The Executive Board of the International Monetary Fund (IMF) has concluded its 2025 Article IV consultation with Djibouti, endorsing the staff appraisal through a lapse-of-time procedure. This process is part of the IMF’s regular surveillance activities to assess member countries’ economic policies and outlook.
According to the IMF, Djibouti’s economy continues to show steady growth and moderate inflation. The country's performance in 2024 benefited from Ethiopia's large market and strong transshipment activity despite ongoing tensions in the Red Sea region. Fiscal and reserves positions improved over the past year following a brief period of fiscal overruns.
The IMF noted that authorities are prioritizing macroeconomic stability, debt sustainability, and economic diversification to support job creation. Efforts are being made to reduce public debt and rebuild reserves through ongoing debt negotiations and prudent fiscal management. The report highlights that while government revenues remain limited relative to development needs and debt service obligations, some state-owned enterprises (SOEs) have shown profitability. The IMF recommends mobilizing SOE dividends for debt servicing and reserve accumulation, implementing reforms to improve SOE efficiency, standardizing tax regimes to broaden the tax base, curbing non-essential expenditures, and applying a medium-term debt strategy.
Private sector development is seen as crucial for increasing formal employment opportunities. The IMF underscores the importance of investing in health and education to strengthen human capital, reducing tax exemptions significantly, and reforming the energy sector as steps toward more inclusive growth.
The assessment by the Executive Board states: "Djibouti is positioned to leverage its economic resilience to tackle fiscal and development challenges. Djibouti has handled recent shocks well, maintaining solid growth despite Red Sea tensions, with moderate inflation and rising reserves. Logistics investments over the past decade have boosted growth and economic transformation but increased external debt, leaving limited fiscal space considering development needs. In a challenging global climate, the authorities’ focus on macroeconomic stability, debt sustainability, and economic diversification to support job creation is commendable."
Growth is estimated at above 6½ percent of GDP for 2024—driven by increased transshipment activity as well as expansions in construction, commerce, telecommunications, and tourism sectors. Lower international food and energy prices helped keep inflation contained during this period. Substantial fiscal consolidation was achieved in 2024 which supported rebuilding reserves after a decline late last year; however reserve levels remain below monetary base requirements.
Looking ahead, projections indicate continued strong growth at about 6 percent for 2025 before stabilizing near 5½ percent over the medium term—primarily due to sustained demand from Ethiopia for port services. Inflation is expected to remain subdued if global food and energy prices stay stable. However, risks include instability in the Horn of Africa that could increase migration pressures on social services amid tight fiscal conditions; reduced development aid; new competition from other regional ports; or shifts in global policy affecting currency values.
The IMF advises restoring debt sustainability through a combination of further fiscal consolidation measures, SOE reforms including enhanced governance practices such as collecting financial statements from all SOEs for monitoring purposes—and finalizing ongoing debt negotiations. The authorities' commitment to these actions was welcomed by IMF staff who also encouraged reviewing SOE portfolios for potential restructuring or divestment where appropriate.
The Fund recommends strengthening Djibouti’s currency board arrangements by enhancing legal autonomy for its central bank (CBD), gradually implementing higher reserve requirements—and retaining future profits within CBD accounts—to help bolster foreign exchange reserves.
Efforts aimed at accelerating private investment—including improving competitiveness among firms operating under various regulatory regimes—and lowering electricity costs via improved bill collection are seen as important factors supporting broader investment momentum in Djibouti. Strengthening small- and medium-enterprise financing along with educational improvements under national strategies like ‘Vision 2035’ were also cited as necessary for long-term private sector expansion.
Finally, improvements in data quality are considered essential for effective policymaking. The authorities have begun taking steps toward better dissemination of macroeconomic statistics with an eye toward meeting international standards for coverage consistency across national accounts data sets.
Under Article IV procedures,[1] publication of related documents requires consent from Djibouti’s government; a decision regarding publication will be made within 28 days following Board consideration.
[1] Under the IMF’s Articles of Agreement, publication of documents that pertain to member countries is voluntary and requires member consent.