CAPE VERDE

The current Constitution of Cape Verde was adopted in 1980 and revised in 1992, 1995, 1999 and 2010. The third revision of the Constitution (Law 1/99 of 23 November 1999) recognises the unitary nature of the state and the autonomy of local government, as well as a pluralistic democracy with interdependence between the different levels of power. It organises a political system close to a parliamentary regime. The president of the Republic, elected by direct universal suffrage for a five-year term, is not the head of government. This function is performed by a prime minister, leader of the parliamentary majority.

Legislative power is exercised by a unicameral parliament, called the National Assembly, comprised of 72 deputies from 13 constituencies. The National Assembly is elected for a five-year term. The last legislative and presidential elections were held on 18 April and 18 October 2021 respectively.

The legal regime of decentralisation is governed by Law 134/IV/95, which defines the administrative autonomy (article 2) and financial autonomy (article 3) of local authorities. In 2010, the government approved the Decentralisation Framework Law 69/VII/2010.

The municipalities are under the authority of the Ministry of State Reform, Public Administration and Local Government. They are grouped in the National Association of Cape Verde Municipalities (ANMCV or Associação Nacional dos Municípios de Cabo Verde). The last municipal elections were held on 25 October 2020, electing mayors and councillors for the municipal councils and mayors and assembly members for the municipal assemblies.

Since the 1990s the country has experienced major reforms in policies, security forces and the economy, with impacts at the municipal level. In 2019, the country ranked 2^nd out of 54 African countries in the Mo Ibrahim Index of African Governance (73.1); 2^nd in the Security and Rule of Law Index (76.2); 6^th in the Human Development Index (67.0) and 2^nd in the Bases for Economic Opportunity Index (72.8).

As part of the Strategic Plan for Sustainable Development 2017-2021 (PEDS or Plano Estratégico para o Desenvolvimento Sustentável), the Programme for the Improvement of Private Sector Competitiveness and Local Economy Development, supported by the African Development Bank, calls for a reduction in municipal dependency ratios on State transfers and recommends the development of municipal strategic plans. The legislative corpus on decentralisation should also be reviewed. The revision of the Municipal Financing Law of 2005, as well as the Law on the Statute of Municipalities and the Framework Law on Decentralisation, is foreseen. In order to introduce a new level (regions) between the central government and the municipalities, a draft Law on Regionalisation was submitted to the National Assembly and approved in general terms in 2018, but has not yet been approved in specific terms.

TERRITORIAL ORGANISATION
Municipal Level [1]	INTERMEDIATE LEVEL	REGIONAL LEVEL	TOTAL NUMBER OF SNGs (2021)
municipalities (municípios/concelhos)
Average municipal size: 25 272 inh.
22			22

[1] Name and number of sub-municipal entities:
32 parishes (freguesias)

OVERALL DESCRIPTION; The territorial organisation of the State is inspired by that of Portugal, taking into account the specificities of an archipelagic country. The country has a single tier of sub-national government, consisting of municipalities, parishes (freguesias) and settlements (povoados) or neighbourhoods.

MUNICIPAL LEVEL: The municipalities were created after the adoption of the Constitution of the Republic in 1992. Since 2005, Cape Verde is divided into 22 municipalities and 32 parishes (freguesias).

The municipalities are spread over nine inhabited islands (of the country's 10 islands). The island of Santiago, the most populated, has nine municipalities, while five islands have only one municipality (São Vicente, Maio, Boa Vista, Sal and Brava), another has two municipalities (São Nicolau) and two islands (Santo Antão and Fogo) have three municipalities.

In the future, a broad consensus of the government with the other political parties, the institutions of civil society and the associations in favour of regionalisation is expected, in order to create supra-municipal authorities, that is, to turn each island into an administrative region, with the exception of the island of Santiago where two regions will be constituted (Santiago North and Santiago South).

The council (conselho) is the administrative district in which the powers of the State are organised at the level of the devolved services of the ministries, but also local power at the level of local authorities (municipios). This electoral district is also the reference framework for legislative elections.

