The Cape Verde debt swap is a January 2023 agreement with Portugal to convert up to €140 million in sovereign loan repayments into climate and environmental spending at home. Instead of money flowing out of the country to Lisbon, Cape Verde will keep paying Portugal in cash, and Portugal will return the equivalent amount as a grant into a new Climate and Environment Fund earmarked for renewable energy, agriculture, and marine investments. It is the first deal of its kind between the two countries, and it sits inside a wider effort to bring sovereign debt back under control after the pandemic.
How the Swap With Portugal Works
Cape Verde owed Portugal roughly €140 million when the deal was announced. The first phase covers €12 million in repayments falling due between 2023 and 2025, with the longer-term aim of channeling the entire repayment stream into the new fund.1UNDP. Debt Swap Feasibility Study
The mechanics are straightforward in principle. Cape Verde pays its debt installment in cash to the Portuguese Ministry of Finance. Portugal then transfers the same amount back as a grant, which is deposited into Cape Verde’s Climate and Environment Fund. Those proceeds can only be used for investments in renewable energy, agriculture, and marine resources.1UNDP. Debt Swap Feasibility Study The International Institute for Environment and Development helped structure the agreement around key performance indicators tied to Cape Verde’s national climate commitments.2IIED. G20 Leaders Urged to Replicate Cabo Verde Debt Restructure for Other Countries
One important caveat: as of mid-2024, actual implementation had not started because the Climate and Environment Fund was still being designed and set up.1UNDP. Debt Swap Feasibility Study The announced structure also leaves room for private-sector debts owed by Cape Verde to Portuguese companies to be folded into similar arrangements later.3Afronomics Law. Sovereign Debt News Update
Where Cape Verde’s Debt Stands
The swap is one piece of a much larger adjustment. Government debt peaked at 147 percent of GDP in 2021 and fell to 100 percent in 2025, with Fitch forecasting roughly 85 percent by 2027.4Fitch Ratings. Cabo Verde IMF staff put the 2026 ratio at 97 percent.5IMF. Cabo Verde: Seventh Review Under the Extended Credit Facility
The IMF has anchored the fiscal side of that improvement. An Extended Credit Facility arrangement approved on June 15, 2022 provides total access of SDR 52.14 million (around $71.28 million), equivalent to 220 percent of the country’s quota. A Resilience and Sustainability Facility arrangement added SDR 23.69 million (about $32.39 million) on December 11, 2023 to support climate-related reforms.6IMF. Cabo Verde: IMF Concludes Article IV Consultation, Seventh Review Under ECF, and Third Review Under RSF
On February 6, 2026 the IMF completed the seventh ECF review and the third RSF review, releasing SDR 2.37 million (about $3.25 million) under the ECF and up to SDR 5.264 million (about $7.23 million) under the RSF. All quantitative performance criteria for the end-June 2025 test date were met, and two of three reform measures for the third RSF review were done, including amendments to the central bank’s organic law.5IMF. Cabo Verde: Seventh Review Under the Extended Credit Facility The economy grew 7.2 percent in 2024 on tourism and consumption, with growth projected at 5.2 percent for 2025 and inflation near the 2 percent target.7IMF. Cabo Verde: Article IV Consultation, Seventh Review Under the Extended Credit Facility
Reforms Running Alongside the Swap
Revenue has done much of the work. Government revenue rose 17.7 percent in the first nine months of 2025 on stronger VAT and income tax enforcement, and the country posted a budget surplus of 0.3 percent of GDP for the year.8S&P Global Ratings. Cabo Verde VAT modernization and the reduction of tax exemptions are meant to broaden the base further.5IMF. Cabo Verde: Seventh Review Under the Extended Credit Facility
Breaking Up Electra
The national water and electricity utility, Electra, was carved up in 2024. Its General Assembly approved a demerger on May 16, 2024, and the new entities became operational on May 31, 2024. The electricity business was split into three specialized companies:
- EPEC, responsible for thermal electricity generation.
