IMF says Cabo Verde stays on track under lending programs as fiscal risks remain in focus

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IMF: Cabo Verde lending update

Highlights

Cabo Verde's real GDP grew 7.6% year on year in the first half of 2026, with inflation at 1.5% and international reserves totaling 1.17 billion euros at end-October.
The IMF notes strong fiscal performance through September but warns that ambitious non-tax revenue forecasts, higher spending, and new subsidies in the 2027 budget may constrain fiscal flexibility.
The IMF highlights the need for continued SOE reform, timely audited accounts, and stricter oversight of government guarantees due to fiscal risks posed by SOE debt.

Program review highlights growth and budget pressures

As reported by the International Monetary Fund, an IMF staff mission visiting Cabo Verde from October 28 to November 6 says the economy remains resilient despite global energy shocks and external uncertainty, while discussions continue on outstanding policy and technical issues under the Extended Credit Facility and Resilience and Sustainability Facility programs.

The mission, led by Martin Schindler, says real GDP grows 7.6% year on year in the first half of 2026, supported by domestic demand and tourism. Inflation averages 1.5% through September, the current account posts a surplus of 0.8% of GDP in the first half, and international reserves reach about 1.17 billion euros at end-October, equal to more than seven months of prospective imports.

The IMF says fiscal performance through end-September remains strong on robust tax revenue and disciplined spending execution, but it warns that maintaining fiscal discipline through the rest of 2026 is critical. It says the 2027 budget target for a primary surplus of about CVE 3 billion, or 0.9% of GDP, is welcome, though ambitious non-tax revenue assumptions, higher current spending and new broad-based subsidies could narrow room to absorb future shocks.

SOE transparency and subsidy reform remain key

The fund says Cabo Verde should continue unwinding temporary support measures as the energy shock fades, while shifting assistance toward better-targeted support for vulnerable households. It also points to the authorities' July move to restore automatic fuel-price indexation as a step that helps contain fiscal risks and preserve the pricing mechanism.

State-owned enterprise reform remains a central issue in the review. The IMF welcomes publication of TACV's 2022 audited financial statements and says a concrete, time-bound plan to complete and publish outstanding audited accounts of major SOEs would improve transparency and strengthen the authorities' ability to monitor contingent liabilities.

The mission also says oversight of government guarantees remains important because publicly guaranteed debt continues to pose fiscal risks, especially where weaker SOEs are concentrated. Beyond near-term budget management, the IMF says reforms in electricity and water, a stronger business environment, broader access to finance and a narrower state role in commercial activity would help support private sector-led growth, investment and job creation.

Sovereign borrowing risks in a higher-rate environment were the focus of our earlier coverage, as persistent geopolitical tensions and elevated fiscal spending can squeeze governments’ fiscal headroom. We noted that emerging and frontier markets are particularly exposed because debt-service costs often rise faster than revenues when energy and food price shocks keep inflation and funding costs elevated.

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