Document of The World Bank Group Public Disclosure Authorized FOR OFFICIAL USE ONLY Report No. 127164-CV INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND INTERNATIONAL FINANCE CORPORATION AND MULTILATERAL INVESTMENT GUARANTEE AGENCY COUNTRY PARTNERSHIP FRAMEWORK Public Disclosure Authorized FOR THE REPUBLIC OF CABO VERDE FOR THE PERIOD FY20-25 September 30, 2019 Public Disclosure Authorized Country Management Unit AFCF1 - Africa Region The International Finance Corporation The Multilateral Investment Guarantee Agency Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank Group authorization. The date of the last Country Partnership Strategy was November 19, 20141. CURRENCY EQUIVALENTS Exchange Rate Effective as of September 30, 2019 Currency Unit: Cabo Verdean Escudo (CVE) CVE 101.380 = US$1.00 GOVERNMENT FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AAA Analytic and Advisory Assistance AECID Spanish Agency for International Cooperation and Development AfDB African Development Bank AFRVP Vice President, Africa Region (World Bank) APL Adaptable Program Loan ASA Advisory Services and Analytics BCV Banco de Cabo Verde (Central Bank) BSG Budget Support Group CAS Country Assistance Strategy CAT-DDO Catastrophe Deferred Drawdown Option CCT Conditional Cash Transfer CE Citizen Engagement CEM Country Economic Memorandum CPF Country Partnership Framework CPIA Country Policy and Institutional Assessment CPPR Country Portfolio Performance Review CPS Country Partnership Strategy CPSPR Country Partnership Strategy – Progress Report CVE Cabo Verdean Escudo DFID Department for International Development (United Kingdom) DPO Development Policy Operations DSA Debt Sustainability Analysis EC European Commission ECOWAS Economic Community of West African States EU European Union FDI Foreign Direct Investment FSAP Financial Sector Assessment Program FY Fiscal Year 11 A CPS progress report and a PLR were not prepared. More details are provided in paragraph 133. GDP Gross Domestic Product GEF Global Environment Facility GFDRR Global Facility for Disaster Reduction and Recovery GNI Gross National Income GPRSP Growth and Poverty Reduction Strategy Paper HIV/AIDS Human Immunodeficiency Virus/Acquired Immunodeficiency Syndrome IBRD International Bank for Reconstruction and Development ICR Implementation Completion Report ICT Information and Communications Technology IDA International Development Agency IDF Institutional Development Fund IDRF Inquérito às Despensas e Receitas Familiares (Family Expenditure and Income Survey) IFC International Finance Corporation IFI International Financial Institution IMF International Monetary Fund INDC Intended Nationally Determined Contribution INE Instituto National de Estatística (National Statistics Institute) INFRASAP Infrastructure Sector Assessment Program IPP Independent Power Project ISR Implementation Status and Results Report JICA Japan International Cooperation Agency M&E Monitoring and Evaluation MCA Millennium Challenge Account MCC Millennium Challenge Corporation MDG Millennium Development Goal MFD Maximizing Finance for Development MIC Middle Income Country MIGA Multilateral Investment Guarantee Agency MpD Movimento para a Democracia (Movement for Democracy) MSMEs Micro, Small and Medium Enterprises MTEF Medium-Term Expenditure Framework NPL Non-Performing Loan ODA Official Development Assistance PAICV Partido Africano da Independência de Cabo Verde (African Party for the Independence of Cabo Verde) PBMC Performance-Based Management Contract PEDS Plano Estratégico de Desenvolvimento Sustentável (Cabo Verde’s Strategic Plan for Sustainable Development) PEMFAR Public Expenditure Management and Financial Accountability Review PER Public Expenditure Review PFM Public Finance Management PIM Public Investment Management PLR Performance and Learning Review PPP Public-Private Partnership PREM Poverty Reduction and Economic Management Department (World Bank) PRG Partial Risk Guarantee PRSC Poverty Reduction Support Credit PSI Policy Support Instrument (IMF) SCD Systematic Country Diagnostic SIDS Small Island Developing State SIL Sector Investment Loan SIM Sistema de Informação Municipal (Municipal Information System) SMEs Small and Medium Enterprises SOE State-Owned Enterprise SSA Sub-Saharan African TA Technical Assistance TACV Transportes Aéreos de Cabo Verde (Cabo Verde Airlines) TVET Technical and Vocational Education and Training UN United Nations USD United States Dollar VAT Value-Added Tax IDA IFC MIGA Vice President: Hafez M. H. Ghanem Sergio Pimenta Keiko Honda Country Director: Louise J. Cord/ Nathan Belete Aliou Maiga Merli Baroudi Task Team Eric R. Lancelot/Fatou Fall Faheen Allibhoy/Luciana Luisa Teixeira Felino Leaders/Manager: Harrington FY20-25 COUNTRY PARTNERSHIP FRAMEWORK FOR THE REPUBLIC OF CABO VERDE TABLE OF CONTENTS EXECUTIVE SUMMARY .......................................................................................................................... 