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Press Release No. 99/50
October 18, 1999
International Monetary Fund
700 19th Street, NW
Washington, D.C. 20431 USA

IMF Approves ESAF Loan for Djibouti

The International Monetary Fund (IMF) today approved a three-year loan for Djibouti under the Enhanced Structural Adjustment Facility (ESAF)1 in an amount equivalent to SDR 19.082 million (about US$26.5 million) to support the government's three-year economic reform program beginning July 1999. The first annual loan will be disbursed in three installments. The first installment in an amount equivalent to SDR 2.726 million (about US$3.8 million) will be available shortly.

In commenting on the Executive Board's discussion of Djibouti's request for the loan arrangement, Mr. Shigemitsu Sugisaki Deputy Managing Director of the IMF, made the following statement:

"Directors welcomed Djibouti's authorities' decision to pursue a comprehensive medium-term adjustment program under the ESAF arrangement, aimed at strengthening macroeconomic policies and deepening structural reforms, in order to accelerate growth, raise employment levels, reduce poverty, and strengthen the external position.

"Directors commended the authorities' intentions to continue a tight fiscal policy stance, while still increasing outlays for social programs and infrastructure investment. In particular, noting the importance of poverty reduction, they underscored the need to provide adequate expenditure allocations for health, education and social safety nets. Directors noted that realizing the program's fiscal objectives would require steadfast implementation of the envisaged tax reform program, the containment of non-priority expenditures--particularly through reductions in the wage bill and the implementation of the demobilization and civil service reform programs. Directors also urged the authorities to accelerate the settlement of arrears in a timely manner.

"Directors encouraged the authorities to persevere in their economic restructuring program, which they considered essential for a fundamental improvement in competitiveness and overall economic performance. In this regard, they underscored the importance of pressing ahead with the privatization program, the freeing up of markets--including in particular the labor market--and reforms in tax, pension, and financial sector.

"Directors recognized that the ambitious reform agenda represented a major challenge for the authorities, and that timely financial assistance on concessional terms and substantial technical assistance from the international community would be essential for the success of the program," Sugisaki said.

ANNEX

Program Summary

During 1996-98, Djibouti made substantial progress, under an IMF-supported reform program, in reducing macroeconomic imbalances. Inflation declined, and in 1998 the price level was relatively stable. The government implemented important structural measures, in particular the demobilization of military and security personnel, civil service downsizing, reduction in the government wage structure, and banking system reforms.

The medium-term reform program aims at establishing an environment conducive to private sector-led role in the growth process, as well as to an enhancement of the country's social indicators. The authorities recognize that the strengthening of macroeconomic policies and far-reaching structural reforms directed at a restructuring of the economy are essential for realizing their overall policy goals of accelerating economic growth and raising per capita income, increasing employment, reinforcing domestic financial stability, and strengthening the external position.

Macroeconomic objectives for the 1999-2002 period entail real GDP growth of 3% on average, annual inflation limited to 2%, and an overall balance of payments deficit contained at 2.5% of GDP on average.

The medium-term fiscal stance will be directed at maintaining macroeconomic stability and strengthening the external position. To this end, the authorities will pursue fiscal restraint to limit the budget deficit to 3% of GDP on average.

The structural reform program includes tax, revenue administration, and budget management reforms, as well as completion of the demobilization program; adoption of a retirement program; and a civil service reform, which together would ensure a further lowering of the wage bill. It also entails the reorientation of budget outlays toward priority purposes--particularly for the education and health sectors and the social safety nets; pension fund reform; banking sector reforms; significant privatization program; deregulation; and legal reforms--including those of the labor and commercial codes and the establishment of commercial courts.

Social Issues

The authorities' poverty reduction strategy encompasses three components: higher economic growth, increased outlays for education and health and the social safety net. In the latter area an employment-creation program will be implemented over 2000-03, and a re-insertion program will provide training for demobilized personnel. A Social Fund Program will address the rehabilitation of education and health infrastructure.

Djibouti joined the IMF on December 29, 1978 and its quota is SDR 15.90 million (about US$22.08 million). Its outstanding use of IMF financing currently totals SDR 6.91 million (about US$9.60 million).


Djibouti: Selected Economic and Social Indicators, 1995–2002

Jan-June

1995

1996

1997

1998

1999

1999

2000

2001

2002

Prov.

Prov.

ESAF Program

I. Economic and Financial Indicators

(Annual percentage changes)

National income and prices

GDP at current prices

0.7

1.2

1.6

1.8

...

3.5

4.4

5.2

6.3

GDP at constant prices

-3.6

-1.5

0.0

1.7

...

1.4

2.3

3.2

4.3

Consumer prices (annual average) 1/

4.5

2.6

1.6

0.1

0.0

2.0

2.0

2.0

2.0

(In percent of GDP)

Government finance

Total revenue and grants

31.1

30.6

31.0

34.2

13.8

34.4

36.2

34.9

34.5

Revenue

29.1

28.8

27.2

25.4

10.2

25.2

26.3

26.8

27.0

Grants

2.0

1.8

3.8

8.9

3.6

9.2

9.9

8.1

7.6

Total expenditure

39.2

34.5

35.3

33.4

16.7

34.8

35.5

34.4

35.0

Current expenditure

35.6

30.6

31.0

26.7

14.9

30.2

30.0

28.9

29.5

Capital expenditure

3.7

3.9

4.3

6.7

1.8

4.6

5.5

5.5

5.5

Overall balance (payment order basis)

