: THE LATENT POTENTIAL OF FISHERIES AND AQUACULTURE IN CABO VERDE Table of Contents Acknowledgements iii Acronyms and Abbreviations iv Executive Summary v Part I. The State of the Economy 1 Recent developments 2 Real sector 2 Fiscal and debt dynamics 3 External sector 10 Monetary policy and financial sector 10 Poverty 12 Outlook and risks 16 Recommendations 17 Part II. Blue Economy: The Latent Potential of Fisheries and Aquaculture in Cabo Verde 21 Introduction 22 Cabo Verde’s fisheries sector: Challenges and opportunities 24 Aquaculture: where is it now and what can it bring to the Cabo Verde economy? 29 Recommendations 30 TABLE OF CONTENTS i CABO VERDE | ECONOMIC UPDATE - MARCH 2024 List of boxes Box 1. The blue economy approach at the World Bank 24 List of figures Figure 1. Services remain the key driver of GDP growth (2022–2023) 2 Figure 2. Exports and private consumption dictate demand-side growth 3 Figure 3. Inflationary pressures have eased with the fall in international food and fuel prices 4 Figure 4. Recent economic developments 5 Figure 5. Fiscal sector developments (percent of GDP) 7 Figure 6. Loan guarantees to SOE are higher than ever 8 Figure 7. Public debt looks to lessen 9 Figure 8. External sector developments 11 Figure 9. Monetary sector developments 13 Figure 10. Poverty has fallen in 2023, but is still higher than in 2019 14 Figure 11. Services are the main source of employment and income 15 Figure 12. High food inflation has hindered poverty reduction 15 Figure 13. Poor and rural households spend the largest share of income on food 16 Figure 14. The inflation experienced by households differs significantly from the official CPI and GDP 18 Figure 15. Cabo Verde’s natural capital is amongst the highest of peers 22 Figure 16. Fish and fish products dominate Cabo Verdean exports 25 List of tables Table 1. Select fiscal indicators (percent of GDP) 6 ii TABLE OF CONTENTS BLUE ECONOMY: THE LATENT POTENTIAL OF FISHERIES AND AQUACULTURE IN CABO VERDE Acknowledgements The Cabo Verde Economic Update is a World Bank report Daniel Thomas Lyng (Consultant, SAWU1), and Didier series that assesses economic trends, prospects, and policies Tabaro (Consultant, EAWM1). Peer reviewers were Philippe in Cabo Verde. Each edition includes a section on recent Ambrosi (Senior Environmental Economist, SAWE1) and economic developments and outlook, followed by a focus Kodzovi Abalo (Senior Economist, EAEM1). section analyzing issues of particular importance. The the- matic section in the present edition focuses on identifying Micky O. Ananth (Operations Analyst, EAWM1), Theresa opportunities for growth and diversification within the Adobea Bampoe (Program Assistant, EAWM1), and Vania ocean economy – with particular emphasis on the fisheries Jurena Gama Lopes (Short-Term Consultant, AWMCV) and aquaculture sectors, given their contribution to the assisted the team. economy and the opportunities they represent. The report was prepared under the overall guidance and The team was led by Rosa Brito Delgado (Economist, supervision of Keiko Miwa (Country Director, AWCF1), EAWM1) and Anna Carlotta Massingue (Senior Econ- Hans Anand Back (Practice Manager, EAWM1), Edouard omist, EAWM1). The team included Veruschka Schmidt Al-Dahdah (Lead Economist and Program Leader, (Senior Environmental Specialist, SAWE1), Eduardo EAWDR), and Daniela Marotta (Lead Economist, Alonso Malasquez Carbonel (Senior Economist, EAWPV), EAWM1). ACKNOWLEDGEMENTS iii CABO VERDE | ECONOMIC UPDATE - MARCH 2024 Acronyms and Abbreviations CAB Current Account Balance IMAR Instituto do Mar CAD Current Account Deficit MSP Marine Spatial Planning CPUE Catch Per Unit Effort MCS Monitoring, Control and Surveillance CET Common External Tariff NDC Nationally Determined Contribution CPI Consumer Price Index NPL Non-performing loan DSA Debt Sustainability Assessment PEDS Strategic Plan for Sustainable Development EEZ Exclusive Economic Zone p.p. Percentage Points EMAR School of the Sea PPG Public and Publicly Guaranteed ESA External Stability Assessment PPP Public-Private Partnerships FDI Foreign Direct Investment PPP Purchasing Power Parity GDP Gross Domestic Product SCD Strategic Country Diagnostic GFC General Fisheries Census SIDS Small Island Developing State GHG Greenhouse Gas SME Small and Medium-sized Enterprise GoCV Government of Cabo Verde SOE State-Owned Enterprise IDRF Household Expenditure and Income Survey WASH Water, Sanitation and Hygiene IUU Illegal, Unregulated, and Unreported y-o-y Year on Year iv ACRONYMS AND ABBREVIATIONS BLUE ECONOMY: THE LATENT POTENTIAL OF FISHERIES AND AQUACULTURE IN CABO VERDE Executive Summary Cabo Verde’s economy has recovered well from the the high of 7.9 percent in 2022, thanks to the easing of significant challenges of the COVID-19 pandemic. international food prices and falling oil prices. However, the pandemic highlighted the country’s inherent vulnerabilities, which include the economy’s heavy reliance on tourism, lack of shock buffers, and the risks posed by Despite recent improvements, poverty levels underperforming SOEs. Climate change impacts are adding are higher than they were before the pandemic to these vulnerabilities. Against this backdrop, this Eco- Economic growth has led to a reduction in poverty nomic Update reviews the state of the economy in 2023, in 2023. Poverty (based on the international poverty and projects forward to 2024 to assess the short-term line of $3.65 per-person, per-day at 2017 purchasing outlook, making policy recommendations for macro­ power parity) is expected to decrease to 15.1 percent from economic strengthening. It also looks in depth at the poten- 16 percent in 2022. However, this is still above the 2019 tial embodied in the blue economy – the ocean, fisheries and pre-pandemic level of 14.1 percent. Growth in the ser- aquaculture – for diversifying Cabo Verde’s economy and vices sector has led to new jobs, especially in tourism, but increasing its resilience, offering policy options for making households’ real income benefits have been dampened by the most of this potential. inflation pressures, especially on food (food inflation was 9.1 percent in 2023). Recent economic developments Ongoing consolidation efforts have improved Growth slowed to 5.1 percent in 2023 despite the fiscal position, with a narrowing of the fiscal exports, mainly tourism, returning to pre-pandemic deficit – but persistent under execution of the levels. Inflation eased to 3.7 percent, aided by capital budget is a concern declining fuel and food prices In 2023, the fiscal deficit improved to 20.3 percent Economic growth in 2023 is estimated to have slowed of GDP, down from 24.1 percent in 2022. This was to 5.1 percent, as service exports stabilize after the largely driven by a revenue increase of 2.8 percentage post-COVID tourism rebound. The accommodation, points of GDP, stemming from higher corporate income transport, and public administration sectors contributed tax, VAT collection, and revenues from airport concessions. 3.2 percentage points to GDP growth, with taxes net of Despite increased nominal spending on goods, services, subsidies contributing 0.8 percentage points. Tourism con- and social transfers, overall spending decreased by 1.1 per- tinues to lead growth, with arrivals surpassing 1 million centage points due to the lower execution of the 2023 in 2023, while construction has seen only modest gains in capital budget. As a result, the primary balance saw a sub- the face of inflationary pressures and stricter credit stan- stantial improvement, shifting from −1.9 percent of GDP dards. Exports (mainly tourism) and private consumption in 2022 to 2.0 percent in 2023. Financing requirements remain primary growth drivers on the demand side. The were met through a combination of budget support from current account balance (CAB) remains relatively stable, development partners and domestic loans. with a deficit of 3.2 percent of GDP in 2023 (3.1 percent in 2022), supported by the continued recovery of tourism The reliance of the state-owned enterprise (SOE) sector receipts and lower import growth. Headline inflation on fiscal support continues to pose significant fiscal decelerated to 3.7 percent (year on year) in 2023, from risks. These risks are primarily driven by the deteriorating Executive Summary v CABO VERDE | ECONOMIC UPDATE - MARCH 2024 performance of Cabo Verde Airlines (CVA), which has supported by the implementation of structural reforms necessitated increased support through direct budget aimed at improving public sector efficiency and the business allocations and loan guarantees since 2020. In 2023 environment. Inflation is expected to decline further, to alone, the government extended loan guarantees totaling 2.7 percent in 2024, as global inflation continues to sub- US$40.2 million to SOEs, with CVA accounting for side, and converge to around 2 percent over the medium 29 percent of the total, and ELECTRA and ASA col- term, supported by the strong nominal anchor provided lectively accounting for 48 percent. This underscores by the peg to the Euro. Poverty is projected to decline to the urgency of addressing fiscal vulnerabilities to main- 14.9 percent in 2024 driven by the services and industry tain fiscal sustainability. To this end, the government is sectors, and a moderation of inflation. Stronger import committed to implementing the SOE reform agenda for growth vis-à-vis exports, with the continued dynamism 2022–2026, involving various degrees of privatization, of economic activity, will increase the CAB from a deficit concessions, and public-private partnerships (PPPs) for of 3.2 percent of GDP in 2023 to 5.3 percent in 2025, 11 SOEs. Progress has been made, including a successful impacting reserve accumulation. This outlook is subject concession agreement with VINCI for airport services and to substantial downside risks stemming from new poten- the resumption of privatization processes for several SOEs. tial commodity price spikes linked to geopolitical shocks, weaker external demand in tourism markets and limited Public debt declined to 113.8 percent of GDP in 2023, progress with the SOE reform agenda, which could driven by GDP growth and a decline in the primary undermine the fiscal consolidation and weaken growth. deficit. This is an improvement from the spike in public Climate-related shocks also remain a concern, given the debt of 148 percent in 2021 that was caused by factors country’s high vulnerability. like the 2020 economic downturn, exacerbated fiscal deficits due to the COVID crisis, and support to SOEs. Cabo Verde’s heavy dependence on sun-and-sea tourism However, it remains well above the pre-pandemic level of leaves it highly exposed to external shocks exacerbated 108.5 percent of GDP in 2019. Adding publicly guaran- by climate change. The rapid expansion of tourism also teed domestic debt and non-guaranteed domestic debt by threatens coastal and marine ecosystems, ranking Cabo SOEs would significantly escalate the debt figures, with Verde among the top 10 most endangered marine bio- total guaranteed debt reaching US$220 million in 2023, diversity hotspots globally. To ensure sustained growth, equivalent to 8.5 percent of GDP. External debt, mainly urgent reforms are needed to mitigate the economy’s vul- concessional at 78.4 percent of GDP in 2023, contrasts nerability to external shocks, facilitating a shift towards with rising domestic debt, now around 35 percent of blue and green activities. GDP post-COVID. To reduce vulnerability to external shocks, trimming support to state-owned enterprises and strengthening debt management practices will be critical. Fulfilling the blue economy potential According to the December 2023 joint WB/IMF Debt Cabo Verde, as an archipelagic Small Island Devel- Sustainability Analysis, public debt is sustainable, but the oping State (SIDS), has a unique blend of challenges risk of overall debt distress is high, and the risk of external and opportunities rooted in its extensive Exclusive Eco- debt distress is moderate. nomic Zone (EEZ) juxtaposed with its small, dispersed land area. The country’s reliance on ocean-based sectors, Outlook and risks particularly tourism and fisheries, underscores the critical role of marine resources in driving economic growth and Real GDP growth is projected to remain relatively livelihoods, albeit accompanied by vulnerabilities to eco- stable in 2024, at 4.7  percent (4.2 percent in per nomic shocks and environmental degradation. Amidst capita terms). Over the medium-term, growth will be these dynamics, Cabo Verde is strategically prioritizing vi Executive Summary BLUE ECONOMY: THE LATENT POTENTIAL OF FISHERIES AND AQUACULTURE IN CABO VERDE the development of its ‘blue economy’, defined by the and hygiene (WASH) practices and promoting formaliza- World Bank as “the sustainable use of ocean resources for tion in fish marketing could enhance revenue and sustain- economic growth, improved livelihoods, and job creation ability without compromising catch quality. while preserving the health of ocean ecosystems.” Cabo Verde has already reflected this ambition in its policy frameworks and strategic documents; this Economic Aquaculture holds significant promise, but needs Update explores progress to date and makes recommen- investment, training, and technical support dations for fulfilling the potential further. The aquaculture sector holds significant promise for sustainable economic development and food security, Fisheries could grow, with the right with favorable conditions across the islands for both supporting environment offshore and onshore operations. While recent regula- tions provide a legal framework for aquaculture activities Cabo Verdean fisheries, predominantly small-scale and and species selection, the industry is challenged by limited artisanal but with a notable semi-industrial fleet, play infrastructure and technical expertise. Initiatives like the a vital role in providing livelihoods and food security establishment of an