IMF Executive Board Concludes 2024 Article IV Consultation with Djibouti
June 4, 2024
Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Djibouti on March 22, 2024.
After the negative shock of the pandemic and a weak recovery in 2021, the November 2022 peace agreement in Ethiopia bolstered the Djiboutian economy. Growth is expected to have reached about 7 percent in 2023, supported by the rebound in port activity and construction. Inflation is expected to have averaged around 1.8 percent in 2023 and projected to remain subdued.
The economic outlook remains cautiously optimistic for 2024 and the medium-term albeit subject to considerable uncertainty. Regional risks, including potential trade disruptions, pose challenges in a context of tight budgetary resources. Stronger-than-expected trade from Ethiopia could support growth, and fully addressing the debt burden could improve debt sustainability and create fiscal space.
Executive Board Assessment[2]
Executive Directors agreed with the thrust of the staff appraisal. They welcomed Djibouti's recovery in 2023, supported by the peace agreement in Ethiopia, which generated a significant expansion in port activities, train traffic, construction, and energy production. However, given the considerable external risks—including Ethiopia's economic trajectory, possible increases in regional migration and refugees, and potentially increased disruptions in the Red Sea—Directors agreed that concerted efforts were needed to address fiscal vulnerabilities, enhance governance, boost job creation, and implement structural reforms.
Directors highlighted the need to address fiscal vulnerabilities through a comprehensive long-term strategy. They emphasized that the debt service moratorium with China provides a window of opportunity for Djibouti to continue to engage with creditors transparently on a strategy to fully address the unsustainable debt burden. In this context, Directors supported increasing the capacity of fiscal institutions to enhance tax collection and policy coherence, and called for a careful review and rationalization of tax incentives and VAT exemptions, while also ensuring that revenues from military base leases reflect their real value. Directors recommended better targeting fuel subsidies to free up resources for key social spending.
Directors welcomed the authorities' efforts toward reforming State-Owned Enterprises. They emphasized the need for better financial oversight and governance of SOEs, and noted that the authorities’ upcoming review and restructuring of the administrative SOEs would be an important first step. Directors stressed that the authorities should build strong and broad-based support and provide adequate resources to ensure their successful implementation.
Directors encouraged improvements in banking regulation and oversight to strengthen the financial sector, especially given the ongoing MENAFATF evaluation. They also agreed that the careful design and introduction of a reserve requirement by the Central Bank of Djibouti (CBD) would be a positive first step to further strengthen the central bank’s liquidity management toolkit.
Directors urged the authorities to move forward with a robust set of structural reforms, including to enhance private sector job creation, tackle informality, improve education and training, and lower telecom and energy costs. Bolstering resilience to climate shocks also remains crucial. Directors emphasized the importance of enhancing the transparency of policy making, especially by improving data quality.
It is expected the next Article IV consultation with Djibouti will be held on the standard 12-month consultation cycle.
