Cabo Verde - Joint World Bank-IMF Debt Sustainability Analysis

Overview & Synopsis

Cabo Verde's external debt risk continues to be moderate consistent with the last joint WB/IMF Debt Sustainability Analysis (DSA) of January 2024,1 while the overall risk of debt distress remains high. Coverage of the public sector has been expanded to include the stock of uncalled domestically guaranteed debt to loss - making SOEs and municipalities. The detailed risk rating for external debt distress shows limited room to absorb shocks. The present value (PV) of public and publicly guaranteed (PPG) external debt-to-GDP is below the threshold over the forecast horizon and breaches the threshold under the export stress test in line with the debt path of the last DSA. Liquidity indicators (debt service to revenue and to export ratios) continue to be below their respective thresholds under the baseline mainly due to the significantly concessional characteristics of Cabo Verde’s external debt. The PV of total public debt-to-GDP is projected to breach the threshold during 2024–2029 under the baseline scenario - a longer period relative to previous DSA - due to the inclusion of the stock of uncalled domestically guaranteed debt to State-Owned Enterprises (SOEs) and breaches the threshold under the stress tests over the forecast period.