In 1984, the drought reduced the harvest by 25% compared to the previous five years. According to Countryaah, the capital of Cape Verde is Praia. 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 planted.
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 development.
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.