News Brief: IMF Completes First Review of Djibouti under PRGF-Supported Program and Approves US$ 3.6 Million Disbursement
July 25, 2000
The Executive Board of the International Monetary Fund (IMF) completed its first review of Djibouti's first annual arrangement under the Poverty Reduction and Growth Facility (PRGF)1 (See Press Release 99/50). The completion of this review enables the release of SDR 2.726 million (about US$ 3.6 million), which brings total disbursements under the three-year program to SDR 5.452 million (about US$ 7.2 million).
After the Executive Board's discussion, Eduardo Aninat, Deputy Managing Director and Acting Chairman, made the following statement:
"The Djibouti authorities have taken steps to address recent fiscal slippages through the adoption of a supplementary budget in July 2000. This action is expected to facilitate a sizeable reduction in budget arrears during 2000, and to lay the foundation for expanded outlays on social programs in the period ahead. On the structural front, progress has been achieved through the recent privatization of the management of Djibouti's port. In addition, the recent agreement on rescheduling terms for Djibouti's obligations to Paris Club creditors represents an important financial contribution to Djibouti's adjustment and reform efforts.
"At the same time, Djibouti's rate of economic growth remains weak, unemployment is high, and the social problems arising from widespread poverty are being exacerbated by the drought affecting Eastern Africa. To strengthen economic performance and reduce poverty, resolute efforts will be needed in implementing the government's program, which seeks to maintain fiscal discipline, expand the scope for private sector economic activities, and undertake wide-ranging reforms to improve Djibouti's competitiveness. Lasting fiscal improvements will require streamlining public employment, including by accelerating demobilization and expanding civil service retirements; improving tax administration; and strengthening expenditure monitoring and control. To create a more business-friendly environment, the government's plans for expanding privatization and reforming the labor and investment codes will need to be implemented rigorously.
"In the period ahead, a high priority should be given to the preparation of an interim Poverty Reduction Strategy Paper, which would help direct and coordinate national and donor efforts to reduce poverty," Mr. Aninat said.
1 On November 22, 1999, the IMF's concessional facility for low-income countries, the Enhanced Structural Adjustment Facility, was renamed the Poverty Reduction and Growth Facility, and its purposes were redefined. It was intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a poverty reduction strategy paper. This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent, and are repayable over 10 years with a 5 ½-year grace period for principal payments.