Cabo Verde

Cabo Verde, located 500 km off Africa's west coast, is a ten-island archipelago with an estimated population of 520,500 residing on nine islands.

Only 10% of its land is arable, and mineral resources are scarce. Since the 1990s, the country has made significant strides, largely due to the rapid growth of tourism, which constitutes 25% of its GDP.

Despite challenges from the COVID-19 pandemic and the Ukraine crisis, the government aims to eradicate extreme poverty by 2026, aligning with the United Nations' 2030 Agenda and the Strategic Plan for Sustainable Development 2022–2026 (PEDS II).

Political Context

Renowned for its democratic stability, Cabo Verde has experienced peaceful transitions between its two main political parties, the African Party for the Independence of Cabo Verde (PAICV) and the Movement for Democracy (MpD), since gaining independence in 1975.

In April 2021, the MpD was re-elected, with Ulisses Correia e Silva continuing as Prime Minister. José Maria Neves, backed by the PAICV, assumed the presidency of the republic on November 9, 2021.

The most recent local elections were held in December 2024, with MpD retaining seven of the 14 municipal councils it held by then, while the PAICV increased its leadership from eight to 15 municipalities. The next legislative and presidential elections are scheduled for 2026.

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Cabo Verde's growth is estimated to have accelerated to about 7.2% in 2024, driven by strengthening tourism activity and a gradual recovery in agricultural activity. Tourist arrivals reached an estimated 1.18 million (+16.5% year-on-year).

Service exports (+16.2% year-on-year) and private consumption (+7.3% year-on-year) remain the primary drivers of growth. Strong service-sector growth, agricultural recovery, and low inflation likely reduced poverty to 14.4% in 2024. Inflation moderated significantly in 2024, with lower energy and food prices bringing average headline inflation down to 1% from 3.7% in 2023. The fiscal deficit widened to 1.1% of GDP in 2024 (0.3% in 2023) driven by higher public investment, spending related to local elections and expanded social programs. Revenue remained stable at 24.7% of GDP, supported by stronger than expected tax revenues. This, along with strong GDP growth, lowered central government debt by 6.0 percentage points to 110.2% of GDP (117% including SOEs’ guaranteed debt). Despite this, fiscal risks persist, including SOE support, rigid expenditures, and high debt-servicing costs.

Growth is projected to hit 5.9% in 2025, stabilizing near 5% in the medium term, supported by improved public sector efficiency and efforts to crowd in private investment, relying on structural reforms aimed at enhancing the business environment.

Increased public investments and continued roll-out of wage-bill reforms will widen the fiscal deficit to 1.5% of GDP in 2025. Despite this, sustained efforts to enhance tax collection, added proceeds from SOE restructuring, and commitment to contain expenditures will reduce the deficit to 0.6% of GDP by 2027.

The outlook faces downside risks, such as commodity price spikes from geopolitical tensions, inflationary pressures, weaker tourism demand, and slow progress on SOE reforms. Climate-related shocks remain a concern, given the country's high vulnerability.

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Education and Social Protection

The multi-sectoral Human Capital Project – HCP aims to support youth and women, and particularly those from poor and vulnerable households, by improving access to basic services and labor market-relevant training.

Health

Cabo Verde faces major health challenges and is working to improve health infrastructure and emergency response through the $29 million Health Security Program in Western and Central Africa. Key efforts include strengthening health security governance, advancing the One Health Agenda, fighting antimicrobial resistance, enhancing surveillance and lab capacity, promoting digital health, and improving emergency health management and services.

Tourism

The flagship $75 million Resilient Tourism and Blue Economy Development Project, supports diversified private sector development within and beyond tourism, including the blue economy. It adopts a spatial approach and builds on the Government of Cabo Verde’s Tourism Operational Plan spanning (2022–2026) as well as its Blue Economy National Investment Plan.

Transport and Urban

The Improving Connectivity and Urban Infrastructure project aims to enhance access to climate-resilient transport and urban infrastructure with a total financing of $40 million. It includes the rehabilitation of roads on several islands: upgrading of urban centers, waterfronts, and key urban areas as well as technical assistance.

Energy

The Renewable Energy and Improved Utility Performance Project (REIUP) aims to increase renewable energy generation, support the energy transition with public and private investments in renewable energy and battery storage, and improve the performance of the electricity sector as well lower service costs by reducing generation costs and non-technical losses.

Digital

The Digital Cabo Verde Project (DCVP) aims to strengthen digital competitiveness and improve digital public services by enhancing the legal framework, connectivity, digital skills, and entrepreneurship.

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The Country Partnership Framework (CPF) for FY20-25 approved in September 2019, prioritizes: (i) Accelerating human capital for inclusive, services-led growth; and (ii) Strengthening the environment for a more diversified economy.

The World Bank’s active portfolio in Cabo Verde includes ten projects totaling $322.2 million, with $278.5 million for national projects and $43.7 million for regional initiatives.

The portfolio comprises multi-sectoral programs that support the country’s vision to become a diversified services and logistics hub powered by green energy. These programs support important infrastructure development in the energy, digital and transport sectors as well as transformative reforms to boost private investment, mitigate the impacts of external shocks and challenges associated with climate change.

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More recently, IFC has significantly increased its engagement in Cabo Verde, achieving record levels of investment $110 million in fiscal year 2024 (including mobilization). In July 2023, IFC committed a sustainability-linked loan of EUR 20 million and an interest rate swap of $6 million to Cabo Verde Airports SA to support the first phase of the rehabilitation and expansion of the country's airport infrastructure. Additionally, in December 2023, IFC committed $37.7 million (including mobilization) to finance the Oasis Atlantico Group. IFC has also undertaken an advisory project in the tourism sector to enhance the framework for strategic tourism development and investment on Boa Vista Island. In March 2024, partnering with five Cabo Verdean banks, IFC delivered training to 69 micro, small, and medium-sized enterprises. Finally, IFC and the World Bank jointly developed the Cabo Verde Private Sector Diagnostic Report (CPDS), which was published in March 2024.

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