## IMF Survey: Djibouti Aims to Be Regional Hub

_IMF News, February 2, 2011_

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**Canonical URL:** [IMF Survey: Djibouti Aims to Be Regional Hub](https://www.imf.org/en/news/articles/2015/09/28/04/53/socar020211a)

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## Bibliographic details
- Published: February 2, 2011

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### Overview
- Djibouti has achieved strong growth in recent years through large foreign direct investment inflows and brisk port activity.
- To realize its goal of becoming a regional transport, trade, and financial hub, Djibouti must become more attractive to private investment while maintaining macroeconomic stability.

### Growth performance and recent outlook
- Growth remained strong despite the global economic crisis, with a modest decline from 5 percent to 4.5 percent expected in 2010.
- The global crisis has affected Djibouti indirectly through lower foreign direct investment and a possible decline in aid flows.
- The $20 million, three-year Extended Credit Facility (ECF) IMF loan was secured by Djibouti in September 2008 to support reforms.

### Strategic advantages and infrastructure developments
- Strategic location: positioned on the Bab El Mandeb straits at the entrance of the Red Sea, halfway between the Mediterranean Sea and the Indian Ocean.
- The port of Djibouti serves as neighboring Ethiopia’s only access to sea.
- Military and security presence: hosts French and U.S. military bases and international anti-piracy operations such as the European Union’s operation Atalanta.
- Recent infrastructure and private investment highlights:
  - A new container terminal at Djibouti’s port built in a public-private partnership with Dubai World expanded the port’s capacity many times over.
  - The new five-star Djibouti Palace Kempinski—owned by Nakheel, a Dubai World company—has boosted tourism and business.

### Social indicators and development challenges
- Unemployment remains stubbornly high at 60 percent.
- Poverty is pervasive despite strong growth.
- United Nations Development Program’s Human Development Index ranking for 2010: 147th out of 169 countries.
- Food security has deteriorated sharply owing to low rainfall over the past four years, and malnutrition has risen.
- High production costs for domestic companies—mainly energy, telecommunications, and labor—limit the benefits of foreign investment.
- Economic activity has been largely confined to the free trade zone and the port, with limited positive spillovers on the rest of the economy.

### Fiscal situation and macroeconomic policy focus
- Authorities incurred a larger-than-expected fiscal deficit in 2009 to address security issues from a border conflict with Eritrea and a social emergency arising from a prolonged drought.
- In 2011, IMF economists noted fiscal discipline and enhancing the budget process as important corrective measures.
- The ECF program aims to:
  - Improve the economy’s competitiveness through lower input costs and a better business environment.
  - Foster macroeconomic stability and improve fiscal discipline.

### Policy recommendations and donor coordination
- Diversify the investor base and develop a strong local private sector by improving competitiveness through a better business environment and lower production costs.
- Work closely with official donors to secure needed concessional financing to support social spending and infrastructure investment.
- Strengthen the budget process to address fiscal shortcomings.

### Banking sector potential
- Banking sector expansion since 2006 has led to increased competition, a wider offer of financial products, more attractive deposit terms, and strong credit growth.
- Potential to become a low-tech, bank-based financial hub by leveraging openness and stability in the region, and exploiting electronic and mobile banking opportunities.
- Opportunities to integrate banking services with port and trade-related financial services, such as insurance and trade credit.
- Required actions for the banking sector:
  - Update the banking regulatory framework.
  - Build greater supervisory capacity, with IMF technical assistance already being supplied.

*IMF Survey: Djibouti Aims to Be Regional Hub — IMF Survey online, February 2, 2011*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [IMF Country Focus](https://www.imf.org/en/news/country-focus)
- [Press release](https://www.imf.org/external/np/sec/pr/2011/pr1103.htm)
- [IMF and Djibouti](http://www.imf.org/external/country/DJI/index.htm)
- [Djibouti’s anti-poverty strategy](https://www.imf.org/external/pubs/cat/longres.aspx?sk=23069.0)
- [Public information notice](https://www.imf.org/external/np/sec/pn/2011/pn1109.htm)
- [IMF program note](https://www.imf.org/external/np/country/notes/djibouti.htm)
- [Extended Credit Facility (ECF) IMF loan](https://www.imf.org/external/np/sec/pr/2008/pr08211.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/socar020211a_