applied aquaculture research program for thousands of fishers and workers in related sectors, aim to address these gaps and support sector growth. including many women. The 2021 General Fisheries However, targeted government interventions are crucial Census highlights the significance of both artisanal and to stimulate entrepreneurship, attract investment, and semi-industrial fleets, with the latter landing a substantial enhance infrastructure to fully capitalize on aquaculture’s portion of the domestic catch, estimated at 73% annually. potential. By prioritizing zoning, grants, and technical The sector contributes significantly to GDP, with fish support, Cabo Verde can foster a thriving aquaculture exports comprising a large share of total exports, primarily industry that benefits local communities and contributes to EU countries—approximately 75 percent of exports to a resilient blue economy. in 2022, totaling almost US$32 million. Despite its eco- nomic importance, challenges persist, such as declining With Cabo Verde’s blue economy development hing- fish exports, informal employment, and high poverty levels, ing on the pivotal role of oceanic sectors, including particularly among fishers on smaller and less affluent fisheries and aquaculture, responsible management islands. Improving fisheries value chains and market access of marine and coastal resources will be vital. This will presents opportunities to uplift this vulnerable demographic require robust data collection, scientific assessment, and and enhance inclusivity in economic growth. integrated planning. Continuing efforts to bolster data and statistical capacity are imperative to inform practical Declining total fish catches and heavy reliance on planning, particularly in managing conflicting uses and EU exports characterize Cabo Verde’s fisheries sector, reducing uncertainty in the marine space and coastal zone. indicating overfishing concerns compounded by climate Additionally, enhancing knowledge on stock health and change impacts and inadequate infrastructure. While climate change impacts is critical for managing fisheries growth opportunities exist from catering to local demand, efficiently and sustainably, as well as investing in monitoring, notably from the tourism industry, infrastructural deficits, control, and surveillance to enforce regulations and promote including unevenly distributed facilities and unreliable resilience. Integrated planning, complemented by the appro- transport systems, are key obstacles. Strengthening fisheries priate application of Marine Spatial Planning (MSP), will governance, improving infrastructure, and expanding the further support the development of targeted sectors, includ- semi-industrial fleet while ensuring sustainability and ing mar­ itime transportation and renewable energy, ensuring inclusivity will be vital for Cabo Verde’s fisheries sector alignment with existing economic activities, and mitigating to thrive. Furthermore, investing in water supply, sanitation, adverse impacts on growth drivers like tourism. Executive Summary vii CABO VERDE | ECONOMIC UPDATE - MARCH 2024 Recommendations offers complementary policy recommendations to tackle economy-wide constraints in transportation, logistics, Policy options to support fiscal revenue mobili- 1)  energy, and the business environment, including market zation, reduce debt vulnerabilities and empower competition and state-owned enterprises, which are essen- complementary engines of growth. tial for driving private sector growth in the short-to- The tables below detail the policy options that could be medium term. considered to accelerate fiscal consolidation, reduce debt vulnerabilities, and empower complementary engines of Policy options to create the conditions for sustainable 2)  growth to reduce dependence on tourism. The recently growth in the blue economy while building resilience published Country Private Sector Diagnostic (CPSD) to adverse shocks, whether climatic or economic. Policy Options Responsibility Timeline Implement additional revenue mobilization reforms to accelerate fiscal consolidation Review and reduce investment-linked tax incentives that may not be delivering MoF Short term the intended economic benefits. Eliminate VAT exemptions on non-essential goods and services, while using MOF Short term additional revenue to strengthen targeted social assistance programs. Leverage technology to streamline tax filing and payment processes, making them MoF Short term more convenient for taxpayers. Implement special taxes on environmentally harmful products. MoF Medium term Expand the tax net to include sectors that are currently under-taxed or not taxed, MoF Medium term such as the informal economy or digital services. Reduce debt vulnerabilities Establish a medium-term debt management strategy to plan and monitor debt MoF Short term levels and risks. Improve public financial management to enhance budget planning, execution, MoF Short term and reporting. Strengthen debt recording and monitoring systems for better transparency and MoF Short term management of debt data. Enhance creditor coordination to manage debt restructuring processes more MoF Short term effectively when needed. Enable sustainability, inclusiveness, and diversification of tourism Regulate “complementary lodgings”1 to enable tourism diversification into more MoF Short term niches and islands. Regulate sustainable access to ecologically sensitive areas whilst providing nautical MoF Medium term tourism operators with an enabling and clear licensing and regulatory framework. 1 The emerging complementary accommodation sector, dominated by platforms like Airbnb and Booking, diversifies tourism offerings, attracting independent travelers and digital nomads to lesser-known destinations. However, its unregulated nature raises compliance concerns. viii Executive Summary BLUE ECONOMY: THE LATENT POTENTIAL OF FISHERIES AND AQUACULTURE IN CABO VERDE Estimated Cost Policy Options Responsibility Timeline (US million)2 Strengthen the evidence base for management of capture fisheries Conduct regular stock assessments, prioritizing Ministry of the Sea, Institute Short term 0.33 stocks of high commercial value of which little of the Sea (IMAR) information is known Model the effects of climate change on fish stocks Ministry of the Sea, IMAR Medium term 0.4 and catch composition at the subnational level Strengthen monitoring, control, and surveillance Ministry of the Sea, General Medium term 1.0 programs to prevent and measure the extent of Fisheries Inspection (IGP) illegal, unreported, and unregulated fishing. and National Directorate of Fisheries and Aquaculture (DNPA) Improve efficiency and productivity of capture fisheries Convert the existing artisanal fleet to expand of Ministry of the Sea, DNPA Medium term 0.4 the semi-industrial fleet, conditional on strong and Ministry of Finance scientific evidence for the sustainability of targeted fisheries and social protection efforts to support existing artisanal fishers. Promote best practices in post-harvest handling, Ministry of the Sea, IGP Short term 0.2 sanitation and hygiene, and marketing to support and DNPA higher value catch and access to formal markets. Identify deficiencies in the necessary infrastructure Ministry of the Sea, ENAPOR Short term 0.2 to support good sanitation and food safety practices. and IGP Promote the development of aquaculture Integrate zoning of aquaculture areas in existing Ministry of the Sea, IMAR, Short term 0.2 and under-development coastal and marine spa- DNPA, Ministry of Finance, tial planning processes. Ministry of Infrastructure (INGT) Develop and disseminate guidance to prospective IMAR Medium term 0.1 aquaculture entrepreneurs about commercially viable species and good biosafety practices. Develop and make available aquaculture-specific EMAR Medium term 0.1 education as part of EMAR. (continues) 2 Cost estimates provided in this table are approximations and should be regarded as preliminary, with detailed cost estimates to be established. 3 Estimated cost for an assessment of stock assessment needs and development of an action plan. Executive Summary ix CABO VERDE | ECONOMIC UPDATE - MARCH 2024 Estimated Cost Policy Options Responsibility Timeline (US million)2 Planning and management of coastal and marine areas Continue and expand use of coastal zone plans Ministry of the Sea, Ministry Short term 0.4 in high-traffic and high-demand areas to mediate of Finance, INGT usage conflicts and manage development. Develop country-wide marine spatial planning to Ministry of the Sea, Ministry Medium term 1.0 promote an overarching, climate-aware strategy of Finance, INGT for the use of Cabo Verde’s extensive marine space. x Executive Summary Part I: The State of the Economy CABO VERDE | ECONOMIC UPDATE - MARCH 2024 Recent developments 27.7 percent in 2019. The country has since rebounded strongly with the return of tourism to the islands, driv- Real sector ing a robust growth rate of 7.0 percent in 2021 and an impressive 17.4 percent in 2022 (Figure 4). Cabo Verde faced significant challenges from the COVID-19 pandemic but has recovered well. In the Economic growth slowed to 5.1 percent in 2023, years leading up to the pandemic, the economy was growing reflecting the stabilization of service exports after steadily. Modest growth, averaging 1.1 percent between the post-COVID tourism rebound. On the supply side, 2009 and 2015, strengthened further over 2016–2019 to growth was underpinned by the value added of the accom- reach an average real GDP growth rate of 4.9 percent. modation, transport, and public administration sectors, This was driven by a thriving tourism sector and strong which contributed 3.2 percent to GDP growth, as well as structural reforms, mainly in the state-owned enterprise by taxes net of subsidies, which accounted for 0.8 percent (SOE) sector. However, the COVID-19 crisis led to a of GDP growth (Figure 1). The recovery of the tourism severe GDP contraction of 20.8 percent in 2020 – the sector continues to drive economic growth, with tourist largest decline in the country’s post-colonial history and arrivals reaching around 1 million in 2023, surpassing the second worst in Sub-Saharan Africa. This decline was the highest recorded figure by 23 percent (registered in primarily due to the collapse of the tourism sector, the 2019) (Figure 4). Despite the tourism sector’s positive backbone of the economy, which represents 25 percent of performance, the commerce sector registered a decline in GDP and drives around 40 percent of overall economic 2023, contributing negatively to GDP growth (−0.5 per- activity. Consequently, national poverty levels surged centage points). The construction sector also had a negative to 31.3 percent in 2020, reversing previous progress impact on GDP growth (−0.5 p.p.) in 2023, still reeling which had seen them fall from 35.2 percent in 2015 to from inflationary pressures on construction costs and Figure 1. Services remain the key driver of GDP growth (2022–2023) (Percentage points) Public administration and social security 0.9 Fishing and aquaculture 0.1 Agriculture, livestock and forestry –0.4 Health and social work –0.3 Education –0.3 Extractive industries 0.0 Other service activities 0.5 Information and communication activities 0.5 Manufacturing industries 0.5 Construction –0.5 Electricity and water 0.2 Real estate Activities 0.6 Financial and insurance activities 0.5 Business Services 0.4 Commerce and repair –0.5 Transport and storage 1.5 0.8 Taxes net of subsidies 0.9 Accommodation and restaurants –2 0 2 4 6 2023 2022 Source: Authors’ calculations using authorities’ data and World Bank estimates (April 2024). 2 Part I: The State of the Economy BLUE ECONOMY: THE LATENT POTENTIAL OF FISHERIES AND AQUACULTURE IN CABO VERDE facing stricter credit standards for companies. Economy- costs, as well as more restrictive credit requirements that wide constraints in transportation, logistics, energy, and are hindering private companies’ ability to finance projects. the business environment may be hindering beneficial The slowdown in economic growth has seen imports spillover effects from the tourism sector. Overall, the fall, contributing positively to GDP growth. Government services sector contributed 4.1 p.p to GDP growth, while consumption grew slightly, but contributed only 0.3 p.p. manufacturing, driven by fish processing industries, to growth, reflecting efforts to curtail unnecessary spending contributed 1.3 p.p. The agriculture and fishing sector as fiscal consolidation efforts take place. reduced growth by 0.3 p.p., reflecting the lingering effects of the five-year long drought. Headline inflation decelerated to 3.7 percent (year-on- year) in 2023 from the high of 7.9 percent in 2022, Exports and private consumption remain the pri- driven by the easing of international food prices and mary drivers of economic growth on the demand side. falling oil prices. Food inflation, which represents 25 per- Exports, mainly tourism, contributed 2.1 p.p. to economic cent of the consumer price index (CPI) basket, slowed to growth in 2023, with tourism demand continuing to grow 5.1 percent in 2023, from 15.8 percent in 2022. Energy (Figure 2). Private consumption contributed 5.8 p.p. to inflation also decreased in 2023, falling by 3.2 percent on growth, but decelerated significantly from 2022 levels, average, thus bringing down housing and utilities prices, explained by the impact of inflation on real disposable as well as transport prices (Figure 3). Prices in the housing incomes and households’ purchasing power, alongside and utilities category, which also represents around the cessation of policy measures aimed at mitigating the 25 percent in the CPI, grew by 2 percent in 2023 com- effects of rising prices of essential goods. Total investment pared to 4.1 percent in 2022. Transport prices grew by fell further in 2023, dragging down GDP growth despite only 0.5 percent, compared to a significant 11.1 percent strong export