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​​The fixed exchange rate regime adopted by Cabo Verde in 1998, establishing a fixed parity with the Euro, aims essentially to ensure convertibility of the Cabo Verde Escudo and create conditions for price stability, thus protecting the value of the domestic currency, and serve as a credible, nominal anchor for monetary policy.​

By adopting the pegged exchange rate system with the Euro, Cabo Verde, as a small open economy, has deepened economic ties with Portugal and with Europe as a whole. It has also ensured favorable conditions for the implementation of structural reforms, with the aim of adjusting and transforming the national economy.

The use of the exchange rate regime and respective nominal anchor has proven to be appropriate for the country's economic development. Thus, BCV has strived to maintain conditions for sustainability of the pegged exchange rate system and the financial system, along with a balanced budget policy, after a slightly “turbulent” early period which characterized the first phase of the Foreign Exchange Agreement (1998 -2000).

Adopting such an exchange rate regime presupposes a theoretical loss of monetary sovereignty, insofar as the economic policy and, particularly, the monetary and fiscal policies, are subordinate to the objective of maintaining exchange rate stability. That is, to the protection of the currency peg.