An International Monetary Fund (IMF) team, led by Esther Pérez Ruiz, recently concluded a visit to Djibouti. The discussions held from December 8 to 12 focused on the country's economic outlook amidst disruptions in the Red Sea and key policy measures aimed at enhancing macroeconomic sustainability and policy credibility.
Esther Pérez Ruiz stated, "Djibouti’s maritime-dependent economy has demonstrated resilience to regional conflicts. Growth in FY24 is projected at a robust 6 ½ percent, driven by increased transshipments as shipping companies navigate Red Sea tensions." She also noted that inflation remains moderate due to efforts by authorities to stabilize energy and food prices amid rising import costs.
The fiscal deficit for FY24 is expected to stabilize at approximately 3 ½ percent of GDP. This stabilization is attributed to reduced interest payments from a debt service moratorium with a major creditor, effective through 2028, which offsets weaker tax revenues and grants. However, international reserves have been declining over the past two years and stood at over three months of imports as of September 2023. This decline requires attention given substantial outstanding external obligations.
Pérez Ruiz highlighted potential risks to Djibouti’s economic outlook: "Limited job creation or the recurrence of droughts could disproportionately affect the poor." On a positive note, stronger-than-expected growth in Ethiopia and resolving Red Sea disruptions swiftly could improve Djibouti's overall outlook.
The authorities are committed to policies promoting macroeconomic sustainability and enhancing policy framework credibility. These include expediting debt negotiations with key creditors, revising military base agreements, enhancing revenue mobilization by shifting from custom duties to inland revenues, and leveraging dividends from profitable state-owned enterprises. Such efforts aim to support the Central Bank's independence under the currency board arrangement, sustaining reserves, exchange rate stability, and inflation control.
Under enhanced monitoring by MENAFATF, reforms are being advanced to maintain a favorable investment climate. To foster inclusive growth and strengthen economic resilience, the government plans cost-effective energy promotion and development of job-rich sectors like tourism as outlined in Djibouti Vision 2035.
"The mission team deeply appreciates the Djiboutian authorities and other counterparts for their warm hospitality, excellent cooperation, and candid discussions," Pérez Ruiz concluded. "We look forward to continued close engagement."