Cabo Verde

Stable growth, driven by tourism and investment

Growth is expected to remain strong in 2026, driven by the same factors as in 2025. Tourism will remain the most powerful of these, fuelled by an increasingly abundant wealthy European clientele from the United Kingdom, France, Germany and Portugal, among others, whose arrival should be facilitated by the opening of new air routes.

The investment will also contribute to growth. Several electrification projects, mainly in rural areas, and projects to expand electricity generation capacity are under way as part of the 2022-2026 Strategic Sustainable Development Plan, which aims to achieve a 50% share of renewable energy in the energy mix by 2030 and 100% by 2050. The projects include the expansion of the wind farm on the island of Santiago, whose capacity will increase from 9 MW to 22 MW, and the construction of eight new solar power plants, some of which will begin construction as early as 2026. Cabo Verde will also continue to invest in inter-island transport infrastructure, such as the expansion of the port of Santo Antão. These investments are mainly financed by multilateral partners (IMF via its RSF instrument, World Bank, EIB, African Development Bank). The construction of large tourist complexes – including accommodation, restaurants and golf courses – is being financed by FDI (Portugal, Spain, the Netherlands, France, the US and China). However, these investments will not enable the economy to diversify, which remains vulnerable to a possible slowdown in Europe.

With the Cabo Verdean escudo pegged to the euro, the appreciation of the European currency against the dollar and moderation in commodity prices should help slow inflation in 2026. This context, combined with rising tourism revenues, increased remittances from the diaspora and redistributive social policies – some of which target poverty reduction – should help to accelerate private consumption.

Primary surplus helps reduce debt

The public deficit is expected to continue to decline in 2026. Revenues will increase thanks to higher taxes on tourist arrivals, tobacco and alcohol, the reduction of customs duty exemptions on certain imported products (consumer goods and semi-processed food products) and the broadening of the tax base through the reduction of tax loopholes and the fight against tax evasion. Investments in energy infrastructure will be partly financed by the introduction of a carbon tax and targeted tax incentives for renewable energy and electric vehicles. At the same time, social transfers are expected to increase to support the professed goal of eradicating extreme poverty by 2026, despite the fact that this appears difficult to achieve. Following the IMF's recommendations, the government also plans to contain the public wage bill as a share of GDP, gradually reduce subsidies to public enterprises, and restructure several of them through partial privatisation and public-private partnerships.

Public spending would therefore increase at a slower pace than revenue, which would generate a slight primary surplus and enable the continued reduction of public debt, two-thirds of which is held by foreign creditors, mainly multilateral institutions such as the World Bank, the African Development Bank and the IMF, in the form of concessional loans. Around one-fifth of external debt is held by bilateral creditors such as Portugal, China and Kuwait, while just under a quarter is held by commercial creditors, dominated by Portuguese banks. Cabo Verde also benefits from an innovative mechanism for converting debt into climate investments. Already, EUR 12 million in treasury bonds held by Portugal have been converted into financing for environmental conservation and the construction of climate-resilient infrastructure. Ultimately, all Portuguese claims, amounting to approximately EUR 140 million, could be converted under the same framework. The strengthening of this mechanism, together with the opening of special economic zones in 2026, should lead to further acceleration in foreign investment.

The current account has been positive since 2024, thanks to the surplus in the services balance generated by continued growth in tourism. The surplus offsets the very large trade deficit, which is expected to further worsen in 2026 due to imports related to the construction of tourism and energy infrastructure. The current account balance is nevertheless expected to remain positive on back of remittances from the diaspora and disbursements from the IMF under its aid programmes (ECF and RSF). This situation has enabled Cabo Verde to repay part of its debt and increase its foreign exchange reserves, which amount to 6.8 months of imports.

Political change likely in 2026

Cabo Verde is one of Africa's few stable democracies. In the last parliamentary elections in April 2021, the Movement for Democracy (MPD, centre-right) retained its absolute majority (38 seats out of 72), re-electing Ulisses Correia e Silva, who had been Prime Minister since 2016. However, the presidential election in October of the same year resulted in the first-round victory of José Maria Neves, a member of the main opposition party, the African Party for the Independence of Cape Verde (PAICV, left). In this semi-parliamentary system, his win ushered in a period of de jure cohabitation, even though, in reality, the President has a much less important role than the Prime Minister and has little policy-making influence. However, the PAICV's victory in the December 2024 municipal elections (15 out of 22 municipalities), which led to a cabinet reshuffle, heralds a change of government in the April 2026 legislative elections. This result reflects popular dissatisfaction with the socio-economic outcomes of the MPD's policies, which have failed to substantially improve living conditions (eliminate extreme poverty) or provide access to essential services (health, education, etc.), despite its election promises.

Close to its former colonial power, Portugal, Cabo Verde also maintains very good relations with other Portuguese-speaking African countries, i.e., Angola, Mozambique, Guinea-Bissau. These relations are reflected in bilateral agreements in the fields of education, maritime security and trade. Cabo Verde cooperates regularly with these countries within the framework of the CPLP (Community of Portuguese-speaking Countries), promoting economic exchange, cross-investment and joint diplomatic initiatives, particularly on issues of regional security and sustainable development.

Internationally, Cape Verde has adopted a largely pro-Western stance. The US is expected to remain a major political partner, as demonstrated by the visit of US Secretary of State Anthony Blinken in January 2024 to strengthen cooperation between the two countries with a view to ensuring regional security and combating piracy. The same is true of Europe in terms of security (combating drug and human trafficking), tourism – particularly the UK, which accounts for more than a quarter of visitors – and FDI. Cabo Verde and the EU have also agreed to renew until 2029 the fisheries agreement that allows access to the archipelago's territorial waters in exchange for remuneration (EUR 3.9 million over the period). China will also remain a strategic partner, continuing to invest in the health and tourism sectors, as well as in the development of a special economic zone focused on the blue economy.

Last updated: September 2025