IMF Staff Completes 2023 Article IV Mission to Djibouti

IMF News, January 25, 2024

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Bibliographic details

• Published: January 25, 2024

Mission and context

• Press Release No. 24/25
• Mission dates: January 14-25.
• End-of-Mission statement date: January 25, 2024.
• Lead IMF team member: Joyce Wong.
• Statement type: End-of-Mission press release conveying preliminary findings; views are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.

Growth and recent performance

• Djibouti became the main port of transit to Ethiopia; GDP growth averaged over 6 percent in 2013–2019.
• Growth in 2023:
  • Rebounded to around 7 percent in 2023.
  • Supported by stronger than projected port traffic and the construction sector.
  • Port traffic grew at 31 percent up to end-September 2023.
• Inflation:
  • Estimated to have slowed to 3.6 percent in November 2023.
  • Decline aided by lower energy and telecommunications costs.
• Staff projection:
  • Recovery expected to continue in 2024, albeit at a lower pace and subject to significant risks stemming from the situation in the Red Sea and developments in Ethiopia.

Fiscal position and public debt

• Debt level:
  • Debt reached 68 percent at end 2022.
• Key actions and needs:
  • Finalizing the preliminary agreement on debt reprofiling with the main creditor would open a window of opportunity to develop a sustainable strategy for public finances in the medium term.
  • Creation of the public debt committee centralizes approvals for all public sector debt to enhance controls over borrowing.
  • A clear medium-term vision for fiscal policy, backed by the highest authorities, is needed to ensure policy coherence and support revenues.
  • Recommended centralization of control over fiscal policy, including:
  • Creation of a tax policy unit in the Ministry of Budget.
  • Unification of the legal framework for tax policy under the tax code.
  • Ongoing review of military base leases should ensure fair value today and include an indexation mechanism to protect future revenues.
  • Caution advised on continuing untargeted fuel subsidies as inflation subsides, given deep development needs.

Revenue administration and anti‑money laundering

• Revenue measures:
  • Planned creation of a large taxpayers’ unit.
  • Continued digitalization of revenue administration to improve tax collection.
• AML/CFT:
  • Upcoming MENAFATF evaluation and related reforms supported by IMF technical assistance would further enhance the country’s AML/CFT framework.

Statistics and data capacity

• Positive developments:
  • Increase in human resources of the statistical agency.
  • Ongoing census.

State-Owned Enterprises, Sovereign Wealth Fund, and governance

• Role:
  • SOEs and the Sovereign Wealth Fund should play a key role in supporting inclusive growth given limited budget resources.
• Governance and management recommendations:
  • Accelerate implementation of the Code of Good Governance.
  • Empower the Executive Secretariat of the State Portfolio with strong political buy-in and adequate resources.
  • Ensure transparent financial reporting for all SOEs and adopt a clear dividend policy tied to mutually agreed performance parameters.
  • Support authorities’ plans to consolidate administrative SOEs and urge acceleration of the technical work.
  • Strong corporate governance and financial transparency are essential to attract private interest, especially as the authorities commit to lowering telecoms costs, including further liberalizing the sector.

Employment and private sector constraints

• Key constraints to increasing employment:
  • High telecom costs.
  • High energy costs.
  • Weak private sector job creation.
  • Informality.
• Authorities’ commitments:
  • Lowering telecoms costs through further liberalization of the sector.

Risks and policy priorities

• Main risks:
  • Regional geopolitical developments, notably the situation in the Red Sea and developments in Ethiopia, pose important risks to the recovery.
• Policy priorities to strengthen resilience:
  • Overhaul the growth model to be more resilient.
  • Build fiscal buffers.
  • Enhance governance across public finances and SOEs.
  • Finalize debt reprofiling with main creditor to provide medium-term relief and space for durable public finance strategy.

International Monetary Fund — IMF staff statement, January 25, 2024.

References

• Djibouti and the IMF
• The Federal Democratic Republic of Ethiopia and the IMF
• IMF Policy Advice -- A Factsheet
• Press Releases
• PRESS CENTER
• https://www.imf.org/en/home