IMF Approves $9.3M for Cape Verde; Growth Forecast Hits 6%
The International Monetary Fund (IMF) and the government of Cape Verde have successfully concluded reviews of two ongoing economic programs, unlocking $9.32 million (€8.86 million) in new financing for the archipelago. The announcement was made during a press conference in Praia on Tuesday following a mission led by the IMF’s Justin Tyson.
Funding Breakdown and Performance
The approved funds are divided between two key initiatives. The completion of the fifth review of the Extended Credit Facility (ECF) will release approximately $5.88 million (€5.59 million), while the second review of the Resilience and Sustainability Facility (RSF) will provide an additional $3.44 million (€3.27 million).
According to IMF officials, Cape Verde met nearly all performance criteria. The sole exception involved gross international reserve targets, which the Bank of Cape Verde (BCV) addressed by raising interest rates by 25 basis points earlier this month. This move aimed to align the country with the Eurozone and prevent capital flight after reserves dipped from 6.2 months of import cover at the end of 2023 to 5.7 months in June.
“All indicative targets and structural benchmarks through September 2024 were met,” the IMF noted in its mission statement.
Upgraded Economic Outlook
On the back of a powerful tourism recovery, strong exports, and rising private consumption, the IMF significantly upgraded its growth forecast for the nation. The fund now expects Cape Verde’s economy to grow by 6% this year—up from its previous estimate of 4.7%—and projects 5% growth for 2025.
Inflation is expected to stay below 2% for the remainder of 2024, gradually aligning with Eurozone levels. Medium-term growth is projected to stabilize at a “potential rate” of approximately 4.8% through 2029.
Risks and State-Owned Enterprise Reform
Despite the positive trajectory, the IMF warned that Cape Verde remains “extremely vulnerable to external shocks.” A primary concern is the fiscal risk posed by the State-Owned Enterprise (SOE) sector. While some state companies are high-performing, others remain dependent on government support.
Justin Tyson emphasized that structural reforms are essential to make these companies “commercially viable” and reduce their burden on public debt. Deputy Prime Minister Olavo Correia welcomed the assessment, viewing the IMF’s focus on SOEs as an “emphasis on the importance of reforms” rather than a failure, specifically highlighting the need for modernization in air transport, energy, water, and sanitation.
A Path to Transformation
The ECF, totaling $63.3 million, was launched in 2022 to stabilize public finances and reduce debt. The $31.7 million RSF, approved in late 2023, focuses on climate change adaptation and the energy transition.
Minister Correia stated that the positive review “strengthens confidence” in the archipelago. He noted that the government’s ultimate ambition is to double economic growth, moving beyond steady performance to reach a “transformative level” for the nation’s economy.
Image: Pexels – douglas miller
