Press Release No. 08/151

Press Release No. 08/151

The following statement was issued today in Djibouti:

"A mission of the International Monetary Fund (IMF) led by Mr. Fernando L. Delgado visited Djibouti during June 14-24, 2008 to continue discussions on an economic program that could be supported by the IMF. The mission met with Hon. Ali Farah Assoweh, Minister of Economy, Finance and Planning, in charge of Privatization; Hon. Djama M. Haïd, Governor of the Central Bank of Djibouti; Hon. Moussa Bouh Odowa, Minister of Energy and Natural Resources; and other senior officials, as well as with some of Djibouti's development partners. The mission expresses its gratitude for the open and frank discussions and the warm hospitality offered by the authorities during the mission's stay.

"The authorities and the mission reached understandings on an economic program that could be supported by a new three-year arrangement under the IMF's Poverty Reduction and Growth Facility (PRGF). The overarching goal of the program is to assist the authorities in achieving the National Initiative for Social Development's (INDS) objectives. These include bringing economic growth to high and sustainable levels and reducing poverty by creating an environment conducive to private sector growth through sustained macroeconomic stability, creating fiscal space for increased investments in infrastructure and the social sectors while strengthening external competitiveness, and further developing institutional capacity.

"The economy of Djibouti performed favorably in 2007 and is poised to continue to improve in 2008. Real GDP growth is projected to accelerate from 5.9 percent in 2007 to 6.9 percent in 2008, despite the strong impact of higher food and oil prices on inflation. Consumer price inflation reached 10.3 percent on an annual basis as of end-April 2008. The food and oil crisis is also having a negative impact on fiscal revenue, which the authorities are compensating for through strengthened expenditure discipline and additional external grants. The external position is projected to further strengthen in 2008 despite the increase of the external current account deficit, due mainly to the large flow of foreign direct investment.

"Looking ahead, Djibouti's economic prospects remain favorable, despite the impact of higher oil and food prices. Real GDP is expected to continue to expand at about 7 percent per year over the medium term, owing mainly to large foreign direct investments. However, the near-term challenge will continue to be maintaining price stability and fiscal discipline. We welcome the steps the authorities are planning to take to further strengthen the tax revenue base, budget execution and liquidity management."

"The mission will continue its work in Washington, D.C., in close consultation with the authorities of Djibouti, with a view to bringing the new program to the IMF Executive Board as soon as possible."