June 25, 2025
The International Monetary Fund (IMF) staff concluded their Article IV mission in Djibouti with preliminary findings on the country's economic status. The statement released highlights that while Djibouti has been effectively managing regional tensions, it faces challenges related to global uncertainties and domestic debt. The IMF staff noted the authorities' plans for significant fiscal consolidation, including leveraging state-owned enterprise dividends and engaging in creditor dialogue.
Djibouti plays a key role in regional stability through maritime security support and humanitarian aid facilitation. Over the past decade, its GDP per capita has doubled due to substantial investments. However, declining government revenues and rising debt service have strained public finances, leading to unsustainable public debt levels and reduced reserves. Economic growth has not translated into sufficient job creation within the formal sector.
In 2024, Djibouti's growth exceeded 6.5 percent, driven by increased transshipments amid Red Sea tensions. Moderate international food and energy prices helped keep inflation stable. The government deficit decreased from 3.5 percent of GDP in 2023 to 2.6 percent in 2024, with reserves starting to recover despite remaining below the monetary base.
Looking forward, Djibouti's growth is projected at around 6 percent for this year but faces risks due to potential regional conflicts and trade policy shifts affecting currency values and inflation rates. Nevertheless, Djibouti has demonstrated resilience through recent shocks such as COVID-19 and various regional crises.
To strengthen economic resilience amidst high uncertainty, Djibouti aims to restore debt sustainability by enhancing fiscal consolidation and improving state-owned enterprises' financial transparency. These efforts include unlocking dividend contributions to the national budget and encouraging private sector growth while protecting vulnerable populations.
A comprehensive fiscal roadmap will focus on broadening the tax base through VAT enhancement, capital income taxation improvements, rationalizing tax exemptions, digitizing tax agencies, and establishing a tax policy unit for better reform efficiency.
Debt negotiations with creditors are ongoing as Djibouti seeks new terms for its liabilities. State-owned enterprises' performance will be crucial for fiscal consolidation efforts following the Sovereign Wealth Fund's dissolution.
The mission commends recent reserve recoveries and urges continued progress in strengthening Djibouti's currency board by amending relevant laws for greater autonomy.
Djibouti is also focusing on inclusivity through private sector development and employment creation initiatives under its education master plan spanning from 2021 to 2035. Plans include diversifying the economy across sectors like logistics, tourism, agribusiness, fisheries while enhancing access to finance and internet services.
“The mission team expresses deep appreciation to the Djiboutian authorities and other counterparts for their warm hospitality, excellent cooperation and candid discussions," stated the IMF representatives during their visit.