Historical Sketch

The Venetian navigator Luigi da Cadamosto discovered the uninhabited Cape Verde islands in 1456. A few years later, Portugal set claim and began the colonization of several islands. In 1587, they were combined with mainland territories on the Gulf of Guinea into the Portuguese Guinea colony. In 1879 the island and mainland territories were separated administratively, and in 1926 became a distinct colony of its own. In 1951, the Portuguese colonies were transformed into overseas provinces. About the same time, the war of liberation began, which again saw some cooperation between the insular and mainland territories. After the Portuguese Revolution of 1974, Guinea attained independence in the same year, and Cape Verde, where no armed struggle has taken place, one year later.

Monetary History Overview

Portuguese settlers and foreign trades introduced a varieties of coin into the Cape Verde Islands. The monetary unification of 1853 established the same vales for Portuguese coins as in the mainland. The foreign gold and silver coins remained in circulation at fixed rates until they were demonetized end 1886. The Portuguese National Overseas Bank began operations in 1865 and introduced paper money into the colony, after 1897 the notes were specifically marked for Cape Verde. The renewed charter of the Oversees Bank of 1901 gave its banknotes full legal tender status. The Cape Verdean Milreis was nominally identical to the Portuguese, however the convertibility of the colonial banknotes was limited. The Portuguese currency reform of 1911 was implemented in the colonies with a delay. The Cape Verdean Escudo of 1914 was on par with the metropolitan currency, the convertibility of the colonial banknotes remained limited. The remodelling of the Portuguese colonial empire of 1951 triggered a unification of the oversees territories' currencies two years later. For Cape Verde, the currency unit did not change, just new banknotes and coins were issued in 1959. Cape Verdean independence in 1975 terminated the role of the National Overseas Bank as issuer of the national currency. The central bank began operations in July 1976, and within a year the colonial banknotes and coins were exchanged. In March of the same year, the Cape Verdean Escudo severed the link with the Portugal currency, which went through a phase of devaluation at the time. Then followed a decade of depreciation during which the Escudo lost two thirds of its value against the US Dollar but still appreciated against the Portuguese currency. After more than a decade of relative stability of the exchange rate, Cape Verde and Portugal concluded a monetary agreement in 1998 which re-established the link between the two currencies. The agreement was confirmed by the European Union so that since 1999 the Cape Verdean Escudo is pegged to the Euro.

Cape Verde joined the International Monetary Fund (IMF) on 20.11.1978.

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