performance. Investment trends can be in 2022. Cabo Verde imports about 80 percent of its con- attributed to persistently high production and construction sumer production, making domestic food and fuel costs highly susceptible to rising global food and energy prices, Figure 2. Exports and private consumption with disproportionate effects on the poor. Core inflation dictate demand-side growth reached an annual average of 2.3 percent in 2023, only (Percentage points) 1.4 p.p. below headline inflation, showing the fading 50 impact of food and energy prices on the overall rate. 40 30 Fiscal and debt dynamics 20 The overall fiscal deficit narrowed in 2023, partly 10 supported by increased fiscal revenues, but also due 0 to the low execution of the capital budget (Figure 5). –10 The overall fiscal deficit is estimated at 0.3 percent of GDP –20 in 2023, compared to 4.1 percent in 2022 (Table 1). –30 A large share of the fiscal adjustment was driven by an –40 improvement in revenue (+2.8 percentage points of GDP) –50 due to higher corporate income tax and VAT collection, Imports Exports as well as revenues linked to the airport private conces- Government Consumption Investment sion (equivalent to 1.5 percent of GDP). Despite higher Private Consumption Growth nominal spending on goods and services, social transfers, Source: Authors’ calculations using authorities’ data and World Bank and debt interest payments, overall spending declined estimates (March 2024). by 1.1 percentage points as the execution of the 2023 Part I: The State of the Economy 3 CABO VERDE | ECONOMIC UPDATE - MARCH 2024 Figure 3. Inflationary pressures have eased with the fall in international food and fuel prices Contribution to inflation 10 7 6 8 5 6 4 3 Percent p.p. 4 2 2 1 0 0 –1 –2 –2 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Transport Food LHS Alcoholic Beverages and Tobacco Healine LHS Source: Authors’ calculations using authorities’ data and World Bank estimates. capital budget was well below the amounts planned. respectively compared to 2022, reflecting economic activity Consequently, the primary balance improved substantially in the service sector and increases in imports. Revenues compared to 2022, from a deficit of 1.9 percent of GDP collected under the airport concession drove non-tax to a surplus of 2.0 percent of GDP in 2023. Financing revenue to increase significantly to 4.4 percent of GDP needs were covered by a combination of budget support (from 2.6 percent in 2022), as the government’s SOE totaling EUR 42 million provided by the World Bank, the reform agenda continued to be rolled out. Grants accounted African Development Bank (AfDB) and other develop- for 1.3 percent of GDP in 2023, reflecting the gradual ment partners, and domestic loans. decline of this modality for financing projects and budget support. Fiscal revenues increased by about 23 percent in 2023, reaching 24.6 percent of GDP (Figure 5), reflecting Total expenditure increased by 4.6 percent in 2023 to continued economic dynamism, improved tax collec- reach 24.8 percent of GDP, despite the under execution tion efficiency, and completion of the airport’s private of the capital budget. Current expenditure increased by concession process. Tax revenues reached CVE 49.7 billion 5.1 percent in 2023 (Figure 5), reflecting an increase in (US$487 million) in 2023, an increase of around 13 per- spending on the acquisition of goods and services under cent compared to 2022. Income taxes (personal and cor- several ongoing projects – mostly technical assistance porate) continued to increase as arrears were recovered services – and on debt interest payments, with some debts after the discontinuation of COVID-19 measures to pro- contracted starting the payment period. Expenditure on tect companies, jobs, and income (installment payments social benefits also increased because of generous pension on taxes, suspension of coercive collection of taxes, and a reforms. The capital budget execution underperformed in lay-off scheme). The strong performance of the economy 2023, representing only 36 percent of projected budgetary in 2022 also had a positive impact on the annual profit allocation, due to the delay of several public investment tax paid by firms in 2023. Taxes on goods and services and projects, mainly to improve housing conditions and to on international trade increased by 12.7 and 1.3 percent strengthen infrastructure for education, health, and roads. 4 Part I: The State of the Economy BLUE ECONOMY: THE LATENT POTENTIAL OF FISHERIES AND AQUACULTURE IN CABO VERDE Figure 4. Recent economic developments . . . although tourist arrivals have exceeded pre-pandemic levels, Economic growth has slowed tourism revenues have stabilized around 2019 levels Real GDP growth (percent) Tourist arrivals 20 1,200,000 18 16 14 12 1,000,000 10 8 6 4 800,000 2 0 –2 600,000 –4 –6 –8 –10 400,000 –12 –14 –16 –18 200,000 –20 –22 –24 0 12 13 14 15 16 17 18 19 20 21 22 23 12 13 14 15 16 17 18 19 20 21 22 23 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Headline inflation has decelerated with the easing of international Private consumption and net exports lead economic growth food prices and falling oil prices Growth contributions (percentage points) Inflation (percent, percentage points) 30 10 20 8 10 6 0 4 –10 2 –20 0 –30 –2 12 13 14 15 16 17 18 19 20 21 22 23 20 20 20 20 20 20 20 20 20 20 20 20 12 13 14 15 16 17 18 19 20 21 22 23 20 20 20 20 20 20 20 20 20 20 20 20 Net Exports (NX) Change in Inventories Government Consumption Total GFCF (I) Inflation, end of period consumer prices Private Consumption Inflation, average consumer prices Source: Authors’ calculations using authorities’ data. Part I: The State of the Economy 5 CABO VERDE | ECONOMIC UPDATE - MARCH 2024 Table 1: Select fiscal indicators (percent of GDP) 2020 2021 2022 2023e 2024p 2025p 2026p Total Revenues 25.3 23.3 21.8 24.6 26.9 25.5 24.5 Tax revenues 18.7 17.5 18.3 18.8 19.2 20.1 20.2 Taxes on income and profit 5.7 4.8 4.2 4.8 4.7 4.8 5.0 Taxes on goods and services 8.9 8.3 9.6 9.9 10.0 10.5 10.6 Taxes on international trade 3.7 4.1 4.1 3.8 4.2 4.5 4.3 Other taxes 0.4 0.4 0.4 0.3 0.3 0.3 0.3 Non-tax revenues 3.3 3.7 2.6 4.4 5.4 4.0 3.6 Grants 3.3 2.1 0.9 1.3 2.3 1.4 0.6 Total Expenditures 34.6 30.8 25.9 24.8 29.7 27.4 25.4 Current expenditures 30.9 28.5 24.1 23.2 26.2 23.6 23.1 Compensation to employees 12.4 11.6 9.1 8.5 9.6 9.6 9.6 Goods and services 6.3 5.2 4.3 4.5 5.9 4.7 4.6 Interest payments 2.7 2.2 2.2 2.2 2.2 2.0 2.0 Subsidies 0.1 0.4 0.8 1.0 0.7 0.6 0.6 Current transfers 5.3 2.9 2.3 2.2 2.6 1.9 1.8 Social benefits 3.7 4.8 3.7 3.7 3.8 3.6 3.4 Other expenses 0.4 1.4 1.7 1.1 1.4 1.2 1.1 Net acquisition of nonfinancial assets 3.4 2.3 1.9 1.7 3.5 3.8 2.3 Other Expenditures 0.4 0.0 0.0 0.0 0.0 0.0 0.0 Primary balance −6.6 −5.3 −1.9 2.0 −0.6 0.0 1.0 Overall fiscal balance −9.3 −7.5 −4.1 −0.3 −2.9 −2.0 −1.0 Net other liabilities −1.2 0.9 −0.1 −0.1 −0.2 −0.1 −0.1 of which On-lending (net) 0.2 1.3 0.1 0.1 0.1 0.1 0.1 Capitalization −0.3 −0.4 −1.1 −0.8 −0.9 0.0 0.0 Financing needs 10.5 6.6 4.2 0.3 3.1 2.1 1.1 Total financing 9.9 6.6 4.2 0.3 3.1 2.1 1.1 Net domestic financing 3.1 1.6 2.3 0.2 −0.1 −0.2 0.9 Net external financing 6.7 5.0 1.9 0.2 3.2 2.5 0.2 Exceptional financing (DSSI) 0.8 6 Part I: The State of the Economy BLUE ECONOMY: THE LATENT POTENTIAL OF FISHERIES AND AQUACULTURE IN CABO VERDE Table 1: Select fiscal indicators (percent of GDP) (Continued) 2020 2021 2022 2023e 2024p 2025p 2026p Net errors and omissions −0.7 0.0 0.0 0.0 0.0 0.0 0.0 Public debt 143.0 148.0 123.7 113.8 110.0 105.6 100.0 External debt 105.4 105.4 85.6 78.4 77.4 75.8 71.0 Domestic debt 37.6 42.6 38.0 35.4 32.6 29.8 28.9 Source: World Bank staff calculations based on Ministry of Finance and IMF data. Figure 5. Fiscal sector developments (percent of GDP) The fiscal deficit has narrowed . . . . . . owing mainly to increased revenues . . . Fiscal sector performance (percent of GDP) Revenue composition (percent of GDP) 40 25 35 30 20 25 20 15 15 10 5 10 0 –5 5 –10 –15 2017 2018 2019 2020 2021 2022 2023 0 2017 2018 2019 2020 2021 2022 2023 Revenues and grants Expenditures Overall balance Primary balance Tax revenue Non-tax revenue Grants . . . and low execution of the capital budget. Current expenditures . . . with the wage bill and current transfers remaining the largest have also narrowed . . . components Expenditure performance (percent of GDP) Current expenditure (percent of GDP) 35 50 45 30 40 35 25 30 20 25 20 15 15 10 10 5 5 0 2017 2018 2019 2020 2021 2022 2023 0 Other current transfers Social assistance 2017 2018 2019 2020 2021 2022 2023 Goods and services Current transfers Current expenditure Capital expenditure Interest payments Wages and compensation Source: Authors’ calculations using authorities’ data. Part I: The State of the Economy 7 CABO VERDE | ECONOMIC UPDATE - MARCH 2024 By functional composition, social expenditure accounted These fiscal vulnerabilities have the potential to impede for 48.1 percent of total expenditures, public services for Cabo Verde’s efforts to restore fiscal sustainability and sus- 36.1 percent, economic affairs for 12.8 percent and envi- tain a downward trajectory of debt relative to GDP in the ronment for 1.6 percent. medium term. The SOE sector continued to require fiscal support, The government is firmly committed to implementing increasing fiscal risks. These risks stem mostly from the the SOE reform agenda for 2022–2026, aimed at miti­ worsening operational performance of Cabo Verde Airlines gating debt vulnerabilities. This agenda encompasses (CVA), which has required greater support through direct various degrees of privatization for 11 SOEs, ranging from budget support and loan guarantees since 2020. Over- full privatization to partial divestments, concessions, and all, the authorities extended loan guarantees amounting to public private partnerships (PPPs). In July 2022, the gov- US$40.2 million in 2023 to support financially distressed ernment successfully concluded a concession agreement SOEs, with the Cabo Verde Airlines (CVA) accounting with an international private operator (Vinci, France) for for 29 percent of the total (Figure 6). ELECTRA, the the airport public service, previously managed by ASA, to electricity and water utility, and the Airports and Air bolster civil aviation.4 Furthermore, the privatization pro- Safety Company (ASA), accounted for around 48  per- cesses have resumed for several SOEs, including ENAPOR cent of total guarantees. Capitalization to SOEs stood at (port management), ELECTRA (electricity and water US$21.6 million in 2023 (up from US$20 million in 2022), production and distribution), EMPROFAC (import with CVA being the largest recipient, at US$9.8 million. and distribution of pharmaceuticals), and INPHARMA Figure 6. Loan guarantees to SOEs are higher than ever (millions of US$) 45.0 40.2 40.0 37.9 35.6 35.0 30.0 25.0 20.1 19.5 20.0 15.0 12.3 11.5 10.0 8.0 7.0 5.6 3.9 3.9 4.0 4.0 3.4 5.0 1.2 1.0 2.2 2.2 2.1 1.8 1.0 1.0 – Total CVA AEB SDTIBM Private Sector AdS CM Total ELECTRA ICV TACV AEB Private Sector SDTIBM AdS Total ASA TACV ELECTRA SDTIBM IFH AEB NOSI 2021 2022 2023 Source: Cabo Verde’s Ministry of Finance. 4 VINCI Airports is the world’s first private airport operator. In July 2022, the government signed a public airport service concession contract with the VINCI group, involving the 40-year management of four international airports and three aerodromes. The concession was definitively handed over to Cabo Verde Airports, owned by the VINCI group, in July 2023. 8 Part I: The State of the Economy BLUE ECONOMY: THE LATENT POTENTIAL OF FISHERIES AND AQUACULTURE IN CABO VERDE (production of pharmaceuticals). The reform agenda made in 2021 (Figure 7). Much of this increase was driven by further progress in early 2024 with the state’s divestment the growth contraction in 2020 (20.8 percent); elevated of shares in Caixa Economica, initiation of the privat- fiscal deficits in response to the COVID-induced crisis ization process for the state’s 61 percent stake in Cabo and effects of global geopolitical tensions on food and fuel Verde Handling (CV Handling), and the launch of public prices (average of 7.1 percent of GDP over 2020–22); consultations for a port service sub-concession. The gov- and provision of direct guarantees and on-lending to some ernment could consider adopting a pragmatic approach state-owned enterprises, notably CVA and ELECTRA. and concentrating efforts on selected SOEs to facilitate Adding SOEs’ publicly guaranteed domestic debt and the most crucial structural reforms during the implemen- non-guaranteed domestic debt would significantly escalate tation of this agenda. The authorities are also striving to the debt figures, with total guaranteed debt reaching enhance transparency by introducing the SOE Manager US$220 million in 2023, equivalent to 8.5 percent of database in 2023. This platform offers access to essential GDP. External debt, which accounted for 78.4 percent of SOE information, encompassing financial statements, GDP in 2023, is mostly concessional, with long matur- risk management reports, as well as business and invest- ities and low interest rates. Domestic debt has increased ment plans. markedly after the COVID-19 shock and currently represents around 35 percent of GDP. Liquidity indica- Public debt declined to 113.8 percent of GDP in 2023, tors have worsened (although they are not dire as most driven by GDP growth and a decline in the primary multilateral debt is concessional): debt service absorbed deficit. Prior to this, public debt had been increasing 50 percent of fiscal revenue in 2022 and is estimated at sharply, from 108.5 percent of GDP in 2019 to 148 percent almost 47 percent in 2023. With the worsening debt Figure 7. Public debt looks set to lessen (percent of GDP) 160.0 140.0 120.0 100.0 143.0 152.0 115.6 105.6 115.4 80.0 93.5 112.8 112.0 82.9 109.4 127.1 60.0 115.3 40.0 20.9 22.1 24.5 26.4 28.5 43.8 20.0 28.5 29.7 37.6 29.5 39.1 1.2 1.6 35.4 0.0 0.2 