1 COUNTRY CONTEXT .............................................................................................................................. 3 A. Recent Economic Developments ..................................................................................... 4 B. Poverty Trends and Poverty Profile ................................................................................. 9 DEVELOPMENT CHALLENGES ............................................................................................................. 12 WORLD BANK GROUP PARTNERSHIP STRATEGY ................................................................................ 14 A. The Government Program ..............................................................................................14 B. Proposed World Bank Partnership Framework ...............................................................16 Lessons Learned from Previous WBG Engagement ..........................................................16 Selectivity...........................................................................................................................17 Objectives Supported by the World Bank Group Program ..................................................19 Implementing the FY20-FY25 Country Partnership Framework ......................................................... 26 RISKS AND MITIGATION ...................................................................................................................... 33 Annex 1. CPF Results Matrix ....................................................................................................................... 36 Annex 2. Completion and Learning Review of the FY15-17 Country Partnership Strategy ........................ 41 CLR Annex 3: Planned Versus Actual ASA Deliveries .................................................................................. 65 Annex 4. Selected Indicators of Bank Portfolio Performance and Management ....................................... 68 Annex 6. Statement of IFC’s Held and Disbursed ....................................................................................... 70 Annex 7. Partnerships and Donors ............................................................................................................. 71 List of Tables Table 1: Select Economic Indicators ................................................................................................ 9 Table 2: Existing Portfolio and Proposed Pipeline for FY20-FY25 (US$ million) ....................................28 Table 3: Systematic Operational Risk-Rating Tool (SORT) .......................................................34 Table 4: Ratings of CPS Pillars and Outcomes .........................................................................46 List of Boxes Box 1. Government of Cabo Verde’s Proposed Education Reforms .........................................22 Box 2: Setting the stage for further results in SOE Reform ........................................................47 List of Figures Figure 1. Debt Sustainability Analysis: Public and Publicly Guaranteed External Debt and Public Debt Indicators (2018-2038) .................................................................................................................................. 8 Figure 2. SCD Findings – Priority Constraints to Poverty Reduction and Inclusive Growth ........................ 12 Figure 3. Cabo Verde’s Strategic Plan for Sustainable Development 2017-2021 ....................................... 15 Figure 4. CPF Focus Areas—Where Government Priorities, Constraints and WBG Competitive Advantage Overlap ........................................................................................................................................................ 18 Figure 5. CPF Objectives—Alignment with Government and SCD Priorities .............................................. 19 Figure 6. Overview of CPF Key Objectives .................................................................................................. 20 Figure 7. Evolution of the Portfolio under Proposed Pipeline FY20-FY25 .................................................. 29 EXECUTIVE SUMMARY 1. Propelled by almost 20 years of sustained growth, Cabo Verde achieved low middle-income country (MIC) status in 2007, one of the first African countries to do so. The economy grew by about seven percent, on average, between