The International Monetary Fund (IMF) Executive Board has completed its fifth review of Cabo Verde's performance under the Extended Credit Facility (ECF) arrangement and its second review under the Resilience and Sustainability Facility (RSF) arrangement. The completion of these reviews allows Cabo Verde to draw approximately US$ 5.87 million from the ECF and US$ 3.43 million from the RSF.
During the ECF review, the IMF approved modifications to Cabo Verde's performance criteria for September and December 2024. The board also supported delayed implementation of three reform measures under the RSF arrangement.
Cabo Verde's economy continues to grow, driven by a rebound in tourism, strong export performance, and increased private consumption. Real GDP growth is projected at 6 percent for 2024, with low inflation and a manageable current account deficit. The country's public debt-to-GDP ratio is on a downward trend due to high growth rates and an improved primary balance.
Despite missing one quantitative performance criterion related to gross international reserves (GIR), Cabo Verde met all other targets for June 2024 under the ECF program. Corrective actions have been taken by Banco de Cabo Verde, including policy rate increases totaling 75 basis points in late 2024.
Looking ahead, Cabo Verde's economic outlook remains positive, with growth expected to converge to around 4.8 percent by 2029. Inflation is forecasted at 2 percent over the medium term, aligning with euro area levels. The current account deficit is expected to stabilize at about 2.5 percent.
However, risks remain due to potential external shocks affecting tourism demand and climate change impacts on infrastructure and tourism sectors. State-owned enterprise reforms are crucial for financial stability, while maintaining concessional financing is important due to high debt levels.
Acting Chair and Deputy Managing Director Bo Li commented: "Economic activity in Cabo Verde was strong in 2024, and the near-term outlook is favorable... Program performance under the extended credit facility arrangement was generally strong."
Li emphasized that fiscal policies should focus on domestic revenue mobilization while protecting social spending and enhancing public investment execution: "Steady progress on the reform of state-owned enterprises remains critical for limiting fiscal risks."
In terms of monetary policy, Li advised that "the Central Bank of Cabo Verde should continue to tighten rates" to protect external buffers while noting that "the financial sector remains stable."
Finally, Li urged continued implementation of structural reforms under the RSF arrangement: "This includes...reform measures...to help catalyze broader financial and technical support for building climate resilience."