Through Law 134/IV/95 on the Statute of Municipalities, the State transferred certain prerogatives and powers to municipalities, in particular in the following areas: sanitation, planning, rural development, health, housing, land, transport, education, social promotion, culture, sports, tourism, environment, internal trade, civil protection, employment and vocational training, police, and municipal investment. The transfer of competencies to municipalities has not always been accompanied by the transfer of resources (financial, material and human) necessary for the exercise of the competencies transferred.

A new Statute of Municipalities is foreseen since 2018 and aims to update the organisation and functioning of municipalities and their associations, as well as the competencies framework. In PEDS I (2017-2021), the strategic objective is the decentralisation (and not the delegation) of key functions. In this context, municipalities will be responsible for the planning and implementation of the Municipal Strategic Plans for Sustainable Development (PEMDS or Planos Estratégicos Municipais de Desenvolvimento Sustentável), which will be integrated into the general framework foreseen in PEDS II (2022-2026) under elaboration. By the end of 2021, all 22 municipalities had already drawn up their PEMDS with the support of UNDP, of which 20 are approved by their respective municipal assemblies.

Main responsibility sectors and sub-sectors
SECTORS AND SUB-SECTORS	Municipal level
1. General public services (administration)	Administrative services (marriage/birth certificates, declarations, registrations, etc.); Public buildings and equipment.
2. Public order and safety	Construction and management of the civil protection service; Management of bathing beaches [shared]; Municipal police [shared]; Urban signage.
3. Economic affairs / transports	Fairs and markets for local products; Municipal roads; Public parks; Urban transport; Local tourism; Encouraging the installation and operation of agricultural, craft or industrial production units.
4. Environment protection	Protection and preservation of nature and of the landscape and municipal urban heritage [shared]; Urban parks and green spaces; Waste management; Street cleaning.
5. Housing and community amenities	Construction of social housing; Toponymy; Drinking water supply [shared]; Street lighting; Urban planning; Housing policy.
6. Health	Construction of basic health units; Health management at local level; Preventive health [shared]
7. Culture & Recreation	Construction of sports venues; Promotion and encouragement of sports; Libraries; Local museums; Protection and conservation of historical, cultural, natural and artistic heritage of municipal interest.
8. Education	Construction and management of infrastructure for pre-primary and primary education [shared]; Organisation of school transport.
9. Social Welfare	Social protection of children and young people; Family support services; Support for vulnerable groups. [shared]

Scope of fiscal data: Municipalities

State General Account 2020

Availability of fiscal data: Medium

Quality/reliability of fiscal data: Medium

GENERAL INTRODUCTION: Law 79/VI/2005 of 5 September 2005 on the Financial Regime of Local Authorities (known as the Local Finance Law) defines the rules and the way each municipality must manage its revenues, can incur debts and receive transfers from the central government.

Despite significant changes in the expenditure and revenue structure since the 1990s, the self-financing capacity of municipalities remains limited. Municipalities are struggling to expand their tax base and remain significantly dependent on central government transfers.

In 2020, the national government announced a proposal for a new Municipal Financing Law, to be presented to the National Assembly, which should improve the revenue generation framework, clarify the distribution of public resources between the State and municipalities and refine the distribution criteria of the Municipal Financing Fund (FFM or Fundo de Financiamento Municipal), the main national tool for financing decentralisation. In addition, other funds such as the Tourism Fund (FT or Fundo do Turismo) and the Environment Fund (FA or Fundo do Ambiente) are distributed to municipalities, whose criteria are set out in resolutions 107/2017 and 108/2017 of 25 September. The Requalification, Rehabilitation and Accessibility Programme (PRRA or Programa de Requalificação, Reabilitação e Acessibilidades) has also provided municipalities with dedicated resources, according to resolution 65/2018. To improve the collection of revenues related to property, a new law on the Property Tax (IUP or Imposto Único sobre o Património) is under preparation.

