IMF Executive Board Concludes 2024 Article IV Consultation with Djibouti
IMF News, June 4, 2024
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- Published: June 4, 2024
Overview and recent developments
- The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation 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 is cautiously optimistic for 2024 and the medium-term but subject to considerable uncertainty from regional risks, including potential trade disruptions.
- Stronger-than-expected trade from Ethiopia could support growth; fully addressing the debt burden could improve debt sustainability and create fiscal space.
Executive Board assessment and priorities
- Directors agreed with the thrust of the staff appraisal and welcomed the 2023 recovery driven by expansion in port activities, train traffic, construction, and energy production.
- Directors noted considerable external risks, including:
- Ethiopia's economic trajectory,
- possible increases in regional migration and refugees,
- potentially increased disruptions in the Red Sea.
- Directors emphasized the need for concerted efforts to:
- address fiscal vulnerabilities,
- enhance governance,
- boost job creation,
- implement structural reforms.
- It is expected the next Article IV consultation with Djibouti will be held on the standard 12-month consultation cycle.
Fiscal policy, debt, and tax policy recommendations
- Directors highlighted the need for a comprehensive long-term strategy to address fiscal vulnerabilities.
- The debt service moratorium with China provides a window of opportunity for Djibouti to engage with creditors transparently on a strategy to fully address the unsustainable debt burden.
- Directors supported increasing the capacity of fiscal institutions to:
- enhance tax collection,
- improve policy coherence.
- Recommended fiscal measures include:
- careful review and rationalization of tax incentives and VAT exemptions,
- ensuring that revenues from military base leases reflect their real value,
- better targeting fuel subsidies to free up resources for key social spending.
State-Owned Enterprises (SOEs) and governance
- Directors welcomed authorities' efforts toward reforming State-Owned Enterprises.
- Emphasized the need for better financial oversight and governance of SOEs.
- Noted that the authorities’ upcoming review and restructuring of the administrative SOEs would be an important first step.
- Stressed the importance of building strong and broad-based support and providing adequate resources for successful implementation.
Financial sector and monetary policy
- Directors encouraged improvements in banking regulation and oversight to strengthen the financial sector, especially given the ongoing MENAFATF evaluation.
- 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.
Structural reforms and resilience
- Directors urged the authorities to implement a robust set of structural reforms to:
- enhance private sector job creation,
- tackle informality,
- improve education and training,
- lower telecom and energy costs.
- Bolstering resilience to climate shocks and enhancing transparency of policy making, especially by improving data quality, were also emphasized.
