Cape Verde’s classification rose from “stable” to “positive” in the latest review carried out by Fitch Ratings, an independent credit market evaluation agency.

Cape Verde was give a B+ rating in the category of long-term foreign and local currency issuer default ratings, as compared to its previous evaluation of BB-.

In the capital and exchange rate risk category, Cape Verde obtained a BB-.

Fitch Ratings, which carried out its evaluation based on provisional accounts data from the third trimester of 2007, says that Cape Verde’s growth has been “rapid” and that its public debt was gone down, while “the peg with the euro is more secure.” “If this tendency is maintained, Cape Verde could move on to the next level of classification,” says the agency.

According to Fitch, Cape Verde continues to “depend on foreign aid in approximately a fifth of state revenues,” which it considers “unusual” for a country with “the income levels it presents.”

According to Finance Ministry data, the GDP saw real growth of 7% in 2007, maintaining the average seen over the last five years, and expects this “strong performance” to continue. Direct foreign investment, dominated by investments in the tourist real-estate construction sector, represented 9% to 10% of GDP in 2006 and 2007.

“Political stability and good governance assured foreign investors, prevailing over the shortcomings in the business atmosphere highlighted by the comparative study carried out by the World Bank. Cape Verde enjoys good relations with the United States and with the European Union, and maintains close dialogue with the IMF within the framework of the Policy Support Instrument accord,” affirms the Ministry of Finances and Public Administration.

In comparison to countries with Fitch ratings classifications similar to Cape Verde, “the government’s general debt,” admits the Finance Ministry, “remains high, at an estimated 74% of the GDP in 2007.” This, however, is justified by the crushing debt in concessional terms “owed to multilateral and bilateral creditors, reducing the real net value of the debt stock by approximately two-thirds of its face value.” The Finance Ministry also stresses that “Cape Verde has not received any debt pardoning.”

“Donors acknowledge Cape Verde’s economic vulnerabilities as typical of a small country that depends on the importation of food and fuel and that is overburdened by the high price of infrastructures,” concludes the Finance Ministry.

Source: A Semana