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Located 500 km off the west coast of Africa, Cabo Verde is an archipelago comprising ten islands, nine of which are inhabited. With a population of approximately 491,233 (according to the 2021 Census), only 10% of its territory is classified as arable land, and mineral resources are limited.

The fragmentation of its territory results in significant connectivity issues and poses challenges for service delivery, including energy, water, education, and health. Since 1990, Cabo Verde has experienced substantial economic progress, largely driven by the rapid development of tourism, which accounts for 25% of GDP. This economic growth has been complemented by considerable social development, supported by robust social policies since the 1970s.

Until 2019, Cabo Verde was regarded as a leader in poverty reduction among Sub-Saharan African countries. However, the country has faced challenges due to the impacts of COVID-19 and the crisis in Ukraine. Despite these setbacks, under the UN 2030 Agenda, which is reflected in the new Strategic Plan for Sustainable Development 2022-2026 (PEDS II), the government has set the ambitious goal of eradicating extreme poverty by 2026.

Political Context

Cabo Verde is often regarded as a model of democracy in Africa. Electoral processes have been conducted regularly, allowing for the peaceful alternation of power between the two major parties. The African Party for the Independence of Cabo Verde (PAICV), governed for two consecutive 15-year periods (1975-1991 and 2001-2016). The Movement for Democracy (MpD), a liberal and right-wing party, was re-elected for a five-year term in the legislative elections held in April 2021, with Ulisses Correia e Silva reappointed as Prime Minister. The Independent and Democratic Cabo Verdean Union (UCID) represents the third political force in the country.

The PAICV-supported candidate, Jos¨¦ Maria Neves, took office as president on November 9, 2021. Three peaceful elections with electronically transmitted results were conducted between October 2020 and October 2021. The next elections in Cabo Verde will be municipal elections in 2024. The subsequent legislative and presidential elections are scheduled for 2026.

Economic Overview

Cabo Verde¡¯s economy is emerging strongly from recent shocks, with tourism playing a key role. Growth reached 5.1% in 2023, supported by a record-high 1 million tourist arrivals that bolstered activity in the services sector. These developments, along with lower inflation, contributed to a 0.5% percentage point reduction in poverty ($3.65 per person per day, 2017 PPP), bringing the poverty rate down to 15% in 2023. Unemployment fell to 10.3%, which is below pre-pandemic levels. Strong revenue performance is facilitating the ongoing fiscal consolidation agenda, as Cabo Verde recorded a 20-year high primary surplus of 2% in 2023, while the overall deficit narrowed to 0.3% (down from 3.9% in 2022). Consequently, public debt decreased by 10%age points to 112.2% of GDP.

This momentum has continued into 2024, with growth expected to reach 5.2%. On the supply side, growth will be driven by robust performance in the services sector and an improved agricultural year, while government consumption and exports will bolster demand. Inflation is anticipated to decline to 1.6%, due to moderating international food prices and a decrease in oil prices. The current account deficit is projected to widen from 2.5% to 3.5% of GDP, reflecting higher capital goods imports¡ªprimarily driven by public sector and tourism sector investments¡ªas well as a gradual stabilization of exports. Improved execution of the investment budget, coupled with adjustments to public servants¡¯ wages, will contribute to an overall deficit widening to 2.7% of GDP, despite strong revenue performance. Public debt is expected to decline to 107.1% of GDP. Looking ahead, economic growth is forecasted to stabilize at approximately 4.8% in 2025-2026, with inflation converging around 2%.

The outlook is subject to downside risks, including potential commodity price spikes due to geopolitical tensions, weaker external demand in tourism markets, and limited progress with the SOE reform agenda, all of which could undermine fiscal consolidation and weaken growth. Climate-related shocks continue to be a concern, given the country's high vulnerability.

Last Updated: Oct 17, 2024

World Bank Group Engagement in Cabo Verde

The Country Partnership Framework (CPF) approved in September 2019 is set to expire at the end of FY25. The objective of the CPF is to support the Government¡¯s efforts to build the foundations for a more diversified, inclusive, and resilient hub economy. The CPF prioritizes: (i) accelerating human capital for inclusive, services-led growth, and (ii) strengthening the environment for a more diversified economy. Cabo Verde¡¯s Performance and Learning Review (PLR) was endorsed on March 15, 2024. This review ensures continued alignment of the CPF program with Ambition 2030, PEDS II (2022-2026), and new sectoral programs, while also reflecting the portfolio¡¯s shift toward recovery and resilience.

