In 1984, the drought reduced the harvest by 25% compared to
the previous five years. According to
the current account deficit was $ 70 million and foreign
debt reached $ 98 million. Still, the food distribution
system and state efficiency prevented the country from being
thrown into famine. Nevertheless, problems with malnutrition
continue to exist in the population.
The lack of resources forced Cape Verde to depend on
foreign aid from all sides. As a result, a number of
projects in the "first development plan" collapsed.
In 1986, the "Second Development Plan" was launched,
which focused on the development of the private sector -
especially the informal sector - and in agriculture in the
fight against desertification. The goal was, until 1990, to
reclaim more than 5,000 hectares of land for agriculture and
to introduce a comprehensive system for the administration
and distribution of the country's water reserves. During the
first phase, more than 15,000 dikes have been built to
collect rainwater and 23,101 hectares of forest have been
Despite the miserable climatic conditions, a continued
increase in agricultural productivity, which allows almost
the entire population to be supplied with meat and
vegetables, without having to depend on imports.
The new government initiated a transition to market
economy, privatized insurance companies, fisheries and
banks. It was a demand from the international organizations
on which the country was now largely dependent. Foreign aid
now accounted for 46% of GDP, while another 15% came from
the funds sent home by 700,000 of its foreigners abroad.
The Liberal government faced a 25% unemployment rate and
declared itself willing to restructure the state. In the
first months of 1993, the government declared that half of
the 12,000 civil servants would be fired and prices would
gradually be released.
The 1994 budget included cuts in public spending, but at
the same time, public investment was to increase from $ 80
million in 1993 to 138 in 1994. The main areas of government
investment were transport, telecommunications and rural
In January 1995, Prime Minister Carlos Veiga made
important changes to his government to "facilitate the
country's transition to market economy". One of the most
important changes was the amalgamation of the ministries of
finance, economy, tourism, industry and trade into a unified
Ministry of Economic Coordination. Inflation stood at 6% in
1995 and the country's economy continued to depend heavily
on foreign aid - first and foremost from the EU.