Press Release: Concluding Statement by IMF Mission to Djibouti
June 16, 2011Press Release No. 11/236
June 16, 2011
The following statement was issued on June 1st in Djibouti:
“An International Monetary Fund mission headed by Mr. Carlo Sdralevich visited Djibouti from May 22 to June 1, 2011 in connection with the fourth review of the arrangement supported by the Extended Credit Facility (ECF).
“The mission met with Ilyas Moussa Dawaleh, Minister of Economy and Finance; Mohamed Awaleh, Minister of Agriculture; Amareh Ali, Minister of Budget; Abdi Elmi Achkir, Minister of Commerce; Zahra Youssouf Kayad, Secretary of State for National Solidarity; Djama M. Haïd, Governor of the Central Bank of Djibouti; other senior officials; and Djibouti's development partners. The mission would like to express its gratitude to the authorities for the productive, open discussions, and the warm welcome during its stay.
“The macroeconomic environment remained mixed in 2010. Real GDP growth slackened, declining from 5 percent in 2009 to 3.5 percent in 2010, particularly due to a significant decline in port activities and low levels of foreign direct investment (FDI). FDI had increased substantially in the preceding years, exceeding 40 percent of GDP in 2007, but contracted in the past two years, falling to 9.5 percent in 2009 and 2.4 percent in 2010. At the same time, inflation, which stood at 1.7 percent in 2009, increased to roughly 4 percent in 2010, driven by the rebound in international food and commodity prices. The current account deficit improved significantly, declining from 9.1 of GDP percent in 2009 to 4.8 of GDP percent in 2010.
“Djibouti’s economic outlook for 2011 is more favorable than in 2010 despite the impact of higher food and oil prices. Real GDP is expected to increase at a growth rate of about 4.8 percent in 2011, largely due to normalization of port activities and renewed FDI.
“In a difficult macroeconomic context, the Republic of Djibouti kept the program on track in terms of budget discipline and public finance, financial sector and structural reforms, in order to create conditions favorable to sustaining growth and reducing poverty.
“The most important problem for Djibouti continues to be job creation: the mission met with members of the new government and the public administration to discuss the recent initiatives launched to promote the creation of enterprises and the employment of the youth, particularly recent graduates, in the private sector.
“The short-term challenge continues to be maintaining price stability and budget discipline. The 2011 budget envisages a balance close to zero, reflecting the strengthening of tax revenue and control of expenditure. The Republic of Djibouti remains determined to reduce outstanding domestic arrears and avoid accumulating new arrears through increased spending controls. In parallel, the authorities should increase budget transparency and sound fiscal management, particularly in regard to subsidies.
“The authorities intend to continue their efforts to strengthen bank supervision and financial sector development, including access to financial services. With technical assistance from the IMF, they adopted several banking laws to strengthen the regulatory and supervisory framework and improve licensing procedures.
“Improving the economy's competitiveness continues to be one of the main objectives of Djibouti's economic program, with a view to promoting private sector development and foreign investment. To this end, Djibouti is committed to pursuing structural reforms, particularly measures to reduce the cost of energy in the context of a strategy developed with donors, increase the supply of water and lower its cost, restructure public enterprises, and expand citizens' access to public services.
“The mission was pleased to consolidate its cooperation with the authorities to assist Djibouti in achieving its objectives of sustained growth and poverty reduction.”