Press Release No. 04/202

The following statement was issued in Djibouti by an International Monetary Fund (IMF) mission staff on September 21, 2004:

"An International Monetary Fund (IMF) mission visited Djibouti from September 5 to September 12, 2004 to review recent economic developments in the context of the implementation of the staff monitored program (SMP), covering the period January-December 2004.

"The mission noted that during the first six months of the year covered by the SMP, fiscal performance remained broadly on track and macroeconomic stability was maintained. In particular, the government wage bill remained under control owing to the demobilization of 411 ex-combatants, allowing the hiring of additional staffs in the education and health sectors. At the same time, inflation remained low while economic growth likely slowed down in the first half of 2004 on account of a decrease in transshipment port activity, despite a significant upswing in private investments, such as the Doraleh oil terminal.

"The mission also noted a significant delay in adopting certain structural reforms included in the SMP, particularly a new labor code and an investment code, which were to have been adopted at end-June 2004.

"The mission encourages the authorities to maintain a policy of restraint regarding domestically financed current expenditures during the second half of the year, particularly for goods, services, and transfers, and to take immediate steps to avoid any further delay in the adoption of structural reforms. The authorities indicated that they remain confident that all the SMP objectives can be achieved by year's end despite the delays and the sharp increase in government expenditure that took place in July.

"In the months ahead, Fund staff will continue to work closely with the Djibouti authorities on the implementation of their program of economic and financial reforms."