6.1 6.2 7.1 6.5 6.8 9.1 10.7 12 13 20 9.3 14 20 8.6 15 20 6 20 17 1 20 18 20 9 20 20 1 20 21 e 20 20 22 p 23 20 20 External Debt Domestic Debt Guaranteed debt Source: Ministry of Finance, December 2023. Part I: The State of the Economy 9 CABO VERDE | ECONOMIC UPDATE - MARCH 2024 trends and the country’s high vulnerability to external External sector shocks, reducing direct support and loan guarantees to SOEs is key. Additionally, it is crucial to continue The current account deficit (CAD) stood at 3.2 percent strengthening debt management practices and reducing of GDP in 2023, a slight increase on 3.1 percent in domestic borrowing. These actions are essential for reducing 2022, reflecting the stabilization of tourism revenues debt vulnerabilities. and slowdown of imports (Figure 8). Tourism revenues, which comprise approximately 78 percent of total ser- The latest joint World Bank-IMF Debt Sustainability vice export revenues, surged by 30 percent, returning to Assessment (DSA), published in December 2023, con- pre-pandemic levels. Conversely, exports of goods fell by cluded that public debt is sustainable, but the risk of around 12 percent, driven by a reduction in re-exports of overall debt distress is high, while the risk of external fuel and foodstuffs at ports and airports. While remittances debt distress is moderate and unchanged from the had regained pre-pandemic levels in 2022, they declined in June 2023 DSA. Debt coverage comprises the central 2023, mitigating the positive impact of export earnings on government, extra budgetary funds, the Central Bank, the CAD (Figure 8). Despite the decrease, remittances rep- and external guarantees, in line with fiscal accounts. The resent around 12 percent of GDP and remain an important granularity of the risk rating of external debt distress indi- source of foreign currency. Additionally, the deceleration of cates limited space to absorb shocks. The present value imports of goods and services, consistent with the down- of the public and publicly guaranteed external debt-to- turn in investments, has helped to contain the CAD. GDP ratio is below the ratio over the forecast period and The financing of the CAD in 2023 primarily relied breaches the threshold protractedly under the export on concessional loans and FDI. The financial account stress test. Liquidity indicators remain firmly below their expanded by around 11 percent, reflecting the continued respective thresholds under the baseline, reflecting the resumption of planned FDI projects. FDI increased slightly highly concessional nature of Cabo Verde’s external debt. in 2023, accounting for 4.3 percent of GDP (4.5 per- The external and overall debt outlook is assessed to be sus- cent in 2022). Around 70 percent of the FDI was directed tainable and is based on assumptions that include growth towards the tourism and tourism real estate sector on the converging to its potential, sustained fiscal consolidation, islands of Sal, Santiago, Boa Vista, and São Vicente. Gross and the acceleration of structural reforms – particularly international reserves grew to around EUR 686 million, those related to restructuring SOEs to reduce fiscal risks covering 5.6 months of prospective imports of goods and and improve the business environment. services (5.9 months of imports in 2022) (Figure 8), well Authorities are committed to fiscal consolidation over above 3.6 months’ level recommended by the IMF 2019 the medium term and to placing the debt-to-GDP ratio External Stability Assessment (ESA). decisively on a downward trend. Fiscal consolidation will be supported by (i) continued improvements to the Monetary policy and the financial sector efficiency of the tax system and broadening the tax base (tax revenues to increase by 16 percent from 2023 levels); The Central Bank has initiated monetary policy tight- (ii) rationalizing the wage bill to a level below 11 percent ening to narrow the interest rate differential with the of GDP, particularly by investing in digital infrastructure; European Central Bank, aiming to safeguard the peg. (iii) leveraging new modalities for financing investments Amid the pandemic crisis, the Central Bank maintained in partnership with the private sector; (iv) restructuring an accommodative monetary policy and financial mea- the SOE sector through public-private partnerships sures to support credit and provide liquidity to households (PPPs), privatizations, and concessions; and (v) exploring and businesses. This included reducing reference interest a new debt management model with conversion of part of rates to historic lows, granting temporary relief from the the foreign debt into natural and climate capital. capital and operating rules for banks, and offering large 10 Part I: The State of the Economy BLUE ECONOMY: THE LATENT POTENTIAL OF FISHERIES AND AQUACULTURE IN CABO VERDE Figure 8. External sector developments The current account deficit remains relatively stable, supported by The deficit was financed mainly by foreign direct investment and tourism receipts and deceleration in import growth concessional loans Current account (percent of GDP) Financial account (percent of GDP) 50 5 40 30 0 20 10 –5 0 –10 –10 –20 –30 –15 –40 –50 –20 12 13 14 15 16 17 18 19 20 21 22 23 20 20 20 20 20 20 20 20 20 20 20 20 12 13 14 15 16 17 18 19 20 21 22 23 20 20 20 20 20 20 20 20 20 20 20 20 Secondary income Primary income Services Goods Other investments Portfolio investment Current account FDI Financial account Remittances have stabilized International reserves remain at comfortable levels Remittances (percentage of GDP) Reserves 16 800 9.0 14 700 8.0 7.0 600 12 6.0 500 10 5.0 400 4.0 8 300 3.0 6 200 2.0 4 100 1.0 0 0.0 2 12 13 14 15 16 17 18 19 20 21 22 23 20 20 20 20 20 20 20 20 20 20 20 20 0 Reserves in Millions of Euro 12 13 14 15 16 17 18 19 20 21 22 23 Reserves in months of current year imports (RHS) 20 20 20 20 20 20 20 20 20 20 20 20 Source: Authors’ calculations using authorities’ data. Part I: The State of the Economy 11 CABO VERDE | ECONOMIC UPDATE - MARCH 2024 loans at exceptionally low costs to support banks. The non-financial corporations, and households. The sector’s reference rate was reduced from 1.5 to 0.25 percent, the concentration is notable, with two out of seven active lending facility rate from 3 to 0.5 percent, and the stand- commercial banks holding two-thirds of the credit and ing deposit facility rate from 0.1 to 0.05 percent. Addi- deposit market shares. The upward trend in NPLs reflects tionally, reserve requirements were reduced to 10 percent the default of some clients in the real estate and construc- from 13 percent, and the rediscount rate from 5.5 to tion sectors, who benefited from the public moratorium 1 percent. A US$450 million credit line to banks was also regime which ended in September 2022. Despite the created, with a 0.75 percent interest rate. With the econ- slight deterioration in the quality of the portfolio, the omy stabilized, and to address potential currency outflow NPL ratio remains below double digits. risks and ensure the stability of the peg, the Central Bank raised the policy rate from 0.25 to 1.0 percent in May 2023 and then further to 1.25 percent in November. The reserve Poverty level cover, at around six months of imports, is deemed Before the onset of COVID-19, Cabo Verde’s poverty adequate to protect the peg. reduction efforts positioned the country as a front- The financial system remained resilient in 2023, sup- runner in Sub-Saharan Africa for elevating living con- ported by the monetary policy measures (Figure 9). ditions. Between 2001 and 2015, Cabo Verde witnessed a Bank solvency remains robust, and the risk of insolvency significant decline in poverty rates, from 42.0 to 19.3 percent is limited. The regulatory capital-to-risk weighted assets (based on the international poverty line of $3.65 per- stood at to 23.7 percent at end-December 2023, well person, per-day, at 2017 purchasing power parity, esti- above the regulatory minimum of 10.5 percent, reflecting mated using the national household survey – IDRF). It the robust loss absorption capability of the national banking also saw a reduction in inequality, as measured by the system and its minimal risk of insolvency. Return on assets Gini Index, which fell from 52.5 to 42.0. Recent micro- stood at 1.8 percent (1.5 percent in 2022), while return simulations by the World Bank reveal a further decrease on equity was at 18.2 percent (16 percent in 2022), both in poverty, from 19.3 percent in 2015 to 14.1 percent comfortable levels. The banking sector remained liquid in 2019 (Figure 10). However, the pandemic-induced and credit to the economy increased by 6.1 percent (y-o-y) shock led to a 6.7 percentage point increase in poverty at end-December 2023. The liquidity in the financial in 2020 to 20.8 percent. Projections by the World Bank sector makes it better prepared to resist the effects of a suggest that the renewal of poverty reduction in 2021, possible increase in non-performing loans with the end as economic growth rebounded after the COVID-19 of the moratoria. shock, has continued into 2023. The financial sector’s structural weaknesses persist Economic growth played a pivotal role in poverty alongside risk aversion, primarily stemming from alleviation in 2023, bolstered by a reduction in infla- elevated non-performing loan (NPL) levels. High tion compared to the preceding year. However, while liquidity levels reflect risk aversion in an environment poverty is projected to decline to 15.1 percent in 2023 of persistently high NPLs (Figure 9), as well as limited from 16.0 percent in 2022, it still exceeds the pre-pandemic investment opportunities that meet acceptable credit stan- level of 14.1 percent estimated in 2019 (Figure 10). This dards. Low asset quality remains a challenge for the sector, is because the positive effects of growth (the expansion and although banks maintain a relatively robust capital of the services sector spurred job creation, particularly adequacy ratio, they remain exposed to the risks posed within the tourism industry) have been offset by infla- by high NPL ratios, which stood at 7.3 percent by end- tionary pressures, notably in food prices, which saw 2023 (7.8 percent in 2022). Moreover, the issue is com- inflation reach 5.1 percent in 2023 despite the decrease pounded by elevated debt levels among public enterprises, in overall inflation from 2022 levels. 12 Part I: The State of the Economy BLUE ECONOMY: THE LATENT POTENTIAL OF FISHERIES AND AQUACULTURE IN CABO VERDE Figure 9. Monetary sector developments The banking sector remains liquid and credit to the economy The financial system remains resilient has increased Monetary aggregates (millions of CVE) Credit to the economy (percent change Y-o-Y) 250,000 14 12 200,000 10 8 150,000 6 4 100,000 2 0 50,000 –2 –4 0 Dec-12 May-13 Oct-13 Mar-14 Aug-14 Jan-15 Jun-15 Nov-15 Apr-16 Sep-16 Feb-17 Jul-17 Dec-17 May-18 Oct-18 Mar-19 Aug-19 Jan-20 Jun-20 Nov-20 Apr-21 Sep-21 Feb-22 Jul-22 Dec-22 May-23 Oct-23 Dec-12 May-13 Oct-13 Mar-14 Aug-14 Jan-15 Jun-15 Nov-15 Apr-16 Sep-16 Feb-17 Jul-17 Dec-17 May-18 Oct-18 Mar-19 Aug-19 Jan-20 Jun-20 Nov-20 Apr-21 Sep-21 Feb-22 Jul-22 Dec-22 May-23 Oct-23 Net foreign assets Net domestic assets (credit) Total deposits Credit to the private sector Money Supply Credit to the economy . . . supported by the policy measures adopted by the Central Bank NPLs have been gradually decreasing but remain high Policy, lending, and deposit rates (percent) Asset quality (percent) 18 120 14 16 12 100 14 10 12 80 8 10 60 6 8 4 6 40 4 2 20 2 0 Dec-12 May-13 Oct-13 Mar-14 Aug-14 Jan-15 Jun-15 Nov-15 Apr-16 Sep-16 Feb-17 Jul-17 Dec-17 May-18 Oct-18 Mar-19 Aug-19 Jan-20 Jun-20 Nov-20 Apr-21 Sep-21 Feb-22 Jul-22 Dec-22 May-23 Oct-23 0 0 13 14 15 16 17 18 19 20 1 2 23 2 2 c- c- c- c- c- c- c- c- c- c- c- De De De De De De De De De De De Policy Rate Bank Lending Rate Bank Deposit Rate NPLs/Total Loans Provisions to NPLs (RHS) Source: Authors’ calculations using authorities’ data. Part I: The State of the Economy 13 CABO VERDE | ECONOMIC UPDATE - MARCH 2024 Figure 10. Poverty has fallen in 2023, but is still higher than in 2019 25 25 20 15 20 Poverty headcount rate (percent) GDP growth and Inflation 10 5 15 0 –5 10 –10 –15 5 –20 –25 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Real GDP per capita CPI Real services GDP per capita Poverty (US$3.65 a day, 2017 PPP) Source: Authors’ calculations using IDRF2015 (Inquérito às Despesas e Receitas Familiares, 2015). Poverty estimated in 2015. Poverty projections from 2016 to 2026. Growth and inflation have both influenced high at 9.1 percent, significantly surpassing levels observed poverty levels in previous years, which ranged between 0.5 and 2.0 per- cent from 2018 to 2021, before spiking to 15.2 percent The poverty reduction in 2023 was underpinned by in 2022. Nonetheless, projections indicate an expected economic growth, with the services sector driving stabilization of food inflation in the medium term, with a job creation. Analysis shows that poverty declined by convergence towards 3 percent by 2026. 0.9 percentage points in 2023, reaching 15.1 percent, mainly driven by activity in the services sector, which saw The escalation in food prices disproportionately impacts a 4.2 percent real per capita growth. The sector employs households with lower incomes and those in rural areas. 