## IMF Executive Board Concludes 2019 Article IV Consultation with Djibouti

_IMF News, October 23, 2019_

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## Bibliographic details
- Published: October 23, 2019

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### Overview
- On September 30, 2019, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Djibouti.
- The government implemented large-scale investments in transport and logistics infrastructure to position Djibouti as a regional trade and logistics hub; combined with business‑climate reforms, this fueled strong expansion.
- Social indicators improved somewhat, but unemployment and poverty remain high.

### Economic performance and outlook
- Real GDP growth:
  - Averaged close to 7 percent during 2014–17.
  - Slowed in 2017, then recovered to an estimated 5.5 percent in 2018.
  - Projected to remain strong over the medium term, at around 6 percent annually (2019 projection shown as 6.0).
- Inflation:
  - Low, driven by declining food prices.
  - Consumer prices (annual average): -0.8 (2015), 2.7 (2016), 0.6 (2017), 0.1 (2018), 2.2 (2019), 2.0 (2020).
  - Consumer prices (end of period): -1.6 (2015), 2.4 (2016).

### External sector and reserves
- Current account:
  - Experienced large swings driven by inventories associated with re-export activities.
  - Underlying current account balance (excluding re-exports) estimated at -0.8 percent of GDP in 2018 (narrative) and table values: -15.1 (2015), 165.3 (2016), -4.4 (2017), -22.1 (2018), 20.8 (2019), 40.0 (2020).
- Official reserves:
  - Decreased by $112 million in 2018, bringing reserve coverage to 3.2 months of imports (excluding imports for re-exports) (narrative).
  - Gross official reserves (in millions of US dollars): 355 (2015), 398 (2016), 556 (2017), 445 (2018), 422 (2019), 443 (2020), 466 (2021), 480 (2022), 516 (2023), 564 (2024).
  - Reserve coverage (months of next year's imports, exc. re-exports): 3.1 (2015).

### Fiscal developments
- Overall fiscal deficit (broad measure including investment spending for two large projects—railway and water pipeline):
  - Fell from 15.7 percent of GDP in 2015 to 2.5 percent of GDP in 2018.
- Pressures on domestically-financed capital spending due to:
  - Lower budget support.
  - Reduction in the tax-to-GDP ratio due to widespread tax exemptions.
  - Rising debt service costs.
- Revenues and grants (percent of GDP): 26.3 (2015), 24.2 (2016), 23.6 (2017), 23.9 (2018), 23.1 (2019), 21.7 (2020), 20.7 (2021), 20.3 (2022), 19.6 (2023), 19.6? (table shows continuing series—tax revenues listed separately).
- Tax revenues (percent of GDP): 14.2 (2015), 13.9 (2016), 13.5 (2017), 13.3 (2018), 12.9 (2019), 12.7 (2020), 12.3 (2021), 12.1 (2022), 11.9 (2023).
- Overall balance (commitment basis): -15.3 (2015), -8.3 (2016), -4.5 (2017), -2.9 (2018), -1.5 (2019), -1.7 (2020), -2.4 (2021), -0.9 (2022).
- Overall balance (cash basis): -15.7 (2015), -8.6 (2016), -4.6 (2017), -2.5 (2018), -1.8 (2019), -1.9 (2020), -2.7 (2021), -1.1 (2022), -1.2 (2023).

### Debt vulnerabilities
- Public and publicly guaranteed debt:
  - Increased from 34 percent of GDP in 2013 to about 71 percent in 2018 (narrative).
  - External public and publicly guaranteed debt (in millions of US dollars): 1,218 (2015), 1,647 (2016), 1,951 (2017), 2,087 (2018), 2,231 (2019), 2,342 (2020), 2,476 (2021), 2,602 (2022), 2,704 (2023), 2,783 (2024).
  - Debt ratios (percent of GDP): 49.8 (2015), 62.9 (2016), 70.5 (2017), 71.4 (2018), 68.4 (2019), 65.0 (2020), 62.5 (2021), 59.5 (2022).
- Djibouti-Addis Ababa railway project:
  - Delays in operationalizing the project prompted discussions with creditor to restructure the loan.
  - Authorities reached an agreement to smooth the debt repayment profile.
- Staff memo: Overall balance, excluding large projects: -2.0.

