The Cabo Verde government remains committed to completing the privatisation of Cabo Verde Airlines (VR, Sal Amilcar Cabral Int'l) by selling its remaining 39% stake in the airline through the dispersion of shares on the stock exchange.

This is according to a news release by the International Monetary Fund (IMF), following its third review of Cabo Verde under the IMF’s Policy Coordination Instrument (PCI) technical assistance programme.

This would see the government off-load the burden of bankrolling the loss-making airline, which has cost Cabo Verde EUR20.6 million (USD24.4 million) through five state-guaranteed loans granted to the airline since November 2020.

It also comes as legislative and presidential elections are scheduled for April and October 2021, respectively. A new five-year economic strategy is also to be prepared later this year based on a recently completed long-term development plan, termed Cabo Verde Ambition 2030, that will be presented for parliament’s endorsement this year.

The government currently retains 39% of the airline after it sold 51% to Loftleidir Cabo Verde, a 70/30 joint venture between Icelandair (FI, Reykjavik Keflavik) subsidiary Loftleidir Icelandic (Reykjavik Keflavik) and other Icelandic investors, in 2019. The remaining 10% is owned by the airline’s employees and Cabo Verde expatriates.

According to the IMF, the Cabo Verde government remains committed to structural reforms committed to in 2019 of its State-Owned Enterprises (SOEs), which the COVID-19 health crisis had delayed.

In this connection, it said, it had reprogrammed the privatisation plan to complete most of the following operations, as conditions permitted:

  • The sale of the remaining state’s shares (39%) in Cabo Verde Airlines. The strategy remained focused on the sale of these shares on the stock exchange;
  • Privatisation of handling agent Cabo Verde Handling;
  • Granting of a concession for airport management.

Other SOEs targeted for privatisation were electricity provider Electra, Caixa Económica de Cabo Verde bank, pharmaceutical companies Inpharma, and Emprofac, as well as the licensing of port services, ENAPOR, through a concession.

According to the IMF, the Cabo Verdean economy is in recession due to the economic impact of the pandemic that has shut down the tourism and transport sectors and significantly affected the rest of the economy. Economic activity is estimated to have contracted by 14% in 2020.

The country's COVID-19 response plan in 2020 received financial support from Cabo Verde’s development partners, including through an IMF rapid credit facility totalling USD32.3 million.

However, the IMF said the country’s economic outlook remained uncertain and dependent upon the duration of the pandemic, the global economic recovery, and the authorities’ ability to support the expected economic recovery through the appropriate policies and reforms, “notably to restructure state-owned enterprises and to facilitate access to finance particularly for small and medium-sized enterprises, and policies to support macroeconomic stability”, the IMF noted.