74.7 percent of the workforce and 62.7 percent of the poor, In Cabo Verde, poor and rural households allocate a larger according to the 2015 household survey (Error! Reference proportion of their earnings to food expenditures (66.4 per- source not found.). Additionally, industry, which employs cent and 65.3 percent respectively, according to the 2015 10.3 percent of the workforce, experienced real per capita household survey) than their urban and non-poor counter- growth of 7.2 percent in 2023. parts (Error! Reference source not found.). Consequently, they are more susceptible to the effects of rising food prices The impact of economic growth on poverty reduction (Error! Reference source not found.). In 2023, food infla- has been hindered by inflation, especially elevated tion, which represents 25 percent of the CPI basket and food prices throughout 2023. A notable feature of the 30 percent of the consumption basket, slowed to 5.1 percent, recent macroeconomic developments in Cabo Verde has while energy inflation decreased by 3.2 percent on average. been high inflation, primarily fueled by surging food and The evolution of inflation (CPI), food inflation (food energy prices (Error! Reference source not found.). In CPI), and the median inflation faced by poor and non-poor 2023, inflation decelerated to 3.7 percent, markedly lower households over 2016–2026 is depicted in Figure 12, high- than the 7.9 percent in 2022, but food inflation remained lighting the dynamics of inflationary pressures over time. 14 Part I: The State of the Economy BLUE ECONOMY: THE LATENT POTENTIAL OF FISHERIES AND AQUACULTURE IN CABO VERDE Figure 11. Services are the main source of employment and income (Share of employment and income for each sector by welfare decile) Employment by sector by welfare decile Income by sector by welfare decile 100 100 90 15 14 13 17 14 15 17 18 18 18 18 90 19 20 80 80 70 53 59 68 64 63 70 72 73 75 75 60 80 84 88 79 60 45 52 58 53 55 64 63 66 50 50 69 71 66 62 73 40 11 40 11 11 30 10 11 30 10 10 10 10 12 9 20 36 12 10 10 10 20 10 10 29 10 10 8 10 23 26 18 16 14 11 9 8 26 11 15 10 26 23 19 14 13 10 8 7 7 20 8 11 7 3 9 8 5 8 0 0 2 t 2 3 4 5 6 7 8 9 t on r N oor l t De 2 De 3 De 4 De 5 De 6 De 7 De 8 Ri 9 t on or N oor l na na es es es es o le le le le le le le le le le le le le le le le Po Po io or ch io or ch -P -P ci ci ci ci ci ci ci ci ci ci ci ci ci ci ci ci at at Po Po De De De De De De De De Ri De N N Agriculture Industry Services Agriculture Industry Services Non-labor Source: Authors’ calculations using IDRF2015. Figure 12. High food inflation has hindered poverty reduction (Breakdown of total inflation, food inflation and median effective inflation, percent) 16 14 12 10 8 6 4 2 0 –2 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 median hh inflation Non-Poor median hh inflation Poor CPI Food CPI Source: World Bank estimates. Projections start in 2024. Part I: The State of the Economy 15 CABO VERDE | ECONOMIC UPDATE - MARCH 2024 Figure 13. Poor and rural households spend the largest share of income on food (Breakdown of consumption in food and non-food, and inflation and GDP deflator) 100 CPI inflation in 2022 was significantly higher than the GDP deflator 10 80 8 69.9 65.3 66.4 72.1 71.1 6 60 4 40 2 20 0 30.1 34.7 33.6 27.9 28.9 –2 0 2017 2018 2016 2019 2021 2023 2024 2022 2025 2026 2020 National Urban Rural Poor Nonpoor Food Nonfood O cial CPI GDP deflator Source: IDRF2015. World Bank estimates. Projections start in 2023. Outlook and risks align with the ECOWAS Common External Tariff (CET) could result in price increases. However, the government Real GDP growth is projected to remain relatively has identified several essential staple goods exempt from stable in 2024, at 4.7 percent (4.2 percent in per capita this policy and is advocating for a phased implementation terms) and remain close to potential over the medium to curb price increases and protect the most vulnerable. term. Growth will be supported by private consump- Additionally, further increases in the Central Bank’s refer- tion, investment in tourism and the blue economy, and ence interest rates planned for 2024, to reduce the interest is expected to average 4.7 percent between 2024 and rate differential with the Eurozone and protect the peg, 2026. As the government restructures the operations of will help to control inflation. Over the medium term, the several important SOEs through public-private partner- strong nominal anchor provided by the peg with the Euro ships (PPPs), direct sale and concession arrangements, and ongoing fiscal consolidation will contain inflation, and implements structural reforms under the Strategic converging to around 2 percent by end-2025. Plan for Sustainable Development (PEDS 2022–2026), further private investment will be mobilized to support The overall fiscal deficit is projected to widen to growth. The strategy aims to achieve greater and more sus- 23.0 percent of GDP in 2024, reflecting the signif- tained growth by increasing economic resilience, boosting icant increase in total expenditure from staff salary productivity, and reducing market fragmentation. The updates, increases in social benefits and acquisition successful implementation of the strategy will enable local of goods and services, and sound execution of public entrepreneurs to benefit from positive spillovers from the investments. Tax revenue collection will remain strong, thriving tourism sector, thereby creating a more diversi- with a review of tax benefits and the continued imple- fied and sustainable economy. mentation of measures to improve tax administration efficiency and broaden the tax base. Continued efforts to Inflation is expected to fall further in 2024, as global mobilize domestic revenue and contain current expenditure inflation continues to subside. Headline inflation is should reduce the fiscal deficit to just above 1 percent projected at 2.7 percent. The revision of import tariffs to of GDP by 2026. Consequently, the primary balance 16 Part I: The State of the Economy BLUE ECONOMY: THE LATENT POTENTIAL OF FISHERIES AND AQUACULTURE IN CABO VERDE is projected to reach a surplus of 1.1 percent of GDP in future, posing significant risks to the sustainability of Cabo 2026. The public debt-to-GDP ratio is expected to improve, Verde’s development model. from 115.3 percent in 2023 to 102.1 percent by 2026, but continued management of fiscal risks related to loan While poverty is projected to decline between 2024 guarantees to SOEs remains critical. and 2026, growth is not expected to be particularly pro-poor. Poverty levels are forecast to remain above While services exports will continue to expand in 14 percent until 2025, with a decrease to 14.9 percent in 2024, the CAD is projected to increase to 6.2 percent 2024 and further decline to 14.2 percent in 2025. How- of GDP, driven by stronger imports vis-à-vis exports ever, the effect of economic growth on poverty alleviation due to continued dynamic economic activity. The CAD is anticipated to continue to be offset by inflation, partic- is expected to decline to 5.7 percent of GDP in 2026, ularly for food items. Food inflation is expected to remain underpinned by the increase in tourism receipts and the high, at 4.3 percent and 3.4 percent in 2024 and 2025 stabilization of import prices for consumption goods. The respectively, above projected overall inflation at 2.7 and stable growth in remittances, reflecting improved con- 2.1 percent in the same years (Figure 12). Analyzing the ditions in the European labor market, will also support combined impact of household-level estimates of nominal the decline in the CAD. Higher public debt amortization per capita growth (based on sectoral income distribution) outflows are expected to increase external financing needs, and inflation (based on the household’s share of food in which are likely to be met primarily by concessional bor- total consumption) allows for projections of the impact rowing and FDI. Robust export growth and rising remit- on real per capita consumption across the income distri- tances, coupled with higher FDI inflows, are expected to bution (Figure 14). Although households in the poorest keep international reserves strong, at around six months deciles are expected to experience growth throughout the of prospective imports over the medium term. entire 2024–2026 period, overall growth is projected to either stagnate across the distribution or be higher among This outlook is subject to substantial downside risks wealthier households. Additionally, households slightly stemming from new commodity price spikes and cli- below the poverty line are anticipated to witness some of matic shocks. An increase in the size or duration of the the lowest growth rates in 2024. terms of trade shock emanating from geopolitical shocks could lead to continued inflationary pressures and the resumption of policy support to ameliorate the impacts, Recommendations which in turn could deteriorate fiscal and debt sustain- ability. Weaker external demand in tourism markets and Cabo Verde could implement a set of policy options limited progress with the SOE reform agenda could to support fiscal revenue mobilization, reduce debt undermine fiscal consolidation and weaken economic vulnerabilities and empower complementary engines growth in the country. In addition, the country remains of growth. This report proposes policy options that can significantly exposed to natural disasters, including those be implemented in the short and medium term to achieve related to climate change. With the highest level of climate these objectives. In addition, the recently published disaster risk in Sub-Saharan Africa and one of the highest Country Private Sector Diagnostic (CPSD)5 offers targeted globally, Cabo Verde is already experiencing the impacts policy recommendations to address key economy-wide of geological and climate-related events, such as the five- constraints in transportation, logistics, energy, and the year long drought, on livelihoods and key growth sectors. business environment to drive private sector growth in These events are expected to worsen in the foreseeable the short to medium term. 5 IFC (International Finance Corporation). 2024. “Creating Markets in Cabo Verde.” Country Private Sector Diagnostic. IFC, Washington. D.C. Part I: The State of the Economy 17 CABO VERDE | ECONOMIC UPDATE - MARCH 2024 Figure 14: The inflation experienced by households differs significantly from the official CPI and GDP Future growth is not expected to be pro-poor 20% 15% 10% 5% 0% –5% –10% –15% –20% –25% 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Poorest Decile 2 Decile 3 Decile 4 Decile 5 Source: Projections prepared by the Poverty and Equity Global Practice based on the IDRF2015. Policy Options Responsibility Timeline Implement additional revenue mobilization reforms to accelerate fiscal consolidation Review and reduce investment-linked tax incentives that may not be delivering MoF Short term the intended economic benefits. Eliminate VAT exemptions on non-essential goods and services, while using addi- MoF Short term tional revenue to strengthen targeted social assistance programs. Leverage technology to streamline tax filing and payment processes, making it MoF Short term more convenient for taxpayers. Implement special taxes on environmentally harmful products. MoF Medium term Expand the tax net to include sectors that are currently under-taxed or not taxed, MoF Medium term such as the informal economy and digital services. Reduce debt vulnerabilities Establish a medium-term debt management strategy to plan and monitor debt MoF Short term levels and risks. Improve public financial management to enhance budget planning, execution, MoF Short term and reporting. 18 Part I: The State of the Economy BLUE ECONOMY: THE LATENT POTENTIAL OF FISHERIES AND AQUACULTURE IN CABO VERDE Policy Options Responsibility Timeline Strengthen debt recording and monitoring systems for better transparency and MoF Short term management of debt data. Enhance creditor coordination to manage debt restructuring processes more MoF Short term effectively when needed. Increase the sustainability, inclusiveness, and diversification of tourism Regulate “complementary lodgings” to enable tourism diversification into more MoF Short term niches and islands.6 Regulate sustainable access to ecologically sensitive areas whilst providing nautical MoF Medium term tourism operators with an enabling and clear licensing and regulatory framework. 6 The emerging complementary accommodation sector, dominated by platforms like Airbnb and Booking, diversifies tourism offerings, attracting independent travelers and digital nomads to lesser-known destinations. However, its unregulated nature raises compliance concerns. Part I: The State of the Economy 19 Part II: Blue Economy: The Latent Potential of Fisheries and Aquaculture in Cabo Verde CABO VERDE | ECONOMIC UPDATE - MARCH 2024 Introduction Figure 15. Cabo Verde’s natural capital is amongst the highest of peers The ocean and its marine resources provide the foun- 3 dation of the Cabo Verdean economy and are a unique US$ (Constant 2018) million engine for development. Beyond tourism, fisheries and 2.5 aquaculture emerge as key contributors to the economy. 