The International Monetary Fund (IMF) Executive Board has concluded the sixth review under the Extended Credit Facility (ECF) arrangement for Cabo Verde, initially approved on June 15, 2022. The board also approved a fifteen-month extension and augmentation of the arrangement, increasing access to SDR 52.14 million with an additional SDR 7.11 million. This completion allows for a disbursement of approximately US$6.18 million.
Cabo Verde's economy is performing well, driven by tourism, strong export performance, and private consumption growth. Economic growth reached 7.3 percent in 2024 and is expected to be 5.2 percent in 2025. Inflation is projected to remain near 2 percent, while the current account may return to a small deficit in 2025.
The financial system remains stable and well-capitalized, with the fiscal balance exceeding program targets due to lower primary expenditures and strong tax revenue growth. The public debt-to-GDP ratio continues to decline.
Performance under the ECF arrangement has been strong with all quantitative performance criteria met by end-December 2024. However, implementation of reform measures under the Resilience and Sustainability Facility (RSF) has faced challenges despite ongoing support.
Cabo Verde’s medium-term economic outlook remains favorable with growth expected to converge to 4.8 percent by 2028 and inflation aligning with euro area levels. The current account is expected to remain in deficit as capital expenditure increases on climate and infrastructure projects.
Risks include global uncertainty and external financing challenges alongside rising spending on climate initiatives which could impact fiscal stability. Delays in state-owned enterprise reforms are also noted as potential risks.
Acting Chair and Deputy Managing Director Bo Li commented: "Economic activity in Cabo Verde in 2024 was strong... Program performance under the ECF was strong... Progress under the RSF arrangement has been weaker than expected... Steady progress on state-owned enterprise (SOE) reforms remains critical..."
The monetary policy framework aims to safeguard the currency peg while maintaining financial sector stability despite non-performing loans requiring attention.
Authorities are encouraged to continue their structural reform agenda focusing on climate resilience and improving business environments through better planning and management resources.