ľ¹ÏÓ°Ôº's active portfolio in Cabo Verde comprises ten projects with a total commitment of nearly $299.2 million. The Resilient Tourism and Blue Economy commitments account for 39%, making it the largest share in the national portfolio, followed by Transport at 23%. Between July 2023 and June 2024, the World Bank delivered approximately $120 million across four IDA operations, including $25 million for a health security program.

New and forthcoming projects in Cabo Verde signify a shift toward larger, more multi-sectoral programs that emphasize a green, resilient recovery, with the private sector playing a pivotal role. These programs also support transformative reforms to boost private investment.

More recently, the Bank approved the second additional financing for the Resilient Tourism and Blue Economy Development project ($30 million), which supports the Government in increasing diversity and resiliency in tourism offerings and promoting the participation of Small and Medium-Sized Enterprises (SMEs) in tourism-related value chains. Additionally, in FY24, the Bank approved a project focused on Improving Connectivity and Urban Infrastructure ($40 million). Investments for this project are chosen through the development of a prioritization framework that serves as an enabler for value chains in tourism, fisheries, and agriculture, while also promoting greater community and women¡¯s involvement in the decision-making process. The project supports key actions under the responsibility of the Ministry of Infrastructure, Territorial Planning, and Housing (MIOTH) through urban, territorial, and road (rural access and connectivity) investments. It also provides assistance to MIOTH in developing the National Infrastructure Plan (PNI) and offers technical support and institutional strengthening to assist the Government with State-Owned Enterprises (SOEs) reforms aimed at improving critical inter-island and maritime connectivity, as well as enhancing urban and territorial planning tools.

International Finance Corporation (IFC)

IFC's engagement in Cabo Verde dates back to 1992 with its first investment in AEF Growela, a shoe manufacturing and leather treatment company located in Mindelo. Subsequently, in 1993, IFC invested in Hotel Tropico to finance a 51-room business hotel in Praia. They also invested in Teylium T Plus (now Unitel), a greenfield GSM operation that obtained a second GSM license in the country. Investments in Cabo Verde have extended to the mining sector, including Britagem, as well as to financial institutions such as Banco Caboverdiano de Negocios (BCN).

More recently, IFC has achieved record levels of investment that rose from $2 million in FY23 to $70 million in FY24 (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 airport infrastructure. Additionally, in December 2023, IFC committed $37.7 million (including mobilization) to finance the Oasis Atlantico Group. Furthermore, IFC has 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, IFC signed financial literacy training agreements with five Cabo Verdean banks and delivered training to 69 micro, small, and medium-sized enterprises within a two-week period. Finally, IFC and the World Bank jointly developed the Cabo Verde Private Sector Diagnostic Report (CPDS), which was published in March 2024.

Last Updated: Oct 17, 2024

Education and Social Protection

The previous Education and Skills Development Enhancement Project (P164294), which ran until January 2023, enabled nearly 2,000 youth to participate in labor market-relevant training and awarded scholarships to over 1,190 individuals, predominantly female, from the poorest households to enroll in labor market-relevant courses.

• Similarly, the Social Inclusion Project (P165267), closed in April 2023,  supported: i) the establishment of a social registry across all municipalities, currently covering over 66% of the population; ii) a social cash transfer program (RSI) that provided regular cash transfers to 4,500 households in the poorest quintile, along with emergency cash transfers in response to COVID-19 for an additional 23,650 households; and iii) a pilot productive inclusion intervention that helped 1,867 households start or improve their small businesses while providing professional training.
• The multi-sectoral Human Capital Project (HCP) (P175828), approved in April 2022, specifically aims to support youth and women, particularly those from poor and vulnerable households, by improving access to basic services and labor market-relevant training. To date, more than 30,000 students have benefited from the new secondary education curriculum; 505 youth have participated in professional training courses aligned with the needs of the private sector; over 1,500 households are involved in a productive inclusion program; and 46 houses in Praia have been rehabilitated to enhance access to essential services such as water, electricity, and sanitation.

Health

In the health sector, the World Bank Group is supporting Cabo Verde through the COVID-19 Emergency Response Project (P173857) by constructing two health centers: one in Ribeira das Patas on Santo Ant?o island and the other in Achada Monte on Santiago island. This initiative aims to bring healthcare closer to the populations of these areas. Additionally, the project is financing a feasibility study for a new hospital that the government intends to build in the capital under a public-private partnership (PPP) model. It also supports the development of the first national digital health strategy and the acquisition of a computerized tomography device for the hospital in S?o Vicente, which will significantly enhance the imaging diagnostic capacity for the northern islands.