Table 1. Djibouti: Selected Economic and Financial Indicators, 2020–29
|
2020 |
2021 |
2022 |
2023 |
2024 |
2025 |
2026 |
2027 |
2028 |
2029 |
|
|
Est. |
Proj. |
|||||||||
|
National accounts |
||||||||||
|
Real GDP |
1.3 |
4.5 |
3.9 |
7.0 |
6.5 |
6.0 |
5.5 |
5.5 |
5.5 |
5.5 |
|
Consumer prices (annual average) |
1.8 |
1.2 |
5.2 |
1.8 |
1.8 |
2.0 |
2.1 |
2.2 |
2.2 |
2.2 |
|
Consumer prices (end of period) |
0.3 |
2.5 |
3.6 |
3.3 |
1.8 |
2.0 |
2.1 |
2.2 |
2.2 |
2.2 |
|
Saving and investment |
||||||||||
|
Fixed capital investment |
29.7 |
29.7 |
30.4 |
30.6 |
30.8 |
31.1 |
31.5 |
32.0 |
32.4 |
33.3 |
|
Non-government |
22.3 |
23.8 |
24.1 |
24.2 |
24.4 |
24.8 |
25.1 |
25.6 |
26.1 |
26.9 |
|
Central government |
7.4 |
7.0 |
6.3 |
6.5 |
6.4 |
6.4 |
6.4 |
6.3 |
6.3 |
6.5 |
|
Gross national savings |
41.2 |
23.1 |
48.0 |
54.2 |
35.9 |
35.1 |
34.4 |
38.0 |
38.2 |
38.5 |
|
Savings/investment balance |
11.5 |
-6.6 |
17.6 |
23.5 |
5.1 |
4.0 |
2.9 |
6.1 |
5.8 |
5.2 |
|
Central government |
||||||||||
|
Revenues and grants |
22.9 |
20.1 |
18.6 |
17.5 |
17.5 |
17.5 |
17.6 |
17.6 |
17.4 |
17.3 |
|
Tax revenues |
11.7 |
11.6 |
11.2 |
10.8 |
11.2 |
11.5 |
11.8 |
12.0 |
12.0 |
12.0 |
|
Nontax revenue |
7.9 |
6.7 |
6.5 |
5.5 |
5.3 |
5.0 |
4.8 |
4.6 |
4.4 |
4.3 |
|
Grants |
3.4 |
1.8 |
1.0 |
1.0 |
1.0 |
1.0 |
1.0 |
1.0 |
1.0 |
1.0 |
|
Expenditure |
25.5 |
23.2 |
20.0 |
20.2 |
20.5 |
20.1 |
19.8 |
19.5 |
19.6 |
19.4 |
|
Current expenditure |
18.4 |
15.8 |
15.1 |
14.1 |
14.4 |
14.0 |
13.7 |
13.4 |
13.5 |
13.3 |
|
Capital expenditure |
7.1 |
7.4 |
5.0 |
6.1 |
6.1 |
6.1 |
6.1 |
6.1 |
6.1 |
6.1 |
|
Domestically financed |
4.0 |
4.7 |
3.0 |
2.1 |
2.1 |
2.1 |
2.1 |
2.1 |
2.1 |
2.1 |
|
Foreign-financed |
3.1 |
2.9 |
2.0 |
3.9 |
3.9 |
3.9 |
3.9 |
3.9 |
3.9 |
3.9 |
|
Covid-19/emergency expenditures |
2.5 |
0.7 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|
Overall balance (commitment basis) |
-2.5 |
-3.1 |
-1.4 |
-2.6 |
-3.0 |
-2.6 |
-2.2 |
-1.8 |
-2.2 |
-2.1 |
|
Change in arrears |
0.1 |
0.4 |
1.2 |
0.4 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|
Overall balance (cash basis) |
-2.4 |
-2.7 |
-0.3 |
-2.3 |
-3.0 |
-2.6 |
-2.2 |
-1.8 |
-2.2 |
-2.1 |
|
Monetary sector |
||||||||||
|
Broad money |
19.4 |
5.3 |
-1.7 |
3.2 |
6.3 |
5.9 |
6.0 |
6.1 |
6.7 |
6.7 |
|
Net foreign assets |
20.1 |
-2.4 |
-7.7 |
0.8 |
2.6 |
2.2 |
2.7 |
2.5 |
2.7 |
2.6 |
|
Net domestic assets |
-0.7 |
7.7 |
6.0 |
2.4 |
3.7 |
3.7 |
3.3 |
3.6 |
4.0 |
4.0 |
|
Of which: Claims on government (net) |
0.4 |
2.3 |
-0.6 |
0.0 |
0.0 |
-0.2 |
-0.3 |
-0.3 |
-0.2 |
-0.2 |
|
Of which: Claims on non-government sector |
2.4 |
2.8 |
5.8 |
2.5 |
3.7 |
3.8 |
3.9 |
4.0 |
4.1 |
4.3 |
|