2 For instance, fisheries support the livelihoods and food 1.5 security of a large proportion of the population in Cabo Verde, especially among the most vulnerable. They also 1 make other important direct contributions: most goods 0.5 exports are of fish products, and fisheries are the largest 0 non-service sector in the economy. Responsible steward- u us s pe es ia is e oa le at rd ev c i in ci m rit Lu el nu Ve ship of marine and coastal resources is therefore crucial to N ad ín Sa ch au Va . Pr & St n bo y M re Se s & tt preserve the drivers of Cabo Verde’s economic success to Ca G Ki é m & . St To nt date and to encourage sustainable growth and innovation. ce o Sã in .V A “blue economy” approach calls for both sustainability St and integration between various oceanic economic sec- Source: World Bank. 2021. Changing Wealth of Nations. Washington, tors, ocean health, and the people who depend upon D.C.: World Bank. oceanic resources for their livelihoods. As an archipelagic small island developing state (SIDS), This part of the Economic Update outlines how the Cabo Verde is endowed with an economic geography Government of Cabo Verde (GoCV) is pursuing a blue and natural capital that present challenges and oppor- economy approach, including through strategic plan- tunities in equal measure. The islands of Cabo Verde cover ning documents and the implementation of policies a land area of only 4,033 sq km but generate an exten- aimed at promoting blue growth and enhancing the sive exclusive economic zone (EEZ) of 734,265 sq km— integration of ocean-based sectors into the broader a sea-to-land ratio of more than 1:180, one of the highest national development agenda. It also identifies oppor- in the world. This extensive EEZ provides abundant tunities for growth and diversification within the ocean resources: Cabo Verde has the third-highest amount of economy, with particular emphasis on the fisheries and natural capital of peer countries (Figure 15),7 and fisheries aquaculture sectors given their contribution to the economy account for 12 percent of this natural capital – the second and the opportunities they represent. The chapter first iden- highest proportion among SIDS peers. While this illus- tifies and analyzes the environmental, economic, and social trates the significance of ocean resources to the Cabo challenges facing the fisheries sector (and others), including Verdean economy, there are limitations posed by its small economic shocks, environmental degradation, and climate and widely dispersed land area. change vulnerability. It then highlights wide-reaching opportunities, before presenting recommended actions The extensive ocean and coastal zones are the back- for how strengthening the fisheries and aquaculture sec- bone of the country’s economy. Tourism, which draws tors so they can best increase their contributions to social mainly on the country’s attractive beaches, diverse and economic development within the framework of Cabo marine life, and clear waters, is the largest ocean-based Verde’s Ocean economy. sector. In 2022 it accounted for 26 percent of GDP8 and 7 After Vanuatu and Mauritius. Other peer countries considered include Samoa, Seychelles, São Tome and Principe, and St. Vincent and the Grenadines. 8 GDP data from UN Statistics Division (2022) “Official National Accounts Data.” GDP data only considers the direct contribution of the tourism sector; the actual economic contribution is likely understated. 22 Part II: Blue Economy: The Latent Potential of Fisheries and Aquaculture in Cabo Verde BLUE ECONOMY: THE LATENT POTENTIAL OF FISHERIES AND AQUACULTURE IN CABO VERDE approximately 39 percent of total employment.9 In fact, which fisheries depend. The country is exposed to episodes Cabo Verde’s strong GDP growth in the 2000s, which of extended cyclical drought, desertification, and extreme drove its graduation from least developed country status, rainfall events that lead to flash floods, particularly in was fueled to a significant extent by the tourism sector. urban areas. Sea level rise, coastal erosion, and loss of bio- Marine fisheries and associated industries represent the diversity and ecosystems will particularly affect beaches largest non-service sector in the country’s economy. and coastal infrastructure, threatening the sustainability Dependent on the health of marine ecosystems and related of the country’s tourism sector. Changes in surface tempera- fish stocks found in Cabo Verde’s coastal and offshore ture, salinity, acidity, and oxygen levels will likely have waters, the fisheries sector supplies about 60 percent of catastrophic effects on Cabo Verdean fisheries. Improving the country’s goods exports.10 Cabo Verde’s dependence the understanding of the impacts of climate change on the on its blue natural capital for growth also means that a quantity of catch and its composition over time will be substantial proportion of the island’s residents rely on vital for building resilience and adaptation in the sector. ocean resources for their livelihoods, whether through the The World Bank is taking these challenges seriously and is tourism industry, fisheries, or other sectors. currently preparing a Country Climate and Development Report (CCDR) for Cabo Verde in close collaboration The highly dispersed land area, large EEZ, and con- with the GoCV. This core diagnostic integrates climate centrated economy, however, expose Cabo Verde to change with development to help prioritize the most economic shocks and environmental degradation. The effective actions to reduce GHG emissions and boost dispersal of the islands brings its share of challenges, adaptation and resilience, while delivering on broader including limited connectivity and geographic concentra- development goals. tion of infrastructure and employment. It also compli- cates the monitoring, control and surveillance (MCS) The GoCV has recognized the growth opportunities necessary to deter overfishing and illegal, unregulated, and and challenges stemming from its oceanic economic unreported (IUU) fishing in the large EEZ. In addition, sectors and has prioritized the development of its blue while the economy has benefitted from a strong tourism economy in its national strategies. The World Bank sector, its reliance on the sector has made it susceptible defines the blue economy as “the sustainable use of ocean to external shocks such as the COVID-19 crisis, when resources for economic growth, improved livelihoods, travel restrictions had a significant impact on Cabo Verde’s and job creation while preserving the health of ocean eco­nomy. Finally, the concentration of tourism on two ecosystems” (Box 1). Cabo Verde has adopted a similar islands, the often unplanned and ad hoc development of approach in policy design as evidenced in its key strategic coastal areas with inadequate environmental safeguards, documents. In 2015, the country adopted the Charter the lack of solid waste management infrastructure, and of the Blue Economy Policy to promote blue growth in pollution have all exacerbated the degradation of the Cabo Verde, highlighting its commitment to promoting country’s natural capital and threaten the already-limited the sustainable development of its ocean and coastal supply of fresh water.11 resources while minimizing environmental degradation and biodiversity loss. The charter focuses on several As a SIDS, Cabo Verde is among the countries most sub-sectors – including maritime transport, capture fisher- vulnerable to climate change. Particularly at risk are ies, and aquaculture – to eliminate key constraints to Cabo its marine and coastal resources—the backbone of Verde’s growth and build on existing successes. Improving the tourism sector and the valuable ecosystems upon transportation, for example, is expected to help increase 9 Total labor force taken from ILOSTAT. The upper bound of employment is determined by summing direct employment measured in the 2021 General Fisheries Census (GFC), manufacturing employment, and post-harvest employment found in the GFC. 10 UN Statistics Division (2022) “Comtrade.” 11 OECD (2022) Sustainable Ocean Economy Country Diagnostics of Cabo Verde. Part II: Blue Economy: The Latent Potential of Fisheries and Aquaculture in Cabo Verde 23 CABO VERDE | ECONOMIC UPDATE - MARCH 2024 Box 1. The blue economy approach at the World Bank “The Blue Economy approach is defined as the sustainable use of ocean resources for economic growth, improved livelihoods, and job creation while preserving the health of ocean ecosystems. Specifically, the Blue Economy requires that the development of individual oceanic sectors be pursued in an integrated fashion, and with a view to managing their impacts on ocean health. The Blue Economy aims to align economic development opportunities with ocean health to foster low- carbon, resource-efficient growth that creates jobs and reduces poverty. It recognizes the triple bottom-line objectives of financial, social, and environmental sustainability. This challenge is made even greater by the fact that, contrary to land- based activities, oceanic sectors operate mostly in a public goods setting, where user rights and property rights are not clearly defined, which leads to many instances of the Tragedy of the Commons.” World Bank (2021) Riding the Blue Wave: Applying the Blue Economy Approach to World Bank Operations. Washington, D.C.: World Bank inter-island connectivity and reduce market fragmentation. by different users, and ensure the long-term sustain- The fisheries and aquaculture sectors, meanwhile, repre- ability of the resources that support economic activity. sent untapped potential due to underdeveloped domestic The GoCV is developing detailed coastal zoning plans to value chains and low productivity in the domestic fishing guide development in high-demand coastal areas. These fleet. Targeted efforts in these areas will help to connect plans are intended to organize sustainable land use, arbi- domestic fishers with the tourism industry, opening a large trate conflicts between uses in limited areas available for and high-value market, and making these sectors more development, and mitigate the social and environmental sustainable. In 2020, the Charter of the Blue Economy impacts of development. Expanding the ambition of blue Policy added strategic areas such as oceans, climate change, economy planning through MSP will enable integration pollution, maritime spatial planning and enhancement of of socioecological data, the identification of investment coastal areas, and renewable energy. The country’s broader opportunities that align with ecological sustainability, Sustainable Development Strategic Plan - 2022/2026 and a stakeholder-driven approach that considers all the (Plano Estratégico de Desenvolvimento Sustentável/PEDS II) impacts of development and regulation on existing, tradi- and the Cabo Verde Ambição 2030 further integrated this tional users of the ocean and its resources. approach by highlighting Cabo Verde’s Ocean economy as one of the main pillars for the development of a sustain- able economy. The National Strategy for the Sea, which Cabo Verde’s fisheries sector: is currently being prepared, strengthens the importance Challenges and opportunities of developing and safeguarding the country’s blue natural capital, while the updated Nationally Determined Con- Cabo Verdean fisheries are mostly small-scale and tribution (NDC) lays out the GoCV’s aims to increase and artisanal, though there is also a sizable and economi- sustain ocean-based food security. cally significant semi-industrial fleet. The artisanal fleet provides a vital source of livelihoods and food security for Strong planning and statistical capacity are essential pre- Cabo Verdeans, supporting several thousand fishers and conditions for the pursuit of a blue economy approach. many more workers in secondary sectors like marketing and Maritime Spatial Planning (MSP) and coastal zone processing, many of whom are women. The 2021 General management plans are especially important to prevent con- Fisheries Census (GFC) tabulated 1,463 active artisanal flicts between users, prevent unintended overexploitation vessels and 4,062 artisanal fishers. Only 76.8 percent of 24 Part II: Blue Economy: The Latent Potential of Fisheries and Aquaculture in Cabo Verde BLUE ECONOMY: THE LATENT POTENTIAL OF FISHERIES AND AQUACULTURE IN CABO VERDE artisanal vessels are motorized, and the primary fishing Figure 16. Fish and fish products dominate Cabo method is hook-and-handline. Conversely, the domestic Verdean exports semi-industrial fleet, comprising 127 vessels, employs 90 1,022 fishers and lands most of the domestic catch in Cabo 80 Verde. On average, from 2013 to 2023, 73 percent of the 70 annual domestic catch is estimated to have been landed 60 US$ million by the semi-industrial fleet.12 Most semi-industrial vessels 50 are purse-seiners, which require careful management and 40 monitoring to avoid overfishing. However, a sizable por- 30 tion is also engaged in hook-and-line fishing. Every year, 20 these two domestic fleets are complemented by a number 10 of foreign-owned and operated purse-seiners and long- 0 lines that fish in Cabo Verde’s EEZ under formal access 09 10 11 12 13 14 15 16 17 18 19 20 21 22 20 20 20 20 20 20 20 20 20 20 20 20 20 20 agreements.13 In addition, Cabo Verde is located in the Fish exports Total exports midst of productive tuna fishing grounds, so 80 percent of the domestically-landed catch consists of tuna.14 While Source: World Integrated Trade Solution/UN Comtrade. small-scale fishers predominantly land small pelagic and demersal species, the semi-industrial fleet (and foreign fleet) capture small tuna and large pelagic fish, including sector,17 with three large fish processing plants with a total the tuna that supplies local processors. processing capacity of approximately 28,000 tons.18 This said, fish exports have experienced a downward trend in The fisheries sector is of high economic importance. recent years largely due to declines in exports of frozen When informal economic activity and secondary sectors fish, which has been attributed to rising difficulties in such as canning, processing, and commerce are included, maintaining logistics chains for frozen products (though the fisheries sector’s contribution to GDP was estimated exports of canned fish remain stable).19 at 3.4 percent in 2019, making it the largest non-service sector in the economy.15 Exports of fish and fish prod- Employment in the primary and secondary fisheries ucts accounted for the vast majority of the country’s sector provides livelihoods for a large share of Cabo exports—75 percent of total exports in 2022, amounting Verdeans, including women. In addition to contributing to almost US$32 million—most of which is exported to to the country’s food security – in 2017, per capita fish the EU (Figure 16).16 The production of canned and pro- consumption was estimated at 11kg and fish accounted cessed fish also dominates Cabo Verde’s manufacturing for about 12 percent of total animal protein20 – fishing 12 Series of statistical data provided by IMar (2024). 13 Macalister Elliot and Partners (2023) Report Updating the Potential of the Main Exploited Stocks in Relation to Fleet Conversion. 14 UN Food and Agriculture Organization (2022). “FAOSTAT: Capture Fishery and Aquaculture Production Statistics.” 