Furthermore, the Health Security Program in Western and Central Africa (HeSP) (P179078), represents another opportunity for the country to substantially improve its capacity to prevent, prepare for, and respond to public health emergencies, with a total funding envelope of approximately $29 million. The first disbursement of $2 million was recently made, to be utilized before the end of this fiscal year, accounting for 8% of the total financing.

Economy resilience and diversification

• The new flagship $45m Resilient Tourism and Blue Economy Development Project (P176981), was approved in June of 2022 and includes a $5 million PROBLUE Multi-donor Recipient-Executed Trust Fund. It adopts a spatial approach and provides flagship support to the GoCV¡¯s recently approved Tourism Operational Plan spanning 2022-2026 (prepared with close support from the preceding Competitiveness for Tourism Development Project), as well as the GovCV¡¯s Blue Economy National Investment Plan. It operationalizes the GovCV and WB¡¯s increased focus on climate resilience by applying climate-smart practices in the design and funding of ocean economy, tourism and connectivity-related infrastructure as well as SME support operations and sector-related policy and regulatory upgrades. Ocean economy activities under the project support a strengthened focus on strengthening the country¡¯s blue economy under the PEDS II and build on a number of non-lending engagements (e.g., the GEF-funded and recently concluded Coastal Fisheries Initiative ¨C Challenge Fund activities, technical assistance under the DPO series) that have led to the request for lending support. The project is due for a further $30 million second additional financing, approved in May 2024 and due for effectiveness by the end of 2024.
• The Access to Finance for MSMEs Project (P163015) in the amount of $25 million, concluded in June 2023, provided critical support to develop the financial infrastructure in Cabo Verde and expand access to finance for MSMEs. The support to the creation of the first partial credit guarantee company in Cabo Verde was instrumental in helping new and existing MSMEs maintain and access credit. Complementary investments included a new credit registry central to improve credit information and a new equity fund to help local MSMEs access longer term capital. At project closing, the number of beneficiaries of credit guarantees provided by the project-backed public partial credit guarantee framework surpassed 2,000 firms (more than the envisioned target of 1,800), and the amount of credit guaranteed was in excess of $45 million (above the envisioned target of $35 million).

Transport and Urban

• The $46 million Transport Sector Reform Project (TSRP - P126516), which closed in September 2022, supported the Government in enhancing the efficiency and management of its road assets while laying the groundwork for state-owned enterprise (SOE) reform in the transport sector. A significant result of the project is that 90% of the national road network is now in good or reasonable condition, with interventions made on many islands, including Santiago, Santo Ant?o, S?o Nicolau, Maio, Fogo, and Brava. These efforts have increased the resilience of both the infrastructure assets and the local communities. Roadworks, such as those at Ribeira dos Picos and Cruz de Picos ¨C Boa Entradinha ¨C Ch?o de Formoso ¨C Gil Bispo, both located on Santiago Island, have critically contributed to improving local populations' access to markets, essential services like education and healthcare, and economic opportunities.
• A new project, titled Improving Connectivity and Urban Infrastructure in Cabo Verde (P178644), signed in February 2024 has a budget of $40 million and aims to enhance access to climate-resilient transport and urban infrastructure in selected areas of the country. It consists of three components: enhancing transport connectivity and resilience, improving urban and community infrastructure, and providing technical assistance for urban and territorial mapping as well as inter-island connectivity.

Statistics

The ongoing Harmonizing and Improving Statistics in West Africa (HISWA) Project (P169265) aims to strengthen the national statistical systems of participating countries in West Africa by harmonizing, producing, disseminating, and enhancing the use of core economic and social statistics. With a budget of $15,000,000, the project has funded several key activities to date, including the censuses of sports, enterprises, and fisheries, the second informal survey, the fourth health and demographic survey (IDSR-IV), the fourth living conditions and poverty survey (IDRF IV), the annual multi-integrated survey (IMC), the electronic billing system, the land cadastral registry in Mindelo and Santiago, and surveys on agriculture, food security, and nutrition.

Last Updated: Oct 17, 2024

Most bilateral and multilateral development agencies have a presence in Cabo Verde. The country's major multilateral partners include the European Union, the African Development Bank, the United Nations, the World Bank, and the International Monetary Fund. Progress has been made in streamlining development assistance and coordination through the Budget Support Donor Group (GAO) mechanism, which actively involves Luxembourg, Portugal, Spain, the European Union, the African Development Bank, and the World Bank.

Last Updated: Oct 17, 2024