Washington DC: An International Monetary Fund (IMF) team,
led by Joyce Wong, visited Djibouti on June 11-15. Discussions covered
recent economic developments, the outlook, and progress on key reforms. At
the end of the mission, Ms. Wong made the following statement:
“The economic rebound post-COVID was held back in 2022 by international
trade disruptions and the conflict in Ethiopia. The authorities’
preliminary estimates point to real GDP growth moderating to 3.7 percent in
2022 relative to 4.8 percent in 2021. Despite the decline in revenues from
the slower economic activity and the shortfall of taxes on domestic fuel,
the fiscal deficit narrowed to 1.4 percent of GDP in 2022. This outturn
reflects in part some arrears accumulation, both domestic and external,
pending the outcome of debt restructuring with their main external
creditor.
“The recent peace agreement in Ethiopia,
Djibouti’s main trade partner, has resulted in an increase in port
activity, as well as rail and road freight. Inflation remains below
regional trends, aided by exchange rate stability and unchanged domestic
fuel prices. A continued recovery is expected for 2023, but the outlook
remains highly dependent on global and regional developments.
“After managing the COVID-19 pandemic, Djibouti continues to face the
consequences of the war in Ukraine, the conflict in Ethiopia, the
tightening of global financial conditions, and climate change. In such a
context, the authorities are working towards rebuilding much needed fiscal
space. In this regard, they are accelerating efforts on debt negotiations
with their main creditor. The upcoming publication of the PEFA report will
pave the way for future reforms. The mission and authorities agree on the
need for an overhaul of fiscal policies. Lastly, the upcoming MENAFATF
evaluation and the ongoing inter-agency preparatory work are shining an
important spotlight on the importance of governance.
“Djibouti’s main challenges are to strengthen economic resilience and
achieve a more inclusive and job-rich growth. In this context, reviewing
exonerations and military base leases will help entrench a more equitable
and sustainable revenue base. Shifting from broad-based subsidies to better
targeted social transfers, as inflation abates, will ensure that scarce
public resources can be directed to human capital development. Furthermore,
accelerating the implementation of the Code of Good Governance for SOEs,
including further empowering the Executive Secretariat of the State
Portfolio, will help improve accountability and contain future risks from
SOE borrowing.
“The mission team expresses deep appreciation to the Djiboutian authorities
and other counterparts for their warm hospitality, excellent cooperation
and candid discussions, and looks forward to continuing close engagement.”
