Cape Verde; Selected Issues

This Selected Issues paper examines macroeconomic challenges for a highly tourism-based economy such as Cape Verde. The changing structure of Cape Verde’s balance-of-payments financing calls for a closer look at the volatility of remittances and their role as an absorber of economic shocks. The paper finds that compared with other external inflows, remittances continue to be a reliable source of foreign financing, but they are declining in importance. It also shows that this influence seems to be gradually fading, and remittances are becoming increasingly procyclical.