Subnational government expenditure by economic classification
2020	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total expenditure	343	5.4%	14.6%	100.0%
Inc. current expenditure	202	3.2%	9.6%	58.8%
Compensation of employees	129	2.0%	11.2%	37.7%
Intermediate consumption	29	0.5%	6.9%	8.6%
Social expenditure	-	-	-	-
Subsidies and current transfers	3	0.0%	1.1%	0.8%
Financial charges	10	0.2%	5.4%	2.9%
Others	30	0.5%	40.1%	8.8%
Incl. capital expenditure	141	2.2%	55.3%	41.2%
Capital transfers	-	-	-	-
Direct investment (or GFCF)	141	2.2%	61.1%	41.2%

EXPENDITURE: In 2020, 58.8% of the municipalities' expenditure is current expenditure. Personnel costs represent about 38% of total expenditure and more than 60% of current expenditure (an increase of 10.4 percentage points compared to 2018); it is the largest expenditure item. Six municipalities represent 64.4% of total operating expenses: the capital Praia (23.5%), Sal (11.3%), São Vicente (11.2%), Santa Catarina (7.1%), Porto Novo (6.0%) and Santa Cruz (5.3%).

The total current expenditure of municipalities accounts for 9.6% of the total current expenditure at the national level and represents 3.2% of the GDP.

DIRECT INVESTMENT: Water and sanitation, housing, urban upgrading and infrastructure are the areas that make up the greatest share in capital investment, supported by municipal self-financing, transfers from the central government and via bank loans. These are areas in which municipalities have always allocated greater investment and which are aligned with the SDGs, namely Goals 3, 6, 11 and 17. They represent more than half of national capital expenditure (61.1%) and 2.2% of GDP.

The Municipal Strategic Plans for Sustainable Development, which have been underway since 2019, cover five areas of investment: Governance and Decentralization, Local Economic Development, Environment and Risk, Social Development and Gender Equality. Of these areas some investment programmes stand out: Modernisation in public service; Civil society participation; Modernisation of agriculture, livestock and fisheries; Sustainable tourism; Employment and Entrepreneurship; Water and Sanitation; Urban Upgrading; Housing; Health, Education and Sports; Women's empowerment and Equality for all.

Decree Law 63/2015 (updating DL 46/2005) refers to public-private partnerships (PPPs) as a State Business Sector Monitoring Unit (UASE or Unidade de Acompanhamento do Setor Empresarial do Estado) within the Ministry of Finance, which manages these partnerships. At national level there are examples of long-term PPPs with the companies: Águas do Porto Novo (in 2008), Cabeólica (in 2010) and Águas e Energia de Boa Vista (in 2010). At the municipal level, cases are rare but have existed, for example in the environment and sanitation sector until recently - this is the case with the company SALIMPA in the municipality of Sal.

ⓘ No detailed data available for this country

Subnational government revenue by category
2020	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total revenue	345	5.5%	20.1%	100.0%
Tax revenue	47	0.7%	3.2%	13.6%
Grants and subsidies	199	3.2%	-	57.8%
Tariffs and fees	-	-	-	-
Income from assets	48	0.8%	-	13.8%
Other revenues	51	0.8%	-	14.8%

OVERALL DESCRIPTION: Law 79/VI/2005 of 5 September, known as the Local Finance Law, governs the financing of municipalities and is currently being updated. The municipalities revenues come from taxes, transfers and other revenues, in terms of current revenues, and also include non-financial and financial assets, in terms of capital revenues. In relation to current revenues, these have a relationship with staff expenses, that is, according to paragraph 3 of the article of that law, personnel expenses must not exceed 50% of current revenues.

The total revenue of municipalities represents about 6% of GDP. This is a percentage that remains low, but has nevertheless increased slightly since the beginning of the decade (it was 3.6% in 2011 and 4.7% in 2016). 70.8% of the municipal total revenue is generated by six municipalities (out of 22 in the country), in the following order of importance: the capital Praia (26.4%), Sal (12.9%), São Vicente (10.9%), Santa Catarina (8%), Porto Novo (6.6%) and Santa Cruz (6%).

