IMF Staff Concludes Visit to Djibouti
IMF News, June 17, 2022
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- Published: June 17, 2022
Overview
- Mission dates: June 12–16.
- Press Release No. 22209.
- Statement reflects preliminary findings of IMF staff and does not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.
- Principal conclusion: Following a series of external shocks, the economic recovery in Djibouti appears uneven and urgent fiscal actions are needed to protect vulnerable households and restore debt sustainability.
Recent economic developments and outlook
- Growth rebounded from pandemic-related disruptions with growth of nearly 5 percent in 2021.
- Port activity remains weak due to the conflict in Ethiopia and trade disruptions in China.
- Reserves have fallen significantly over the past year.
- Rising global commodity prices have:
- Added pressure on the balance of payments.
- Put upward pressure on inflation and adversely affected purchasing power.
- Increased pressure on the government budget.
- Growth in 2022:
- Will depend on the resumption of port activity.
- Is tentatively forecast at 3½ percent.
Fiscal pressures, debt, and public finances
- Debt service is set to triple this year with the recent expiration of the G20 Debt Service Suspension Initiative (DSSI).
- Debt service is set to triple this year to almost 5 percent of GDP.
- Authorities have maintained fixed domestic fuel prices despite rising global prices.
- As a result, fiscal revenues are set to contract sharply.
- Urgent need to create fiscal space for additional social spending, given rising prices and vulnerable households.
Policy recommendations and reforms advised by the mission
- Create fiscal space to support vulnerable households by:
- Targeting fuel subsidies.
- Strengthening cash transfer programs.
- Urgently review additional measures to create fiscal space, including:
- Domestic revenue mobilization.
- Continued public financial management and governance reforms.
- Objective of measures: allow further social spending and restore debt sustainability.
Mission closing remarks
- The mission team thanked the authorities for warm hospitality and productive discussions and looks forward to continuing close engagement.
- Media contact: PRESS OFFICER: Wafa Amr; Phone: +1 202 623-7100; Email: MEDIA@IMF.org; @IMFSpokesperson
IMF Press Release No. 22209 — June 17, 2022.