- Cabo Verde's economy remains resilient despite a challenging external environment. Growth remains robust, inflation is contained, the external position is strong, and international reserves remain at historically high levels. Fiscal performance through end-September has also remained strong despite higher energy costs and spending pressures.
- Maintaining fiscal discipline will be critical to preserve hard-won gains and further reduce public debt. While the 2027 budget target of a primary surplus of 0.9 percent of GDP is welcome, ambitious revenue projections, rising current spending, and new subsidies could limit the fiscal space needed to respond to future shocks. Replacing broad-based subsidies with better-targeted support for the most vulnerable would help strengthen the fiscal position.
- Completing outstanding structural reforms will be essential to sustain the gains going forward. Priorities include strengthening state-owned enterprise (SOE) transparency and containing fiscal risks from government guarantees, completing electricity and water sector reforms, and creating greater space for private sector-led growth and resilient investment.
Praia, Cabo Verde: An International Monetary Fund (IMF) team led by Mr. Martin Schindler visited Cabo Verde during October 28 - November 6, 2026, to assess progress under the ECF- and RSF-supported programs. Access is 220 percent of quota (SDR 52.14 million, approximately US$71.64 million) under the ECF and 100 percent of quota (SDR 23.69 million, approximately US$32.55 million) under the RSF.
At the conclusion of the mission, Mr. Schindler issued the following statement:
"The IMF team welcomes the authorities' commitment to the objectives and policies of the existing IMF-supported programs.
"Cabo Verde's economy has remained resilient despite the global energy shock and heightened external uncertainty. Real GDP grew 7.6 percent year-on-year in the first half of 2026, supported by strong domestic demand and tourism. Inflation remains contained averaging 1.5 percent through September. The external position is strong, with the current account recording a surplus of 0.8 percent of GDP in the first half of 2026, supported by strong tourism receipts and remittances, notwithstanding a widening trade deficit. International reserves continued to accumulate, reaching about €1.17 billion at end-October, equivalent to over seven months of prospective imports. The banking system remains well-capitalized, profitable, and liquid.
"Fiscal performance has also remained strong through end-September, supported by robust tax revenues and disciplined expenditure execution. Maintaining fiscal discipline through the remainder of 2026 will be paramount. Expenditure commitments should remain closely aligned with realized revenues and available concessional financing, with corrective measures taken promptly if either falls short.
"The authorities' July decision to restore automatic fuel-price indexation, after its temporary rules-based suspension, was a commendable step that helped contain fiscal risks and preserve a well-functioning pricing mechanism. As the energy shock fades, temporary support measures should be unwound and electricity tariffs gradually realigned with underlying costs. Support for vulnerable households should increasingly rely on well-targeted instruments.
"Progress in reducing fiscal risks from state-owned enterprises (SOEs) remains particularly important. The IMF team welcomes the publication of TACV's 2022 audited financial statements and ongoing work toward a concrete and time-bound plan for completing and publishing outstanding audited accounts of major SOEs. Completing these reforms and ensuring timely and comprehensive financial reporting will strengthen transparency and the authorities' capacity to identify, monitor, and manage contingent liabilities.
"Careful oversight of government guarantees and other forms of support to SOEs remains important. Publicly guaranteed debt remains an important source of fiscal risk, particularly given the concentration of exposures among financially weaker SOEs. Continued rigorous review of both existing and new guarantees, together with a reliance on concessional financing and refraining from contracting or guaranteeing new non-concessional debt, would help contain these risks and support debt sustainability.
"The near-term growth outlook remains favorable, supported by robust tourism, sustained investment, and resilient domestic demand. Risks to the outlook are broadly balanced. On the downside, heightened global uncertainty could weigh on activity, given Cabo Verde's dependence on imported energy and food and tourism receipts. On the upside, stronger-than-expected tourism performance and continued investment in the sector could further support growth. Exposure to climate-related shocks remains a key structural vulnerability.
"Looking to 2027, fiscal policy should consolidate the gains achieved under the program and keep public debt firmly on a downward path. The 2027 budget target of a primary surplus of about CVE 3 billion, or 0.9 percent of GDP is welcome. At the same time, the budget relies on non-tax revenue projections that may be challenging to achieve to finance higher current spending and new broad-based subsidies. This creates fiscal risks and limits the room to respond to future shocks. In this context, a clear commitment by the authorities to withhold expenditure appropriations in the event of revenue shortfalls, so that the primary balance target is met, would provide an important safeguard.
"The composition of the 2027 budget is also important. Realistic non-tax revenue projections and tighter recurrent spending, particularly on goods and services, would create space for growth-enhancing capital investment while preserving the primary balance anchor. Keeping wage bill reforms consistent with a medium-term envelope of around 9 percent of GDP, gradually phasing out temporary energy subsidies, and improving targeting of education, health, and connectivity subsidies would further strengthen the quality and sustainability of public spending.
"Monetary policy should remain firmly anchored in safeguarding the exchange rate peg. The July increase in reserve requirements from 10 to 12 percent was an appropriate response to substantial excess liquidity. Going forward, a data-dependent approach that closely monitors developments in inflation, capital flows, and international reserves remains important. In this context, restoring a positive interest rate differential with the European Central Bank (ECB) policy rate would further support the peg. Continued normalization of reserve requirements, accompanied by effective liquidity management, would help strengthen monetary transmission and financial resilience.
"Steadfast progress on structural reforms will be equally important. Completing outstanding reforms in the electricity and water sectors and establishing transparent cost-recovery frameworks would strengthen the financial sustainability of these sectors, attract private investors, and reduce fiscal risks. More broadly, further improvements in the business environment, broader access to finance, and a more focused role for the state in commercial activities would help foster a more dynamic private sector, diversify the economy, and support job creation. Looking ahead, sustaining strong growth, increasing investment in human capital and climate-resilient infrastructure, and continuing to reduce the public debt burden will require prudent macroeconomic policies, steady reform implementation, and continued close engagement with Cabo Verde's development partners.
"The IMF team met with Secretary of State for Finance Maria José Lopes; Banco de Cabo Verde (BCV) Governor Oscar Santos; BCV Board Members Antonia Lopes, Soeli Santos, and Antonio Semedo; other government and central bank officials; Municipal President Armindo Luz and Secretary of Finance António Dias of Ribeira Grande; development partners; and private sector representatives, including during visits to São Vicente and Santo Antão. The team thanks the authorities and other counterparts for their excellent cooperation and candid, constructive discussions, and the municipality of Ribeira Grande for its warm hospitality. Discussions will continue in the coming weeks to finalize outstanding policy and technical issues."