Credit to non-government (in percent of GDP) |
26.3 |
26.9 |
28.6 |
28.1 |
28.2 |
28.4 |
28.6 |
28.9 |
29.3 |
29.9 |
|
External sector |
||||||||||
|
Current account balance |
366 |
-224 |
656 |
946 |
223 |
187 |
148 |
334 |
344 |
328 |
|
(In percent of GDP) |
11.5 |
-6.6 |
17.6 |
23.5 |
5.1 |
4.0 |
2.9 |
6.1 |
5.8 |
5.2 |
|
Underlying current account balance 1/ |
87 |
-224 |
172 |
554 |
-77 |
-113 |
-152 |
34 |
44 |
28 |
|
(In percent of GDP) |
2.7 |
-6.6 |
4.6 |
13.8 |
-1.8 |
-2.4 |
-3.0 |
0.6 |
0.7 |
0.4 |
|
External public and publicly guaranteed debt |
2,356 |
2,416 |
2,453 |
2,527 |
2,596 |
2,636 |
2,628 |
2,621 |
2,491 |
2,332 |
|
(In percent of GDP) |
74.0 |
71.4 |
65.8 |
62.8 |
59.5 |
55.9 |
51.5 |
47.7 |
42.0 |
36.9 |
|
Foreign direct investment |
158 |
167 |
187 |
183 |
195 |
206 |
218 |
230 |
242 |
256 |
|
(In percent of GDP) |
5.0 |
4.9 |
5.0 |
4.5 |
4.5 |
4.4 |
4.3 |
4.2 |
4.1 |
4.0 |
|
Exports of goods and services (percent change) |
-28.3 |
39.7 |
10.0 |
2.5 |
0.7 |
3.3 |
5.9 |
8.5 |
5.5 |
3.3 |
|
Imports of goods and services (percent change) |
-28.1 |
60.1 |
-7.1 |
-3.5 |
15.4 |
4.0 |
6.8 |
5.7 |
5.6 |
3.7 |
|
Gross official reserves |
677 |
578 |
581 |
573 |
617 |
664 |
713 |
769 |
826 |
890 |
|
(In months of next year's imports of goods and services, exc. re-exports) |
2.9 |
5.5 |
7.2 |
4.7 |
5.1 |
5.3 |
5.6 |
6.1 |
6.5 |
7.0 |
|
Gross foreign assets of commercial banks |
1,753 |
2,026 |
1,751 |
1,782 |
1,808 |
1,820 |
1,845 |
1,861 |
1,890 |
1,915 |
|
(In months of next year's imports of goods and services, exc. re-exports) |
7.6 |
19.3 |
21.8 |
14.7 |
15.0 |
14.5 |
14.6 |
14.7 |
14.8 |
15.1 |
|
Exchange rate (DF/US$, end of period) |
177.7 |
177.7 |
177.7 |
177.7 |
177.7 |
177.7 |
177.7 |
177.7 |
177.7 |
177.7 |
|
Real effective exchange rate (yearly average, 2010=100) |
111.4 |
106.3 |
… |
… |
… |
… |
… |
… |
… |
… |
|
(Change in percent; depreciation -) |
0.9 |
-4.6 |
… |
… |
… |
… |
… |
… |
… |
… |
|
Memorandum items |
||||||||||
|
Nominal GDP (in millions of Djibouti francs) |
566,068 |
601,732 |
662,164 |
714,919 |
775,565 |
837,952 |
906,961 |
977,082 |
1,053,140 |
1,123,567 |
|
Nominal GDP (in millions of US dollars) |
3,185 |
3,386 |
3,726 |
4,023 |
4,364 |
4,715 |
5,103 |
5,498 |
5,926 |
6,322 |
|
Nominal GDP per capita (US dollars) |
3,224 |
3,378 |
3,667 |
3,907 |
4,184 |
4,465 |
4,775 |
5,085 |
5,420 |
5,718 |
|
Population (million) |
0.988 |
1.002 |
1.016 |
1.030 |
1.043 |
1.056 |
1.069 |
1.081 |
1.093 |
1.106 |
|
Sources: Djibouti authorities and |
||||||||||
|
1/ Current account balance excluding |
||||||||||
[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .
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