Cabo Verde Secures IMF Backing After Successful Review of Economic Programs

An International Monetary Fund (IMF) mission led by Mr. Martin Schindler concluded its visit to Cabo Verde on May 13, 2025, after nine days of in-depth discussions with the country's authorities on the status and future direction of its economic reform programs. The talks centered on the sixth review of the Extended Credit Facility (ECF), the third review of the Resilience and Sustainability Facility (RSF), and the potential extension of both arrangements.

Following the mission, Mr. Schindler announced that staff-level agreements had been reached with Cabo Verdean officials on all major policy commitments under both the ECF and RSF programs. These agreements pave the way for disbursements totaling nearly US$ 16.75 million, subject to IMF Executive Board approval.

Financial Overview: Augmented Support from IMF

Under the existing ECF arrangement, Cabo Verde has access to funds totaling 190 percent of its quota — SDR 45.03 million (approximately US$ 63.3 million). With the proposed augmentation of 30 percent (SDR 7.11 million), the total funding under the ECF will rise to SDR 52.14 million. The RSF arrangement currently provides access equal to 100 percent of quota (SDR 23.69 million or US$ 31.69 million).

Upon approval, the sixth ECF review would unlock a disbursement of SDR 4.51 million (around US$ 6.09 million), while the third RSF review could result in the release of up to SDR 7.896 million (roughly US$ 10.66 million), contingent upon reform milestones.

Economic Growth and Stability: Strong Momentum in 2024

Cabo Verde’s economy exhibited remarkable resilience and growth in 2024, with GDP expanding by 7.3 percent. The economic expansion was driven largely by the continued recovery and expansion of tourism, robust export performance, and steady private consumption.

The inflation rate stood at a subdued 1.0 percent, while the country registered a current account surplus, an indicator of strong external sector performance. Fiscal discipline also paid off, as the government exceeded its 2024 budgetary targets, thanks to higher-than-expected tax revenues and restrained primary expenditures.

The public debt-to-GDP ratio is on a downward trajectory, further reinforcing confidence in the country’s macroeconomic framework.

Reform Achievements and Future Outlook

All structural benchmarks and quantitative performance criteria set for end-December 2024 under the IMF programs were successfully met. Implementation of RSF reform measures is progressing, albeit at a slower pace than anticipated in some areas.

Looking ahead, the IMF forecasts Cabo Verde’s GDP to grow by 5.2 percent in 2025. Inflation is expected to rise slightly to around 2 percent, in line with euro area trends. Meanwhile, the current account is projected to return to a modest deficit of 1.3 percent of GDP in 2025, before stabilizing at approximately -3.5 percent in the medium term.

The 2025 fiscal path remains robust, with the government targeting a higher primary balance than previously estimated. Ongoing tax reforms are expected to bolster revenue mobilization efforts.

Financial Sector and Monetary Policy Alignment

The IMF commended the Banco de Cabo Verde (BCV) for its recent decision to raise the deposit rate by 30 basis points, bringing it to 2.25 percent. This move fully closes the interest rate gap with the European Central Bank (ECB), a key step in preserving the country’s exchange rate peg and maintaining adequate reserve buffers.

End-March 2025 data indicate that the financial system remains sound — it is liquid, profitable, and well capitalized.

Risks and Resilience: External and Climate-Related Vulnerabilities

Despite the positive outlook, the IMF noted several risks that could impact Cabo Verde’s economic trajectory. The country remains vulnerable to external shocks — including fluctuations in energy and food prices, global trade uncertainty, and potential downturns in the tourism sector.

Additionally, climate-related threats such as rising sea levels, extreme weather patterns, and infrastructure degradation continue to pose long-term risks to the island nation’s stability and development. Delays in state-owned enterprise (SOE) reforms and rising public debt could also hinder fiscal sustainability.

Nevertheless, potential upside risks include stronger-than-expected tourism performance and investor confidence leading into the legislative and presidential elections scheduled for 2026.

IMF Commends Cabo Verde’s Commitment

Mr. Schindler concluded his remarks by expressing gratitude to the Cabo Verdean authorities and stakeholders for their transparency, cooperation, and commitment to advancing the country's economic stability and development.

With continued dedication to reforms and prudent fiscal and monetary management, Cabo Verde is poised to deepen its partnership with the IMF and strengthen its resilience against future shocks.

Tags: Cabo Verde, IMF, ECF, RSF, economic reform, tourism, fiscal policy, SDR, monetary policy, inflation, public debt, sustainability, climate risk