-8.1

-3.9

-4.3

0.9

-2.8

-0.4

0.7

0.5

-0.5

Change in arrears (decrease-)

3.2

-0.7

2.4

-0.8

1.7

-1.2

-4.5

-4.3

-2.8

Overall balance (cash basis)

-4.9

-4.6

-1.9

0.1

-1.2

-1.6

-3.8

-3.9

-3.3

Government domestic arrears (stock) 2/

23.1

22.0

23.9

22.9

23.8

20.8

13.6

7.6

3.2

Government domestic debt 3/

18.7

19.0

18.8

17.6

17.8

17.2

19.4

20.7

21.2

(Change in percent of broad money)

Money and credit

Money and quasi-money

3.3

-10.0

-1.4

8.2

0.2

2.2

5.4

5.8

6.4

Net foreign assets

-3.6

-10.3

-4.0

-2.6

-2.0

-0.9

0.5

0.4

0.8

Net domestic assets

6.9

0.2

2.7

10.7

2.2

3.1

5.0

5.4

5.6

Claims on the central government (net)

2.0

0.0

2.0

-1.1

0.9

0.6

2.2

2.1

1.7

Claims on nongovernment sector

8.0

2.1

-0.3

11.2

5.0

6.1

2.8

3.3

3.9

Interest rates (in percent)

Lending rates

9.4-13.1

9.5-13.3

9.2-12.4

13.0-14.0

Deposit rates

4.2-6.0

2.1-4.0

3.6-6.0

3.6-4.0

(In millions of U.S. dollars; unless otherwise indicated)

External Sector

Exports

37.6

39.6

42.6

59.1

65.0

70.2

75.9

82.4

Locally produced goods

13.6

13.7

12.9

13.9

14.7

16.0

17.1

18.5

Re-exports

24.0

25.9

29.7

45.3

50.3

54.2

58.8

63.9

Imports

206.8

200.7

204.0

238.8

242.9

254.4

259.9

272.8

For domestic use

178.7

171.0

174.7

190.8

193.4

201.0

202.0

209.9

For re-export

28.1

29.7

29.2

48.0

49.5

53.4

57.9

62.8

Services (net)

85.9

82.3

85.5

85.6

62.0

62.7

70.6

83.1

Income (net)

17.3

15.7

12.2

11.7

12.5

12.2

12.4

12.4

Of which: Interest obligations

-3.9

-3.7

-5.0

-6.5

-6.3

-6.7

-7.0

-7.3

Transfers (net)

49.0

46.9

52.2

67.9

70.8

73.3

65.4

61.5

Of which: Official transfers

60.1

57.0

61.0

72.2

74.9

77.1

68.7

64.5

Current account

-17.0

-16.3

-11.5

-14.4

-32.9

-35.9

-35.5

-33.4

Overall balance

-10.0

-34.0

-12.0

-11.4

-15.0

-14.2

-14.0

-11.0

Memorandum items:

Currency board gross foreign assets

In millions of U.S. dollars

71.4

77.0

67.8

64.4

67.9

71.5

75.1

78.8

Monetary and LOLR cover (in percent)

115.6

122.2

113.1

111.8

113.7

118.1

116.9

117.3

116.5

Commercial bank gross foreign assets

In months of imports for domestic use

10.0

8.6

8.1

7.6

7.2

7.1

7.2

7.3

In percent of GDP

Current account

-3.5

-3.3

-2.3

-2.8

-6.2

-6.5

-6.1

-5.4

Overall balance

-2.0

-6.9

-2.4

-2.2

-2.8

-2.6

-2.4

-1.8

Official debt 4/

In millions of U.S. dollars

265.3

284.3

316.6

337.0

352.6

368.1

382.9

398.3

In percent of GDP

54.1

57.3

62.8

65.7

...

66.4

66.4

65.7

64.2

Debt service ratio 5/

To current account receipts

5.0

4.9

3.6

5.3

...

6.1

6.3

5.9

5.7

To exports of goods and services 6/

7.5

7.2

5.4

8.2

...

9.8

10.1

9.1

8.5

Public sector overdue obligations

In millions of U.S. dollars

...

...

...

8.9

10.1

0.0

0.0

0.0

0.0

Exchange rate (DF/US$) end-of-period

177.7

177.7

177.7

177.7

177.7

Real effective exchange rate

 

(End-year change in percent; depreciation-)

 

-1.2

-0.5

13.9

-6.1

II. Social and Demographic Indicators

 

Population: 660,000 (1996 estimate); rate of growth 3 percent

Unemployment rate: 40 percent (51 percent for under 20 years of age)

Life expectancy: 50 years (at birth)

Infant mortality rate: 106 (per 1,000 live births)

Medical access: 1 physician per 5,900 people (1991)

Education: Pupil-teacher ratio: 47.2 (primary school); gross enrollment ratio: 14 percent (of secondary school age children)

Sources: Djibouti authorities; IMF staff estimates; and World Bank social and demographic data.

1/ Staff estimates for 1995–March 1999; based on official CPI from April 1999.

2/ Preliminary staff estimates including wage arrears, arrears to private suppliers, public enterprises, and pension funds, and public agency arrears assumed by the government.

3/ Including to public enterprises and the domestic banking system.

4/ Before rescheduling.

5/ Obligations basis, before rescheduling.

6/ Exports of locally-produced goods and nonfactor services.



1 The ESAF is a concessional IMF facility for assisting eligible members that are undertaking economic reform programs to strengthen their balance of payments and improve their growth prospects. ESAF loans carry an interest rate of 0.5% and are payable over 10 years with a 5 -year grace period.


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