### Financial sector and inclusion
- Financial sector remains fragile despite progress in cleaning up banks’ balance sheets.
- Financial inclusion is low.
- Some banks lost correspondent banking relationships (CBRs) with international banks, but new CBRs were rapidly established, preserving financial flows and stability.
- Gross foreign assets of commercial banks (in millions of US dollars): 1,157 (2015), 1,190 (2016), 1,423 (2017), 1,345 (2018), 1,435 (2019), 1,539 (2020), 1,658 (2021), 1,795 (2022), 1,953 (2023), 2,134 (2024).

### Executive Board assessment and policy recommendations
- Directors welcomed strong growth, low inflation, and improved business environment, but noted heightened debt vulnerabilities and high poverty and unemployment.
- Key recommendations and calls:
  - Adopt a multi‑faceted approach to reduce debt vulnerabilities combined with accelerated structural reforms.
  - Develop a medium‑term fiscal policy framework with a policy anchor consistent with debt sustainability.
  - Reduce the pace of borrowing, including strict limits on government guarantees and SOE borrowing.
  - Prioritize concessional financing.
  - Enhance domestic resource mobilization to create fiscal space for poverty‑reducing spending and debt reduction.
  - Design and implement a strategy to reduce tax exemptions and special regimes.
  - Continue Fund assistance on capacity development.
  - Strengthen fiscal governance, including enhancing the public procurement framework and improving SOE governance (implement performance contracts).
  - Deepen structural reforms to achieve broad‑based private‑sector led growth, job creation, and poverty reduction; strengthen contract enforcement and property rights.
  - Reduce production costs, particularly in electricity and telecommunications, and raise skills of Djiboutian nationals.
  - Fully implement the anti‑corruption framework and strengthen institutional capacity to stimulate private investment.
  - Maintain the currency board arrangement as an effective nominal anchor.
  - Implement reforms to enhance external competitiveness given an external position weaker than fundamentals would imply.
  - Strengthen financial sector stability and inclusion, upgrade banks’ regulatory environment, strengthen supervision, and make the AML/CFT framework more effective to limit corruption opportunities and preserve correspondent banking relationships.

### Selected key statistics (exact values from table)
- Real GDP (annual percentage change): 7.7 (2015), 6.9 (2016), 5.1 (2017), 5.5 (2018), 6.0 (2019).
- Fixed capital investment (percent of GDP): 32.4 (2015), 29.9 (2016), 22.8 (2017), 16.6 (2018), 17.1 (2019), 18.4 (2020), 18.3 (2021), 16.2 (2022), 15.2 (2023), 14.7 (2024).
- Gross national savings (percent of GDP): 60.1 (2015), 28.9 (2016), 19.3 (2017), 31.6 (2018), 16.9 (2019), 19.0 (2020), 19.4 (2021), 17.9 (2022), 17.5 (2023), 17.3 (2024).
- Exports of goods and services (percent change): -23.8 (2015), 55.3 (2016), 6.6 (2017), 6.8 (2018).
- Imports of goods and services (percent change): 51.2 (2015), -2.8 (2016), 17.8 (2017), 7.3 (2018), 5.9 (2019).
- Nominal GDP (in millions of Djibouti francs): 434,612 (2015), 465,375 (2016), 491,728 (2017), 519,540 (2018), 562,724 (2019), 608,417 (2020), 657,820 (2021), 711,235 (2022), 768,988 (2023), 831,429 (2024).
- Nominal GDP (in millions of US dollars): 2,445 (2015), 2,619 (2016), 2,767 (2017), 2,923 (2018), 3,166 (2019), 3,423 (2020), 3,701 (2021), 4,002 (2022), 4,327 (2023), 4,678 (2024).
- Population (million): 0.966 (2015), 0.993 (2016), 1.020 (2017), 1.049 (2018), 1.078 (2019), 1.109 (2020), 1.138 (2021), 1.167 (2022), 1.196 (2023), 1.226 (2024).

*Source: IMF Executive Board Concluding Statement, "IMF Executive Board Concludes 2019 Article IV Consultation with Djibouti", October 23, 2019.*

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## References

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- [Djibouti and the IMF](http://www.imf.org/external/country/DJI/index.htm)
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_Source: https://www.imf.org/en/news/articles/2019/10/23/pr19383-djibouti-imf-executive-board-concludes-2019-article-iv-consultation_