15 National Institute of Statistics of Cabo Verde (2019) “National accounts data.” 16 UN Statistics Division (2022) “Comtrade.” 17 World Bank Group (2018) Republic of Cabo Verde: Adjusting the Development Model to Revive Growth and Strengthen Social Inclusion. World Bank, Washington, DC. Available at: https://doi.org/10.1596/30550. 18 The three large fish processing plants in Cabo Verde are FRESCOMAR, ATUNLO, and SUCLA. 19 International Finance Corporation (forthcoming) Cabo Verde: an archipelago of opportunity. Pathways to foster sustainable private sector led growth. The lower value of exports also correlates with the downward trend in reported catch in the Cabo Verdean EEZ and among foreign vessels, though data is limited for the latter. 20 FAO (2023) Fishery and Aquaculture Country Profiles. Cabo Verde, 2018. Country Profile Fact Sheets. Fisheries and Aquaculture Division [online]. Rome. Updated May 26, 2020. Part II: Blue Economy: The Latent Potential of Fisheries and Aquaculture in Cabo Verde 25 CABO VERDE | ECONOMIC UPDATE - MARCH 2024 provides direct employment for at least 7,000 Cabo increasing market access for domestic and small-scale Verdeans. It represents the primary income for 80 percent fishers will provide further opportunities for this vulner- of fishers, supporting households averaging 4.6 members, able population. according to the 2021 GFC. However, employment statis- tics may underestimate fisheries’ role in employment due Total fish catches have been declining and the country’s to the informal nature of the sector. Independent estimates fish and processed fish product exports are heavily suggest over 1,000 fishers are unaccounted for in official reliant on the EU. In 2015, fisheries’ total production statistics.21 In addition, secondary sectors such as process- stood at approximately 39,393 tons, with tuna accounting ing and marketing account for many more jobs. The 2021 for around 76 percent of the total catch (by volume). GFC recorded about 2,016 fish handlers and sellers, and In 2021, the total catch decreased to only 11,623 tons, an additional 19,900 people employed in the manufac- while both the artisanal and the semi-industrial fleet turing sector.22 Taken together, employment in the primary grew following an increase in fishing licenses,25 suggesting and secondary fisheries sectors accounted for up to a dramatic decline in catch per unit effort (CPUE). The 12 percent of Cabo Verde’s total labor force in 2021.23 combination of increased fishing capacity in the artisanal sector and perceived declining catch suggests overfishing Secondary fisheries sectors are an especially important of demersal species in nearshore waters. However, these source for women. An estimated 3,500 women sell fish, fisheries are particularly difficult to monitor, and lack of with many more working in the fish processing business— data and recent stock assessments makes it hard to confirm where 57 percent of employees are women—and in com- their status. Significant fishing effort among industrial tuna merce. The high proportion of women employed in fish fleets across the Atlantic Ocean could also be affecting the processing and marketing provides an avenue for creating tuna resources in Cabo Verdean waters. Climate change may more inclusivity of growth through productivity improve- be compounding these trends (see below). The combined ments and expansion in the secondary sectors. Finally, effects of overfishing and climate change will put the while comprehensive statistics on the incidence of poverty country’s ecosystems and food security at risk, as recog- and average incomes of fishers are not available, the avail- nized in Cabo Verde’s PEDS II. The West African region able evidence suggests relatively high levels of poverty is projected to be one of the regions most affected by across this demographic group. A case study referenced climate change with regards to the productivity of fish- in the World Bank’s 2018 Strategic Country Diagnostic eries sectors.26 (SCD) found that one-third of fisheries households on Santiago Island are considered extremely poor, and the The volumes of fish being exported consistently 2021 GFC indicates that most fishers have never had surpass the volumes of fish being caught in territo- vocational training or attained education beyond primary rial waters. This suggests that the three fish processing school. Additionally, fishers are overrepresented as a per- plants are also sourcing fish from vessels fishing outside centage of the total population on the smaller and less Cabo Verde’s waters. If they were to solely source the fish wealthy islands.24 Improving fisheries value chains and from the local semi-industrial fleet or the foreign vessels 21 Wabnitz, C and Harper, S (2023) The Republic of Cabo Verde: Gender and Fisheries Country Fact Sheet. 22 International Labor Organization (2021) ILOSTAT country statistics. 23 Estimated total labor force taken from ILOSTAT (2021) based on latest available data. The upper bound of employment is determined by summing direct fisheries employment and post-harvest employment measured in the GFC and manufacturing employment estimated by the ILO. 24 Distribution of fishers taken from General Fisheries Census. Population distribution taken from National Institute of Statistics. 25 The number of artisanal licenses increased from 467 in 2016 to 1082 in 2020, influenced in part by the elimination of the license fee; a policy change made by the government in response to the economic hardship caused by the 2020 pandemic. See Aquino, M.L. (2023) “The limits of the European Union’s fisheries agreements as sustainable development instruments: The case of Cape Verde,” Marine Policy, 148, p. 105455. 26 OECD (2022) Sustainable Ocean Economy Country Diagnostics of Cabo Verde. 26 Part II: Blue Economy: The Latent Potential of Fisheries and Aquaculture in Cabo Verde BLUE ECONOMY: THE LATENT POTENTIAL OF FISHERIES AND AQUACULTURE IN CABO VERDE licensed to fish in the EEZ, they would not be able to point of sale, as well as support for entrepreneurship and operate at capacity. As foreign industrial vessels may not SME development. By developing the quality, reliability, satisfy the EU’s rules of origin requirements, the GoCV and scale of services necessary to act as a dependable has been granted a temporary derogation allowing for fish supplier to large businesses, Cabo Verde can better inte- processed in Cabo Verde to be considered as originating grate the fisheries and tourism value chains. from Cabo Verde, even if caught outside of Cabo Verdean territorial waters. The derogation expired in 2023, though The impacts of climate change will likely be significant negotiations are ongoing for renewal with retroactive for the fisheries sector, but more information is needed. effect. The expiration of the derogation threatens the Climate change impacts on fisheries in Africa will be principal export market for Cabo Verde’s most significant high, even in the more optimistic emissions scenarios.28 export product. The development of the domestically However, potential in fish catches in Cabo Verde and flagged semi-industrial fleet would avoid this issue, as fish other countries in high latitudes is estimated to decrease caught by Cabo Verdean vessels would be considered as less in comparison to other West African countries. originating from Cabo Verde regardless of whether caught Modelling indicates likely decreases in maximum catch in international or territorial waters. potential of up to 36 percent, but the range of likely outcomes is large and sensitive to the choice of model, In addition to unmet demand from the fish processing with some more optimistic scenarios suggesting possible sector, there is strong and unmet demand from the gains of 26 percent in maximum catch potential.29 Further- country’s tourism industry, suggesting opportunities more, the research available to date does not explore for fisheries given the right investments. The local tourism changes in catch composition or the subnational distri- industry imports an estimated 80 percent of the fish and bution of fish stocks; yet these are vital for understanding seafood it consumes, owing in part to the inability of the economic impact of climate change on fisheries in the local producers to consistently supply high-quality fish country. For instance, changes in tuna distribution will products.27 Hospitality providers, along with large domes- have a far greater impact than changes in stocks of lesser tic and international buyers from all industries, require commercial importance, while detailed understanding of consistent and verifiable quality and handling standards. subnational variations in catch are necessary to guide In Cabo Verde, landed fish products are quickly sold in infrastructure investment and planning efforts. Further direct-to-consumer markets that lack refrigerated storage research in this domain is critical for planning processes facilities, leading to spoilage, low quality, and poor com- and improving the resilience of the sector. The Govern- pliance with food safety standards. The absence of cold ment of Cabo Verde has therefore partnered with the Uni- chains and codified procedures for fish handling makes versity of British Columbia to carry out a comprehensive locally caught fish unusable by the tourism operators, who study of climate change impacts on Cabo Verde’s fisheries therefore import frozen fish products to meet their needs. of economic and socio-economic importance. The GoCV is pursuing training programs, digital market access platforms, and micro-infrastructure to improve Inadequate fisheries infrastructure and unreliable inter- handling practices and market access. These efforts need island transport systems need to be addressed. Recep- to be backed up by infrastructure to support cold chains tion facilities, landing sites, and cooling facilities in Cabo and the efficient transfer of goods from landing site to Verde are unevenly distributed across the islands. While 27 West Africa Coastal Areas Management Program (2020) “Cabo Verde: Blue bond note.” 28 World Bank (2019) Climate Change and Marine Fisheries in Africa: Assessing Vulnerability and Strengthening Adaptation Capacity. 29 World Bank (2019). The 8.5 representative concentration pathway (RCP 8.5 pathway) indicates a 36 percent decrease in maximum catch potential (MCP) by 2100 using the multispecies size spectrum ecological model. Other models and timelines indicate changes in MCP ranging from +26 percent to -36 percent. Potential increases in MCP reflect scenarios where extant fish stocks migrate to Cabo Verdean waters. Part II: Blue Economy: The Latent Potential of Fisheries and Aquaculture in Cabo Verde 27 CABO VERDE | ECONOMIC UPDATE - MARCH 2024 reception facilities for semi-industrial fishers are relatively facing Cabo Verdean capture fisheries. The expiry of abundant, opportunities are scarce for small-scale fishers to the EU derogation on rules of origin makes endogenizing land or market their catch. The 2021 GFC identifies only industrial and semi-industrial fishing a key priority for the three ice machines on Santiago, where 35 percent of Cabo fisheries sector. Increasing the capacity of the existing semi- Verdean fishers are based, and none on Fogo, where just industrial fleet – either through productivity improvements under 10 percent of fishers are based (though data quality or through artisanal-to-semi-industrial fleet conversion – may be weak). Anecdotal evidence suggests that additional could help supply local processors with fish whilst also capacity has since been installed on Santiago. Only one meeting rules of origin requirements. Furthermore, pro- landing facility is recorded on Santiago; none are recorded moting the exploitation of potentially underused crus- on Fogo. While the data does not permit an analysis of the tacean and deep-sea demersal species may provide an capacity of reception facilities or the adequacy of available opportunity for increased diversification in catch and refrigeration infrastructure, estimates of high post-capture revenue. Each of these measures must be implemented losses support the conclusion that the infrastructure is with careful oversight and sound management: a sig- insufficient, especially for small-scale fishers. nificant reduction in the artisanal fleet on certain islands will be necessary to expand the semi-industrial fleet to Improvements in fisheries governance and manage- ensure the sustainability of the fisheries. A precondition ment are needed to ensure the long-term sustainability of reducing artisanal fishing capacity is adequate social of the country’s fisheries. Cabo Verde has taken important support for fishers, fish marketers and gleaners who are steps towards the country’s goal of developing its blue at risk of losing their livelihoods. Ensuring that domestic economy by significantly strengthening the fisheries legis­ household demand can continue to be met and support lation in 2020 and introducing a new law to regulate for predominantly female fish sellers is essential. Other aquaculture in 2021. A number of associated decrees have measures include retraining programs and adequate boat also been adopted, for example on fisheries inspection, buyback offers. license fees, and the structure of fisher associations. How- ever, like many other countries, Cabo Verde struggles Additionally, exploitation of new stocks must be with adequate capacity for effective data collection, effi- accompanied by up-to-date status assessments and cient MCS systems, and enforcing legislation. The 2021 MCS measures.31 Currently, fisheries data is not sufficient GFC indicated moderate compliance with regulations to conclusively determine whether an expansion would on vessels and fisher registration and licensing. However, be sustainable, so strengthening GoCV’s statistical and informality in both the artisanal and semi-industrial sectors scientific capacity to close this gap is critical. The GoCV is remains persistent and affects not only the sector’s man- currently tackling these issues on several fronts, including agement, but also the effective provision of public ser- through a comprehensive study and risk assessment to deter- vices, revenue generation, social protection and access to mine the feasibility of establishing a semi-commercial finance.30 Ineffective MCS and high informality have led fishery based on deep-sea demersal resources, strengthening to overfishing, especially in nearshore fisheries, which has fisheries data collection, and revamping and upgrading led to diminished fish stocks and reduced food security the country’s fisheries statistics system. and livelihoods in the long-term, especially for vulnerable, coastal communities. Investing in improved water, sanitation, and hygiene (WASH) practices for the fisheries sector will promote Developing capacity in the existing semi-industrial higher-value and catch sustainability. Establishing greater fleet and tapping into domestic markets for fish and formality in the marketing of fish will lead to better fish products will help manage the risks and challenges pricing and more consistency for fishers while minimizing 30 International Finance Corporation (forthcoming) 31 Macalister Elliott & Partners Ltd (2023) Viabilidade da conversão do esforço entre as frotas de Pesca de pequena escala e Semi-industrial de Cabo Verde. 