The issue of Cabo Verde's debt transparency has been a recurring theme in the country's financial landscape. Despite being a crucial aspect of public finance, the actual extent of the state's debt remains unclear. In recent sessions of the National Assembly, the topic of hidden debt was debated, with concerns raised about the lack of transparency and accountability in the country's financial dealings.
The debate centers around the discrepancy in debt figures reported by different entities. For 2025, the Ministry of Finance reported a debt of 302.5 billion escudos, which is 99.8% of the country's GDP. In contrast, the Banco de Cabo Verde reported a debt of 346.2 billion escudos, equivalent to 115.7% of GDP. This difference of 43.7 billion escudos highlights the need for clarity and consistency in debt reporting.
The issue is not merely a matter of accounting; it has significant implications for transparency, responsibility, and trust in public finances. The government cannot expect citizens, businesses, and creditors to have confidence in its financial management if the actual extent of its debt is unclear. The question remains: how much does the Cabo Verdean state actually owe?
The debt service, including interest and amortization, poses a significant burden on public finances. Between 2021 and 2025, debt service accounted for approximately half of the country's fiscal revenues. In 2025, the total debt service reached 39.4 billion escudos, which is 59.6% of fiscal revenues and 13% of GDP.
The International Monetary Fund (IMF) and the World Bank have expressed concerns about Cabo Verde's debt levels. The two institutions use reference thresholds of 55% of GDP for external debt, 21% for debt service to exports, and 23% for debt service to revenues. Cabo Verde consistently exceeds these thresholds, particularly the latter two.
The IMF and World Bank classify Cabo Verde as being at high risk of debt distress, although they consider the debt formally sustainable. This sustainability depends on maintaining potential growth, fiscal consolidation, and structural reforms, which remains vulnerable to shocks. A persistently high debt level above 100% of GDP also poses risks to growth and increases the likelihood of debt distress.
To address these concerns, experts recommend an independent audit of the public sector's liabilities, including guarantees, arrears, and debt of local authorities. Unifying official statistics and introducing a test for the economic and social profitability of new debt can help mitigate these risks. Implementing a "golden rule" of public finances, where debt finances investment rather than current expenditure, can also help ensure fiscal sustainability.
Key points
- Cabo Verde's debt transparency is under scrutiny due to discrepancies in reported debt figures.
- The country's debt service poses a significant burden on public finances, accounting for approximately half of fiscal revenues.
- Experts recommend an independent audit and reforms to ensure fiscal sustainability and mitigate debt risks.
