S&P Affirms Cape Verde Sovereign Rating as Tariff Relief Extended

Cape Verde's sovereign credit rating remains B+/B, with S&P Global Ratings reaffirming it on 7 August 2026 and maintaining a positive outlook that it had assigned in February. The rating upgrade in February 2026 was based on Cape Verde's fiscal consolidation, strong tourism and remittance inflows, and foreign currency reserves exceeding €1 billion.

The country's regulator, ARME, extended tariff relief measures, including a 70% discount for August and a 100% discount for social tariff beneficiaries through December 2026. This support is estimated to cost the government 130 million escudos, or roughly €1.18 million, in July alone. Cape Verde's energy regulator stated that these measures, implemented on 30 June, will continue under government Resolutions No. 95/2026 and No. 98/2026.

The International Monetary Fund (IMF) assessed Cape Verde's debt as sustainable but vulnerable, with high risk of overall debt distress and moderate risk of external debt distress. The IMF recommends that the country sets electricity tariffs at cost-recovery levels. S&P's positive outlook hinges on Cape Verde maintaining fiscal discipline and avoiding any permanent subsidies that could weaken debt metrics.

The rating upgrade is significant for Cape Verde, as the economy relies heavily on tourism, remittances, and external financing. The electricity issue is politically sensitive due to imported fuel costs influencing domestic prices. The next test for Cape Verde will be whether the government extends the tariff relief beyond December 2026, as doing so would prioritize social protection over the cost-recovery principle advised by the IMF.