Bank of Cape Verde Hikes Reserve Requirements to 12%
The Bank of Cape Verde (BCV) moved to tighten domestic liquidity on Wednesday, announcing an increase in the minimum reserve requirement (MRR) ratio for the first time since the start of the COVID-19 pandemic. The central bank also opted to hold its key interest rates steady despite mounting global economic pressures.
Curbing Excess Liquidity Amid Global Tensions
Following a recommendation from its Monetary Policy Committee, the BCV hiked the reserve requirement from 10% to 12%, effective July 16. This ratio—the portion of deposits that commercial banks must hold in reserve rather than lending out—had remained at 10% since 2020, back when extraordinary measures were introduced to keep the economy afloat during the pandemic.
The central bank stated that the increase is necessary to address a “context of structural excess liquidity” and to bolster the stability of the national financial system. This proactive stance comes as a response to an increasingly volatile external environment, characterized by rising international energy prices and heightened geopolitical tensions in the Middle East, both of which have fueled global inflationary pressures.
Interest Rates Remain On Hold
While the reserve requirements saw a shift, the BCV decided to maintain its current interest rate corridor. The policy rate remains unchanged at 2.5%, the standing lending facility at 2.75%, and the standing deposit facility at 2.25%.
Strong Economic Fundamentals
Despite the cautious adjustments, the central bank’s outlook on Cape Verde’s domestic performance remains positive. The BCV reported that the national economy “continues to evolve favorably.”
While the country’s external accounts have faced some pressure due to a rise in imports, the bank noted that Cape Verde’s net international reserves remain at “comfortable levels.” Current reserves are sufficient to cover approximately nine months of projected imports for 2026, providing a significant buffer against external shocks.
The Monetary Policy Committee is scheduled to reconvene on September 8 to re-evaluate the nation’s economic strategy and the impact of these latest measures.
Image: Pexels – Matheus Natan