With regard to State transfers, in the framework of the PRRA Program (Resolution 65/2018 updated by Resolution 61/2019), Programme Contracts are established with municipalities for the execution of specific projects. The signing of the contracts allows the transfer of a first tranche leaving the remainder to be transferred following the provision of a technical and financial report. Since 2018, about Esc 1.83 billion, representing 1.1% of GDP has been transferred to municipalities through the PRRA. The same procedure is adopted in the transfers of the Tourism and Environment Funds.

TAX REVENUE: Taxes represent 13.6% of total subnational revenues and continue to be the largest current revenue raised in the municipalities of Praia (the country's capital), Sal (the most touristic island of the country) and São Vicente (the most cultural island) representing 69% of total taxes. There are two categories of taxes collected by the municipalities: (i) the property tax (IUP or Imposto Único sobre o Património) and the motor vehicles circulation tax (ICVA or Imposto de Circulação de Veículos Automóveis); and (ii) the income tax (IUR or Imposto Único sobre os Rendimentos) and the stamp tax (IS or Imposto Selo). Taxes in category (i) are not shared with the central government, that is, they are 100% municipal. Taxes in category (ii) are not owned by municipalities, i.e., municipalities only serve as intermediaries to receive the taxes and remit them to the central government.

Within the taxes, from category (i), IUP is the one that generates the most revenue in all municipalities. In 2016, IUP accounted for 95% of total taxes. In order to improve revenue collection related to property, a new law on IUP is under preparation.

Although the amount of the taxes has decreased in the first year of the COVID-19 pandemic (-11.9% compared to 2019), local taxpayers demonstrated a sense of citizenship in an effort to comply with their tax obligation, even in an atypical year when their incomes, particularly for those who work in the private sector, were reduced due to layoffs, as well as those who did not receive any income to comply with their obligation, mainly regarding the payment of the IUP.

GRANTS AND SUBSIDIES: With approximately 58% of total subnational revenues, grants and subsidies represent a significant share of the resources of municipalities. This revenue category has been fluctuating over the last ten years, but in general, municipalities are still very dependent on the central government, often due to the failure of most of them to collect all taxes as provided by law. It is estimated that this dependency reaches 60%. In 2020, the percentage of grants and subsidies is lower than in the two previous years (63.5% in 2019 and 59.9% in 2018) due to cautious approach in the context of the situation and the outbreak of the COVID-19 pandemic. No data is available on the breakdown of grants between current and capital grants.

Transfers to municipalities are mainly allocated through the Municipal Financing Fund (FFM or Fundo de Financiamento Municipal). The amount of the FFM allocated to municipalities is 10% of the value of taxes collected by the State in the year before last to the year to which the budget refers, according to Article 10 of the Local Finance Law. The FFM provides more than 90% of central government subsidies to municipalities. The FFM is composed of two funds, the Common Municipal Fund (FMC or Fundo Municipal Comum), representing 75% of the total fund and the Municipal Solidarity Fund (FSM or Fundo de Solidariedade Municipal), representing the remaining 25%. The distribution formula for the FMC is as follows: 20% of the funds are distributed equally among the municipalities, 50% are based on population, 15% on the percentage of children and 15% on the area of the municipality. Since 2016 this type of transfer has been increasing, demonstrating the growth in State revenues, stemming from the economic growth before the pandemic. The FFM allocated to municipalities is used autonomously by the municipalities themselves in current expenditure, without requiring justifications to the central government. About 53.2% of the FFM goes to 6 of the 22 municipalities: the capital Praia (15%), Santa Catarina (11%), São Vicente (9%) and Santa Cruz (7%), Porto Novo (5.7%) and São Filipe (5.5%). The total FFM amounts transferred to municipalities in 2020 were around 2.3% of GDP.

Municipalities may benefit from other subsidies, namely under 'programme contracts' to finance infrastructure, and may also receive contributions from international public institutions.

Also, since 2016, the central government has established a special partnership with municipalities in compliance with the principles of complementarity and subsidiarity which has materialised, in terms of transfer of financial resources, in the allocation of 50% of the Tourism Fund and 60% of the Environment Fund. This partnership also includes the PRRA Programme which also provided the municipalities with earmarked resources and whose distribution is made according to Resolution nº65/2018 of 10 July.

