Press Release No. 22209

IMF Staff Concludes Visit to Djibouti

June 17, 2022

• Following a series of external shocks, port activity in Djibouti remains subdued.
• Rising global commodity prices have added to already significant budget pressures as debt service is set to triple this year with the recent expiration of the G20 Debt Service Suspension Initiative (DSSI).
• Urgent action is needed to create fiscal space for additional social spending, including to support vulnerable households facing higher prices.

Washington DC: An International Monetary Fund (IMF) team, led by Brett Rayner, visited Djibouti from June 12­–16. Discussions covered recent economic developments, the outlook, and progress on key reforms. At the end of the mission, Mr. Rayner made the following statement:

“Following a series of external shocks, the economic recovery in Djibouti appears uneven. While the economy has rebounded from pandemic-related disruptions with growth of nearly 5 percent in 2021, port activity remains weak due to the conflict in Ethiopia and trade disruptions in China. Meanwhile, rising commodity prices are putting additional pressure on the balance of payments and reserves have fallen significantly over the past year. Rising global food prices have also put pressure on inflation, adversely affecting the purchasing power of the population. Growth in 2022 will depend on the resumption of port activity and is tentatively forecast at 3½ percent.

“Rising fuel prices have added pressure on an already strained budget. Debt service is set to triple this year to almost 5 percent of GDP following the expiration of the DSSI. Meanwhile, the authorities have maintained fixed domestic fuel prices in the face of rising global prices. As a result, fiscal revenues are set to contract sharply. The mission advised the authorities to create fiscal space to support vulnerable households faced with rising prices by targeting fuel subsidies and to strengthen cash transfer programs. The mission also encouraged the authorities to urgently review additional measures, including domestic revenue mobilization and continued public financial management and governance reforms, to create space for further social spending and to restore debt sustainability.

“The mission team would like to thank the authorities for the warm hospitality and productive discussions and looks forward to continuing close engagement.”