Key statistics (selected figures from Table 1)
- Real GDP growth:
- 2020: 1.3
- 2021: 4.5
- 2022: 3.9
- 2023 (Est.): 7.0
- 2024 (Proj.): 6.5
- 2025 (Proj.): 6.0
- 2026 (Proj.): 5.5
- Consumer prices (annual average):
- 2020: 1.8
- 2021: 1.2
- 2022: 5.2
- 2023 (Est.): 2.0
- 2024 (Proj.): 2.1
- 2025 (Proj.): 2.2
- Fixed capital investment (percent of GDP):
- 2020: 29.7
- 2021: 30.4
- 2022: 30.6
- 2023 (Est.): 30.8
- 2024 (Proj.): 31.1
- 2025 (Proj.): 31.5
- 2026 (Proj.): 32.0
- Gross national savings (percent of GDP):
- 2020: 41.2
- 2021: 23.1
- 2022: 48.0
- 2023 (Est.): 54.2
- 2024 (Proj.): 35.9
- 2025 (Proj.): 35.1
- 2026 (Proj.): 34.4
- Revenues and grants (percent of GDP):
- 2020: 22.9
- 2021: 20.1
- 2022: 18.6
- 2023 (Est.): 17.5
- 2024 (Proj.): 17.4
- 2025 (Proj.): 17.3
- Tax revenues (percent of GDP):
- 2020: 11.7
- 2021: 11.6
- 2022: 11.2
- 2023 (Est.): 10.8
- 2024 (Proj.): 11.8
- 2025 (Proj.): 12.0
- Expenditure (percent of GDP):
- 2020: 25.5
- 2021: 23.2
- 2022: 20.0
- 2023 (Est.): 20.2
- 2024 (Proj.): 20.5
- 2025 (Proj.): 19.8
- Overall balance (commitment basis, percent of GDP):
- 2020: -2.5
- 2021: -3.1
- 2022: -1.4
- 2023 (Est.): -2.6
- 2024 (Proj.): -3.0
- 2025 (Proj.): -2.2
- Broad money (percent change):
- 2020: -1.7
- 2021: 3.2
- 2022: 5.9
- Net foreign assets (percent change):
- 2020: -7.7
- 2021: 0.8
- 2022: 2.6
- 2023 (Est.): 2.7
- Credit to non-government (in percent of GDP):
- 2020: 26.3
- 2021: 28.6
- 2022: 28.1
- 2023 (Est.): 28.2
- 2024 (Proj.): 28.4
- 2025 (Proj.): 28.9
- 2026 (Proj.): 29.3
- Current account balance (in millions):
- 2020: 366
- 2021: -224
- 2022: 656
- 2023 (Est.): 946
- 2024 (Proj.): 223
- 2025 (Proj.): 187
- 2026 (Proj.): 148
- 2027 (Proj.): 334
- 2028 (Proj.): 344
- 2029 (Proj.): 328
- External public and publicly guaranteed debt (in millions):
- 2020: 2,356
- 2021: 2,416
- 2022: 2,453
- 2023 (Est.): 2,527
- 2024 (Proj.): 2,596
- 2025 (Proj.): 2,636
- 2026 (Proj.): 2,628
- 2027 (Proj.): 2,621
- 2028 (Proj.): 2,491
- 2029 (Proj.): 2,332
- External public debt (percent of GDP):
- 2020: 74.0
- 2021: 71.4
- 2022: 65.8
- 2023 (Est.): 62.8
- 2024 (Proj.): 59.5
- 2025 (Proj.): 55.9
- 2026 (Proj.): 51.5
- 2027 (Proj.): 47.7
- 2028 (Proj.): 42.0
- 2029 (Proj.): 36.9
- Gross official reserves (in millions):
- 2020: 677
- 2021: 578
- 2022: 581
- 2023 (Est.): 573
- 2024 (Proj.): 617
- 2025 (Proj.): 664
- 2026 (Proj.): 713
- 2027 (Proj.): 769
- 2028 (Proj.): 826
- 2029 (Proj.): 890
- Nominal GDP (in millions of Djibouti francs):
- 2020: 566,068
- 2021: 601,732
- 2022: 662,164
- 2023 (Est.): 714,919
- 2024 (Proj.): 775,565
- 2025 (Proj.): 837,952
- 2026 (Proj.): 906,961
- 2027 (Proj.): 977,082
- 2028 (Proj.): 1,053,140
- 2029 (Proj.): 1,123,567
- Nominal GDP (in millions of US dollars):
- 2020: 3,185
- 2021: 3,386
- 2022: 3,726
- 2023 (Est.): 4,023
- 2024 (Proj.): 4,364
- 2025 (Proj.): 4,715
- 2026 (Proj.): 5,103
- 2027 (Proj.): 5,498
- 2028 (Proj.): 5,926
- 2029 (Proj.): 6,322
- Population (million):
- 2020: 0.988
- 2021: 1.002
- 2022: 1.016
- 2023 (Est.): 1.030
- 2024 (Proj.): 1.043
- 2025 (Proj.): 1.056
- 2026 (Proj.): 1.069
- 2027 (Proj.): 1.081
- 2028 (Proj.): 1.093
- 2029 (Proj.): 1.106
Source: IMF staff estimates and projections; Djibouti authorities.