In 2020, the country received significant international transfers for Public Investment Projects (PIPs) benefiting municipalities, from global donors such as: The Republic of China, Luxemburg, UNDP, United Nations, Global Environment Fund, WHO, Portugal and the European Union; amounting to Esc 3.4 billion, representing 21.9% of the total GDP.

OTHER REVENUE: Data relating to tariffs and fees are not evidenced in the State General Account, however they are present in detail in the unpublished Municipal Management Accounts. This type of revenue falls under the competence of the municipalities: they have the authority to propose the regulations and rates of municipal tariffs and fees, which have to be approved by the municipal assembly and are updated every so often.

Revenue from assets represent about 14% of total municipal revenues in 2020. Revenue from assets is a significant part of the revenues of most municipalities. It includes revenues from land, housing, buildings and other rents and income from property. This type of revenue is regulated by the municipalities, i.e., it is under the financial autonomy of local governments. Revenue from assets rose from Esc 1 042 million in 2018 to Esc 1 232 million in 2019, and increased to Esc 1 241 million in 2020, representing 0.8% of GDP.

Subnational government fiscal rules and debt
2020	Dollars PPP / inh.	% GDP	% general government debt	% SNG debt	% SNG financial debt
Total outstanding debt	28	0.4%	0.3%	100.0%	-
Financial debt	28	0.4%	0.3%	-	100.0%
Currency and deposits	-	-	-	-	-
Bonds / debt securities	-	-	-	-	-
Loans	28	0.4%	0.3%	-	-
Insurance pensions	-	-	-	-	-
Other accounts payable	-	-	-	-	-

FISCAL RULES: The Local Finance Law (79/VI/2005) allows local governments to borrow on national financial markets to finance local investments. Debt in international financial markets requires government approval. As per Article 8 (10) (a) of the law, overall municipal debt service expenditures, which are the sum of the amortization of outstanding principal and interest payments, must not exceed 15% of current revenues. The law establishes rules for the execution and monitoring of municipal budgets. In addition, budgets are subject to the budget classification defined by Decree-Law 37/2011 and the rules governing municipal public accounting. So far, there is no maximum municipal debt limit in relation to the country's debt.

DEBT: In 2020, municipalities (17 of the 22 existing in the country) borrowed Esc 723 million (USD 15.5 million PPP), a variation of -12.6% with respect to 2019. The amount of loans represents 9.3% of total municipal revenues, a rise of 4.3 percentage points over a four-year period. The value of debt corresponds to 0.4% of GDP and 0.3% of national debt. The municipalities that contracted the most debt were the municipalities of Praia (the country's capital) and Sal (the country's most touristic island) representing 58.2% of total debt (+18.2 percentage points over 2019).

TERRITORIAL MANAGEMENT OF THE CRISIS: A National Contingency Plan (PNC or Plano Nacional de Contingência) was developed in Cape Verde so that crisis management was guided by a multisectoral and multidisciplinary approach, and whose activities were developed at the central level and at the level of the Health Regions and Health Delegations. The PNC also served as a basis for each municipality, as well as different institutions, to elaborate their own contingency plans.

A Rapid Intervention Technical Team (ETNIR or Equipa Técnica de Intervenção Rápida) was created at the national level, which was responsible for mobilising the country's health structures, acting on prevention, coordinating information between different health levels, and integrating different public and private sectors/institutions. Health surveillance and triage was instituted in municipalities with international ports and airports; an ambulance was made available for each island to ensure the transport of suspected or ill cases; regional and central hospitals were to ensure the availability of a space for isolation and local health offices were requested to assist in the training and provision of personal protective equipment (PPE) for technicians involved in the prevention and response to suspected cases. Periodic simulation exercises were conducted at the level of Health Regions and municipalities, to test and improve standard operating procedures, the management of suspected cases, the collection and sending of samples to laboratories and the correct use of PPE.

