Press Release No. 04/105

Press Release: IMF Executive Board Reviews Djibouti's Poverty Reduction Strategy

June 4, 2004

The Executive Board of the International Monetary Fund (IMF) today reviewed the Joint Staff Assessment of Djibouti's Poverty Reduction Strategy Paper (PRSP) that was conducted by staffs of the IMF and the World Bank, and welcomed Djibouti's PRSP.

At the conclusion of the Executive Board's discussion of Djibouti's PRSP, Mr. Carstens, Deputy Managing Director and Acting Chair, stated:

"Djibouti's Poverty Reduction Strategy Paper (PRSP) provides a comprehensive framework for poverty reduction. National ownership of the PRSP has progressed considerably when compared to the Interim PRSP, through the strengthening of the institutional framework and the broadening of the consultative and participatory process.

"The PRSP recognizes the need to create the conditions for higher and sustainable economic growth and greater job creation by stimulating private sector development and reducing the cost of doing business in Djibouti. It also emphasizes the importance of accelerating human resource development through investment in education, health, including the fight against the HIV/AIDS pandemic, social protection, and reducing gender disparities. The strengthening of both institutional capacity building and governance are also identified as key elements to enhance economic and social development.

"In moving forward, several challenges will need to be addressed, including further refinement of the poverty reduction strategy, better prioritization of policies and projects, and forceful carrying out of structural reforms to improve Djibouti's competitiveness. Other areas in which progress will be needed include strengthening public finances, redirecting public expenditure more toward social expenditures, curbing burdensome administrative procedures, improving the judicial system, making the labor market more flexible, and facilitating investment. A stronger link should be also established between the annual budget process and the medium-term strategy proposed in the PRSP.

"Additional donor support and technical assistance will be critical to achieving the PRSP's objectives. However, given the limits to absorptive capacity and the already relatively large public sector, it will be important to reform the public expenditure management system to ensure that any additional funds provided to finance the development strategy are used effectively," Mr. Carstens said.