- ONSEC, which handles transmission, dispatch, and the single-buyer function.
- EDEC, which covers distribution and retail.
Electra kept water and sanitation and provides corporate support during the transition. The split allowed a write-off of legacy energy sector liabilities totaling more than $277 million, which stayed on Electra’s books. Before the demerger, Electra held $64 million in loans backed by sovereign guarantees and $139 million in on-lending. Under existing legislation, the government plans to transfer up to 75 percent of shares in EPEC and EDEC to the private sector.9World Bank. Cabo Verde Renewable Energy and Improved Utility Performance Project
Airports and the Caixa Sale
In August 2022, Vinci Airports secured a 40-year concession to finance, operate, and modernize all seven of Cape Verde’s airports, including the four international airports on Praia, Sal, São Vicente, and Boa Vista. The concession, awarded by direct agreement rather than competitive bidding, carried €80 million in upfront payments: €35 million at signing and €45 million once traffic recovered to 2019 levels. Vinci also committed to an annual percentage of gross revenues and planned investments totaling €619 million over the life of the concession.10Africanews. French Operator Vinci Becomes Cape Verde’s Airports Concessionaire The second €45 million installment arrived in 2025, giving the budget a one-off boost.8S&P Global Ratings. Cabo Verde
In early 2024 the state launched a public sale of 27.44 percent of its stake in Caixa Económica de Cabo Verde at 4,080 escudos per share, routed through the Cape Verde Stock Exchange’s Blu-X platform and major commercial banks and marketed to families at home and in the diaspora.11Africa Press. State of Cape Verde Begins Privatizations With Sale of Stake in Caixa The transaction generated $14.6 million.8S&P Global Ratings. Cabo Verde
Climate Finance Beyond the Swap
The Portugal deal is not the only tool Cape Verde is using to raise money for its climate agenda. The government’s Nationally Determined Contribution estimates a total funding need of $2 billion between 2023 and 2030 to meet its climate targets, far more than any single swap can cover.12IMF. Cabo Verde: Resilience and Sustainability Facility
In 2021 the Cape Verde Stock Exchange launched the Blu-X platform with UNDP, a dedicated marketplace for blue economy and sustainable development investments; it raised about $40 million in its first two years.13UNDP SDG Finance. How Cabo Verde Is Leveraging INFFs to Fund Its NDC Targets14INFF. First Cabo Verdean Blue Bond Listed on the Luxembourg Stock Exchange
In October 2025, Cape Verde launched a Financial Strategy and Implementation Roadmap with support from UNCTAD, the UN Economic Commission for Africa, and ECLAC. It envisions expanded green and blue bond issuances, additional debt-for-climate swaps, and sustainability-linked financing instruments, with the aim of positioning the country as a sustainable finance hub.15UN ECA. Cabo Verde Launches Financial Strategy to Secure Climate Investment
Multilateral lenders are also plugged in. The World Bank approved a $15 million Development Policy Financing credit in December 2025 for fiscal resilience, digitalization, renewable energy, and economic diversification, followed in January 2026 by a $13.3 million Renewable Energy and Improved Utility Performance Project expected to mobilize $108 million of private capital for 68 MW of new solar and wind and 12 MWh of battery storage.16World Bank. World Bank Supports Cabo Verde’s Efforts to Advance Fiscal Resilience and Sustainable Growth17World Bank. 18African Development Bank. Cabo Verde Country Page
Why the Deal Is Being Watched
The swap has drawn attention well beyond the two countries involved. The IIED and other advocates have urged G20 leaders to copy the structure for other climate-vulnerable nations, pointing to the use of performance indicators tied to national climate plans and to the fact that the arrangement redirects an existing cash flow rather than relying on new concessional lending.2IIED. G20 Leaders Urged to Replicate Cabo Verde Debt Restructure for Other Countries Whether the model delivers on paper’s promise now depends on how quickly the Climate and Environment Fund becomes operational and starts moving money into the projects it was built to pay for.