Cabo Verde

Cabo Verde, located approximately 500 km off Africa's west coast, is a ten-island archipelago (nine of which are inhabited) with an estimated population of 527,326. Since the 1990s, the country has made significant socio-economic progress, largely driven by the rapid growth of tourism sector, which employs more than two thirds of the country’s population and contributes approximately 25% of GDP and up to 44% when considering indirect effects on the economy.

Despite challenges from the COVID-19 pandemic and global price shocks following the war in Ukraine, poverty rates in Cabo Verde have fallen significantly between 2015 and 2023, from 35.5% in 2015 to 24.8% in 2023 (according to official estimates from INE). The recovery in growth since 2021— particularly in the services sector — and remittances have contributed to the continued reduction in poverty.

Political Context

Renowned for its democratic stability, Cabo Verde has maintained a strong record of peaceful political transitions since independence in 1975. The country’s political landscape has been shaped by two major parties, PAICV and the Movement for Democracy (MpD), which have alternated in power through free elections.

In May 2026, PAICV secured 37 of 72 seats in the legislative elections. Francisco Carvalho became Prime Minister on June 19, 2026, succeeding Ulisses Correia e Silva and marking a change in national government.

At the local level, PAICV strengthened its position in the December 2024 municipal elections, winning 15 of the country's 22 municipalities, while the MpD won seven. The next major electoral milestone is the presidential election scheduled for November 15, 2026, with a second round scheduled for November 29 if required.

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Cabo Verde’s strong growth momentum from 2025 carried into 2026, with real GDP expanding by 6.4% year-on-year in the first quarter, driven by tourism and investment. Tourist arrivals reached almost 380,000 in the first quarter of 2026, up 16.8% from a year earlier, building on the record 1.25 million arrivals registered in 2025.

Growth is projected at 5.3% in 2026, before stabilizing at around 5.1% over the medium term. The expansion in services is expected to support household incomes. Poverty at the upper-middle-income poverty line is projected to decline from 56.2% in 2025 to 54.2% in 2026, leaving around 9,000 fewer Cabo Verdeans in poverty, while extreme poverty is projected at 9.9%.

Inflationary pressures eased in 2026, with year-on-year inflation falling to 0.4 % in July from 2.7% a year earlier, reflecting caps on fuel prices introduced to mitigate the impact of higher global energy prices. Average inflation is projected at 2.4% in 2026 before easing to 2.0% by 2028.

The overall fiscal balance recorded a surplus of 1.1% of GDP in 2025, supported by the final receipts from the airport concession fee and robust revenue performance.

However, the fiscal balance is projected to shift to a deficit of 1.5% of GDP in 2026, as sustained revenue performance is offset by election-related expenditure, continued project implementation, wage-bill reforms, expanded education and health commitments, and compensation to fuel and electricity distributors. Fiscal consolidation is expected to resume thereafter, narrowing the deficit to 0.7% of GDP by 2028. Public debt is projected to continue declining, from 99.9% of GDP in 2025 to 93.9% in 2026 and about 86% by 2028. The current account is expected to move to a deficit of 1.1% of GDP in 2026, while international reserves remain above seven months of imports.

Risks to the outlook are tilted to the downside. A sharper slowdown in European partner economies, heightened global uncertainty, commodity-price volatility, or disruptions to international trade could weaken tourism, growth, and the external position. Domestically, contingent liabilities from state-owned enterprises remain material, while a more expansionary-than-projected 2027 budget could slow fiscal consolidation and raise sustainability risks.

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The multi-sectoral Human Capital Project (HCP) aims to support youth and women from vulnerable households by improving access to basic services and labor-market training. With a financing of $29.75 million, the project supports initiatives combining social protection, education and skills development.

The Health Security Program (HeSP) aims at enhancing public health emergency preparedness and expanding access to quality healthcare. With a total financing of $28,74 million, the program supports initiatives to strengthen health security governance, advance the One Health Agenda, combat antimicrobial resistance, boost surveillance and laboratory capacity, promote digital health, and optimize emergency management and service delivery.

The Resilient Tourism and Blue Economy Development Project (RTBED) aims to build a more diversified and resilient private sector, both within and beyond tourism. With total financing of $75 million, the project invests in tourism and blue economy infrastructure and local value chains in target destinations.

The Improving Connectivity and Urban Infrastructure Project aims to enhance access to climate-resilient transport and urban infrastructure. With a total financing of $80 million, the project supports road rehabilitation across several islands, the upgrading of urban centers and waterfronts, and the provision of technical assistance.

The Renewable Energy and Improved Utility Performance Project aims to increase renewable energy generation and support the energy transition. With a total financing of $31.40 million, the project supports public and private investments in renewables, battery storage, rooftop solar, energy efficiency in 32 health facilities, last-mile electrification, and sector reforms.

The Digital Cabo Verde Project aims to strengthen digital competitiveness and improve digital public services by enhancing the legal framework, connectivity, digital skills, and entrepreneurship. With a total financing of $40 million, the project supports digital transformation including internet connectivity, digital public infrastructure, and digital services.

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A new Country Partnership Framework (CPF) for FY27-31 is planned, with discussion with new government expected to commence between October and December 2026. The Streamline SCD has just been completed. The World Bank’s active portfolio in Cabo Verde amounts to $330.30 million, comprising IDA credit ($250.70m) IDA SML ($0.80m), IBRD ($3.50m), SUW ($23.30m), CRW ($30.00m), and Trust Fund co-financing ($22.00m). It includes nine projects: five IPF national projects, two IPF regional projects, one PforR and one DPF.

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IFC has significantly increased its engagement in Cabo Verde, achieving record levels of investment of approximately $120 million in fiscal year 2026 (including mobilization). The IFC program in Cabo Verde focuses on key infrastructure and tourism development, In December 2026, IFC committed a sustainability-linked loan of EUR 120 million to Cabo Verde Airports SA to support the second phase of the rehabilitation and expansion of the country's airport infrastructure. In 2026, IFC also delivered a financial management training program for SMEs in partnership with Pro-Empresa, and a management training program with Caixa Económica.

MIGA has no exposure in the country but actively continues to explore ways to mobilize investments in strategic sectors by providing political risk insurance and other risk mitigation instruments.

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