This paper reviews the significant macro-fiscal challenges posed by climate change in
Djibouti and the costs of mitigation and adaptation policies. The paper concludes that
Djibouti is susceptible to climate change and related costs are potentially large. Investing
now in adaptation and mitigation has large benefits in terms of reducing the related costs in
the future. Reforms to generate the fiscal space are therefore needed and investment for
mitigation and adaptation to climate change should be built into the long-term fiscal
projections. Finally, concerted international efforts and stepping up regional cooperation
could help moderate climate-related macro-fiscal risks.
The paper suggests an operationally usable framework for the evaluation of growth
inclusiveness—the inclusive growth framework (IGF). Based on the data on growth, poverty,
and inequality, the framework allows for the quantitative assessment of growth inclusiveness.
The assessment relies on the decomposition of the change in poverty into growth, distribution,
and decile effects, which can be calculated using the Distributive Analysis Stata Package
(DASP). Availability of at least two household surveys is the main precondition for the use of
the IGF. The application of the IGF is illustrated with two country cases of Senegal and
The paper examines the poverty-reducing and distributional characteristics of Djibouti’s economic growth, and discusses policies that might help make growth more inclusive. It covers the period between 2002 and 2013, for which comparable household surveys are available. The main findings are that while in the past decade the overall level of poverty in Djibouti declined, there have been no clear signs of improvements in either equality or growth inclusiveness. Growth has not been inclusive and benefitted mainly those in the upper part of the income distribution. These conclusions should be treated as indicative. Progress in poverty reduction and inclusiveness would require not only sustained high growth but also the creation of opportunities in sectors with high earning potential for the poor. Better targeted social policies and more attention to the regional distribution of spending would also help reduce poverty and improve inclusiveness.