Standard & Poor’s maintains credit rating on Cabo Verde but improves outlook

13 October 2016

Standard & Poor’s (S&P) has kept Cabo Verde’s (Cape Verde’s) credit rating at “B”, both in the short and long term, but improved the outlook from negative to stable, according to a statement released Wednesday.

S&P said in the document that the “stable” outlook reflects the view that economic growth will accelerate, reducing the fiscal and external deficits and that Cabo Verde will continue to benefit from the support of the largest creditors combined with political stability.

The sovereign risk of the archipelago is expected, however, to be penalised by fiscal and external imbalances and the tourism sector’s dependence on the European economies, trade, investment and debt.

S&P estimates that Cabo Verde’s public debt will reach 125% of GDP by the end of the year, a percentage that makes the archipelago the sixth most indebted country among all those classified by the agency.

Although most of the debt was contracted under special conditions, resulting in long maturities and low interest rates, about three-quarters of the public debt is denominated in foreign currency, which can translate into risk for the economy.

S&P expects Cabo Verde to “continue to maintain good relations” with international donors, “although there is a risk” that the country achieving the status of “average income” will lead to it receiving less government funding in the medium/long term. (macauhub)