Under the responsibility of the National Institute of Public Health (INSP or Instituto Nacional de Saúde Pública) in liaison with the National Directorate of Public Health (DNS or Direção Nacional de Saúde Pública), a Risk Communication Plan was also carried out in order to help protect public health during the early response to public health emergencies. To mitigate the risks of transmission, the Epidemiological Surveillance (EV) was also created. The involvement of the community consisted in the notification of suspected cases through telephone and electronic contacts made available by the DNS. Through a national network of laboratories, the samples were diagnosed in coordination with the INSP Virology Laboratory.

EMERGENCY MEASURES TO COPE WITH THE CRISIS AT THE DIFFERENT LEVELS OF GOVERNMENT: The central government adopted the following social measures: payment of an Emergency Social Inclusion Income to families in extreme poverty and food assistance to extremely poor households with children in the education system or families at food risk. With regard to the population's Food and Nutrition Security, it guaranteed the stability of stocks and prices of basic foodstuffs through Resolution 80/2020. Debt forgiveness was also given to families in classes 1 and 2 of the Unified Social Cadastre.

The central government approved Decree-Laws 38/2020, 45/2020 and 65/2020 to protect the credits of households, businesses, municipalities, private social solidarity institutions, non-profit associations and other social economy entities. It provided support to companies to ensure liquidity and access to finance and to maintain jobs with the approval of Laws 83/IX/2020, 97/IX/2020 and 103/IX/2020. Through Law 88/IX/2020, it granted incentives for the production of products needed to respond to the pandemic, as well as the importation of goods, equipment and materials with exemption from duties and VAT.

The municipalities have also sought to prioritise the protection of lives, the health of people, the defence of employability and the satisfaction of the basic needs of the most vulnerable. To support this, the central government provided the municipalities in the fight against COVID-19 with a total of Esc 108.3 million (~USD PPP 2.4 million).

IMPACTS OF THE CRISIS ON SUBNATIONAL GOVERNMENT FINANCE: The budget execution of the municipalities was clearly affected by the state of emergency at the end of March 2020 due to the pandemic of COVID-19 and by the electoral process to appoint the new municipal political bodies. COVID-19 weakened the country's economy, undermined health security, labour security, food security and increased the vulnerability of the most disadvantaged people or those dependent on the informal economy. As a result, municipalities faced constraints in revenue mobilisation and collection, in current expenditure (particularly compulsory charges for some municipalities), and in capital expenditure, namely that of the Municipal Investment Programmes (MIP).

In the first year of the pandemic (2020) revenues increased to 5.5% of GDP (from 5.2% in 2019), current expenditure decreased from 5.5% in 2019 to 5.4% of GDP and investment expenditure decreased from 1.9% in 2019 to 0.6% of GDP, although the amount of transfers increased as a share of GDP from 2.9% to 3.2%.

The municipality of Sal, a favourite destination for tourists visiting Cape Verde for the sun and beach, was the most penalised by the crisis. For example, in 2019, there were 0.82 million tourists in the country of which 45.4% (0.37 million) were in Sal, a number that fell to 0.1 million in 2020, which corresponds to a 77.7% decline.

ECONOMIC AND SOCIAL STIMULUS PLANS: The central government has been working on a National Plan for Response, Recovery and Promotion of the Economy for the period July 2020-January 2022. The plan aims to respond to the crisis and provide guidance for post-crisis recovery public measures. The COVID-19 Socio-Economic Assessment in Cape Verde proposes to take advantage of new opportunities to build a more sustainable and inclusive future. A medium-term recovery agenda is suggested which highlights: (1) carrying out reforms to stimulate new investments, improve the business environment and diversify the economy, in particular in the tourism sector; (2) reducing the vulnerability of the economy to external shocks, through a focus on sustainable growth, namely in strengthening the Health, Education, Civil Protection, Employment, Environment, Governance and Human Rights system; (3) investing in resilience by strengthening food and livestock production and adopting universal and sustainable systems regarding health, and (4) positioning the country as a regional digital hub.