28 Part II: Blue Economy: The Latent Potential of Fisheries and Aquaculture in Cabo Verde BLUE ECONOMY: THE LATENT POTENTIAL OF FISHERIES AND AQUACULTURE IN CABO VERDE post-harvest losses. Combined with digital traceability, Aquaculture is one of the sectors identified by the these measures can promote increased revenue without GoCV for development as part of the country’s ocean threatening catch sustainability. Pursuing these measures economy. A decree32 was passed in 2021 to regulate the requires buyers and processors to incentivize good practices installation and operation of aquaculture production estab- and reward post-harvest handling practices that have not lishments. Specifically, the legal framework governs Cabo been attractive to date. The GoCV has recently embarked Verde’s aquaculture resources, including licensing, regis- on improving the promotion of local fishery products tration, and control of aquaculture activities, and provides through a study to assess opportunities and develop an guidelines for producing aquatic animals, coordinating origin and sustainability certification/labeling scheme for activity, and promoting the aquaculture sector. Approved relevant fisheries and aquaculture products in Cabo Verde. aquaculture species were published through a regulation33 The aim is to increase visibility and encourage consump- as part of the new legislation and include tuna, amber- tion of local products, especially by the tourist market. jack, snapper, and lobster. The country’s Instituto do Mar (IMAR) is also seeking to establish an applied aquaculture research program to support entrepreneurs in the sector. Aquaculture: where is it now and what can it bring to the Cabo Verde economy? While local environmental conditions may appear favorable and are even considered promising for aqua- If implemented sustainably, aquaculture could help increase global food production, and possibly reduce culture, the industry faces significant infrastructure the pressure from overfishing on coastal and marine constraints. There are currently only two aquaculture ecosystems. When developed sustainably, aquaculture operators in Cabo Verde: (i) an established operator focused can be used to generate economic activity in coastal on land-based shrimp production; and (ii) an early-stage communities and strengthen food security at both global business focused primarily on producing bluefin tuna, one and local levels. However, issues such as improving feed of the highest value fish in the international market, and efficiency, transition to renewable energy sources for fish with a secondary focus on amberjack. Key impediments farms, reduced reliance on air freight and others must all to growth are the paucity of geographically distributed be addressed. cooling facilities and the absence of efficient inter-island transport. Seafood, whether farmed or wild-caught, requires Cabo Verde’s conditions for aquaculture are consid- reliable cold chains and transportation to access high- ered favorable and could potentially help meet local value markets, such as supermarkets in Praia, hotels on demand and even export markets in the longer term. Sal, or importers in Europe. Facilities with sanitation cer- Offshore aquaculture is especially promising across the tificates are especially important for the export market, as islands of Cabo Verde, though additional information products must meet food hygiene regulations. Identified is necessary to quantify the effects of climate change on sites should be evaluated in the context of comprehensive aquaculture potential. Large swathes of favorable areas for marine spatial and coastal zone planning and with the aquaculture development and private sector investment available infrastructure in mind. have been identified around Boavista, Maio, São Vicente, Santo Antão, Sal, and Santiago. Onshore aquaculture also There is also a need for specialized human capital, holds potential, though to a lesser extent, as suitable areas technical information, and research to reduce start-up are much smaller. Additionally, domestic and interna- costs and risks. There is a lack of relevant technical exper- tional markets may provide sufficient demand for farmed tise in the country, as well as limited training opportu- seafood produced with high sanitation standards. nities. Similarly, few suppliers specialize in the essential 32 Decree No 15/2021 of 09 February 2021. 33 (Portaria) Regulation No 01/2022 of 15 July. Part II: Blue Economy: The Latent Potential of Fisheries and Aquaculture in Cabo Verde 29 CABO VERDE | ECONOMIC UPDATE - MARCH 2024 equipment or formulated feeds necessary for scaling-up planning and inform the pursuit of new opportunities in aquaculture farms. IMAR is seeking to establish a dedi- capture fisheries and aquaculture. The GoCV’s planning cated, applied aquaculture research unit to develop and documents and processes should prioritize the data collec- disseminate guidance on the most viable local species, and tion and scientific assessment necessary to facilitate practical to expand upon existing site identification efforts. The planning in the marine space and coastal zones. Compre- GoCV has identified research and scientific support as hensive and accurate planning is especially important to one of the pillars of its forthcoming Strategy for the Sea. adjudicate between conflicting uses and reduce uncertainty. It has recently established a “School of the Sea” (EMAR) intended to build expertise in maritime sectors; this remit Additional information on stock health and the effects could include the training of aquaculture technicians and of climate change is especially important to improve distribution of biosecurity and environmental informa- the efficiency and productivity of capture fisheries tion. Local production of relevant inputs may present an and promote the development of aquaculture. There opportunity for the country’s local industry. is insufficient fisheries data to evaluate the health and maximum sustainable yield of fisheries in Cabo Verde, The potential of the aquaculture sector underscores the and the medium- to long-term effects of climate change need for government action to stimulate local entre- on existing targeted species is uncertain. Collecting and preneurship and attract foreign investment through evaluating this information is essential if Cabo Verde seeks targeted programs offering zoning, grants, technical assis- to promote resilience and sustainable growth in fisheries tance, and improved infrastructure. These measures, coupled and aquaculture. Building the evidence base should also be with the burgeoning interest in private investment, could accompanied by investment in monitoring, control, and spearhead the evolution of aquaculture in Cabo Verde, surveillance both to quantify the extent of illegal, unregu- contributing to a blue economy that benefits local commu- lated, and unreported fishing and to enable enforcement nities and the national economy. of existing plans. Taken together, developing data and statistical capac- Recommendations ity alongside integrated planning will help to foster resilience to climate change. Data and planning provide Cabo Verde’s blue economy development plans are the tools to identify low-carbon development pathways set against a strong institutional backdrop and well that contribute to mitigation efforts and can foster thought-out planning. The country is pursuing forward- enhanced climate resilience through nature-based solu- thinking solutions to diversify the economy and promote tions and hybrid infrastructure. Understanding future environmental and economic resilience. Oceanic sectors, trends in capture fisheries production and the suitability including fisheries and aquaculture, have the potential to of aquaculture sites will also mitigate against the threat of play a central role in Cabo Verde’s future development adverse ecological shocks to livelihoods and growth. story. Addressing the constraints facing these sectors and filling gaps in data and knowledge will be crucial for Appropriate development and application of MSP harnessing the full potential of marine resources to diver- will also be useful in improving the GoCV’s other sify the economy, create jobs, alleviate poverty, and drive targeted sectors, including maritime transportation overall development. and renewable energy. Situating investments in port and transportation infrastructure, low-carbon fuel bunkering, Continuing to pursue and apply systematic planning and offshore renewable energy in the context of existing for oceanic sectors relies on a strong foundation of data economic activities and areas of expected growth is crucial and statistical capacity. Cabo Verdean institutions provide to avoid negative spillover effects that unduly harm existing a solid base upon which to continue to foster data-driven drivers of growth. The tourism industry, in particular, 30 Part II: Blue Economy: The Latent Potential of Fisheries and Aquaculture in Cabo Verde BLUE ECONOMY: THE LATENT POTENTIAL OF FISHERIES AND AQUACULTURE IN CABO VERDE is sensitive to undesirable development and should be given the conditions for sustainable growth in the blue economy particular attention. while building resilience to adverse shocks, whether climactic or economic. The specific policy options aim The policy recommendations presented below aim to to create a clear and convincing picture of the long-term address constraints, mitigate risks, and pursue oppor- prospects for Cabo Verde’s blue natural capital and the tunities in the targeted sectors. The objective is to create resources that underpin its success to date. Estimated Cost Policy Options Responsibility Timeline (US million)34 Strengthen the evidence base for managing capture fisheries Conduct regular stock assessments, prioritizing Ministry of the Sea, Institute Short-term 0.335 stocks of high commercial value but which lack of the Sea (IMAR) information Model the effects of climate change on fish stocks Ministry of the Sea, IMAR Medium-term 0.4 and catch composition at the subnational level Strengthen monitoring, control, and surveillance Ministry of the Sea, General Medium-term 1.0 programs to prevent and measure the extent of Fisheries Inspection (IGP) illegal, unreported, and unregulated fishing. and National Directorate of Fisheries and Aquaculture (DNPA) Improve efficiency and productivity of capture fisheries Convert the existing artisanal fleet to expand of Ministry of the Sea, DNPA Medium-term 0.4 the semi-industrial fleet, conditional on strong and Ministry of Finance scientific evidence for the sustainability of targeted fisheries and social protection efforts to support existing artisanal fishers. Promote best practices in post-harvest handling, Ministry of the Sea, IGP Short-term 0.2 sanitation and hygiene, and marketing to support and DNPA higher-value catch and access to formal markets. Identify deficiencies in the infrastructure to support Ministry of the Sea, Short-term 0.2 good sanitation and food safety practices. ENAPOR and IGP Promote the development of aquaculture Integrate zoning of aquaculture areas in existing Ministry of the Sea, IMAR, Short-term 0.2 and under-development coastal and marine spatial DNPA, Ministry of Finance, planning processes. Ministry of Infrastructure (INGT) (continues) 34 Cost estimates provided in this table are approximations and should be regarded as preliminary, with detailed cost estimates to be established. 35 Estimated cost for an assessment of stock assessment needs and development of an action plan. Part II: Blue Economy: The Latent Potential of Fisheries and Aquaculture in Cabo Verde 31 CABO VERDE | ECONOMIC UPDATE - MARCH 2024 Estimated Cost Policy Options Responsibility Timeline (US million) Develop and disseminate guidance to prospective IMAR Medium-term 0.1 aquaculture entrepreneurs about commercially viable species and good biosafety practices. Develop and make available aquaculture-specific EMAR Medium-term 0.1 education as part of EMAR. Improve the planning and management of coastal and marine areas Continue and expand use of coastal zone plans Ministry of the Sea, Ministry Short-term 0.4 in high-traffic and high-demand areas to mediate of Finance, INGT usage conflicts and manage development. Develop country-wide marine spatial planning to Ministry of the Sea, Ministry Medium-term 1.0 promote an overarching, climate-aware strategy of Finance, INGT for the use of Cabo Verde’s extensive marine space. 32 Part II: Blue Economy: The Latent Potential of Fisheries and Aquaculture in Cabo Verde