Djibouti
2007 Article IV Consultation: Staff Report; and Public Information Notice on the Executive Board Discussion

Djibouti’s 2007 Article IV Consultation focuses on the medium-term growth prospects and policies necessary to ensure that growth is broad based and accompanied by sufficient employment creation. Real GDP growth is estimated at 4.8 percent in 2006, driven by fiscal expansion, and a sizable private investment in the port and construction sectors. Consumer price inflation has increased slightly from 3.1 percent on average in 2005 to 3.6 percent in 2006, reflecting mainly increases in the prices of food, housing, water, and electricity.

Abstract

Djibouti’s 2007 Article IV Consultation focuses on the medium-term growth prospects and policies necessary to ensure that growth is broad based and accompanied by sufficient employment creation. Real GDP growth is estimated at 4.8 percent in 2006, driven by fiscal expansion, and a sizable private investment in the port and construction sectors. Consumer price inflation has increased slightly from 3.1 percent on average in 2005 to 3.6 percent in 2006, reflecting mainly increases in the prices of food, housing, water, and electricity.

I. Introduction

1. Djibouti’s performance under a previous PRGF arrangement and two staff-monitored programs (SMP) was mixed (Box 1). Real GDP growth accelerated somewhat in recent years, and consumer price inflation remained low (Figure 1). Fiscal performance was, however, generally weak, although improving in 2005 as the result of expenditure restraint (Figure 2). Cash management was typically strained, with the recurrent emergence of new external and domestic arrears. Implementation of structural reforms has generally been slow.

Performance Under the July-December 2005 Staff-Monitored Program (SMP)

All quantitative fiscal targets were largely met (Table 8). However, mostly because of higher-than-programmed reimbursements of domestic and external arrears, the cash situation of the treasury remained strained resulting in the accumulation of new domestic and external arrears, and some small deviations from the quantitative monetary targets.1 Most external arrears accumulated in 2005 have been repaid in early 2006.

Table 8.

Djibouti: Revised Indicative Targets in the Staff-Monitored Program (SMP)

(In millions of Djibouti francs; unless otherwise indicated)

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Sources: Djibouti authorities; and Fund staff estimates.

On the structural side, only limited progress was made in making the economy more competitive and improving fiscal management. A new Labor Code was adopted in December 2005; most technical work related to the introduction of a single registry file for the civil service has been completed; and several steps were taken towards the introduction of a value-added tax (Table 9).

Table 9.

Djibouti: Structural Benchmarks for the July–December 2005 Staff-Monitored Program 1/

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For the last four structural targets, the outcome only applies to the July–December 2005 program.

1

This accumulation of arrears resulted from a large repayment of arrears towards Arab donors ahead of the December Round Table, and the unbudgeted repayment of one additional month of wage arrears.

Figure 1.
Figure 1.

Djibouti: Real Sector, 2001–06

Citation: IMF Staff Country Reports 2007, 178; 10.5089/9781451810684.002.A001

Sources: Djibouti authorities; and Fund staff calculations.
Figure 2.
Figure 2.

Djibouti: Fiscal Developments, 1998–2006

Citation: IMF Staff Country Reports 2007, 178; 10.5089/9781451810684.002.A001

Sources: Djibouti authorities; and Fund staff calculations.

2. Djibouti’s growth prospects have improved considerably, anchored in the development of the port. The authorities’ strategy has been to foster the involvement of foreign investors and Arab donors in building essential infrastructure. As a result, very large foreign direct investment will help develop services around the port and the expansion of exports over the medium term.

3. The main policy issues discussed during the consultations were (a) the need to ensure growth is broadly based and accompanied by sufficient employment creation, (b) policies to enhance medium-term fiscal sustainability, while reducing poverty, and (c) key financial sector reforms. Djibouti is facing particularly high unemployment and poverty rates—respectively estimated at 50-60 and 42 percent in 2002, albeit informal employment is largely underestimated. A major challenge ahead for Djibouti is therefore to ensure that growth is not confined to an enclave around the port, and results in an increase of local employment and improved fiscal revenue. This will require measures to significantly improve competitiveness and more determined implementation of structural reforms.

II. Recent Developments

4. Growth was strong in 2006. Real GDP growth is estimated at 4.8 percent in 2006, driven by fiscal expansion, and large foreign direct investment (FDI) in the port and construction sectors. The share of investment in GDP grew from 19 percent in 2005 to about 30 percent in 2006. Consumer price inflation is estimated to have risen slightly from 3.1 percent on average in 2005 to 3.6 percent in 2006, reflecting mainly increases in the prices of food, housing, water, and electricity.

5. Broad money growth continued its trend deceleration of the past few years in 2006 at about 10 percent (Figure 3). Domestic liquidity grew, supported by the favorable economic environment and financing conditions. The share of foreign currency deposits in total deposits decreased slightly to 56 percent in 2006. After several years of decline, credit to the private sector increased by about 9 percent, primarily benefiting those sectors with business related to the direct or indirect implementation of foreign direct investment.

Figure 3.
Figure 3.

Djibouti: Money and Finance, 1999–2006

Citation: IMF Staff Country Reports 2007, 178; 10.5089/9781451810684.002.A001

Sources: Djibouti authorities; and Fund staff calculations.

6. A surge in imports largely financed by foreign investment led to a deterioration of the trade and current account balances (Figure 4). As a consequence the external current account is estimated to have shifted from a small surplus in 2005 to a deficit of 9 percent of GDP in 2006. However, the large capital and financial account surplus has more than offset the deficit in the current account, resulting in an increase in gross official reserves to US$117 million at end-2006 (equivalent to 3.2 months of imports of goods and services and a currency board cover of 109 percent).

Figure 4.
Figure 4.

Djibouti: External Sector, 2001–06

Citation: IMF Staff Country Reports 2007, 178; 10.5089/9781451810684.002.A001

Sources: Djibouti authorities; and Fund staff calculations.

7. The Djibouti franc has continued to depreciate in real effective terms in 2006 but competitiveness remains weak (Box 2). Tentative staff’s estimates of the equilibrium real effective exchange rate suggest that the actual real effective exchange rate was substantially overvalued in the 1990s (about 40 percent above the equilibrium rate in 1994–96), but the gap with the equilibrium rate has since narrowed significantly, as a result of higher efficiency and productivity of the port and the depreciation of the U.S. dollar vis-à-vis the Euro since 2001.1 These estimates do not, however, take into account recent and projected future current account deficits and the expected sharp increase in external debt over the medium term. More generally, a variety of indicators suggest that competitiveness remains weak, as reflected by high electricity, labor, and other domestic production costs, low skill levels, a labor productivity negatively affected by khat2 consumption, and a weak institutional environment

Djibouti: Competitiveness, 1980–2006

uA01fig01Sources: Djibouti authorities; World Bank; and Fund staff calculations and estimates.1/ Estimates are derived using coefficient estimates in IMF’s Working Paper No. 06/236, which applies Edwards’ methodology to a panel of WAEMU countries. Caveats are discussed in paragraph 7.

8. The fiscal stance turned from slightly restrictive in 2005 to strongly expansionary in 2006. The base fiscal deficit—domestic revenues minus domestically financed spending—widening from 2 percent of GDP in 2005 to 7.1 percent in 2006, as outlays related to regional elections and the summit of Common Market for Eastern and Southern Africa (COMESA) countries were only partly offset by the good revenue performance. The overall fiscal balance on a commitment basis also worsened slightly from a surplus of 0.2 percent of GDP in 2005 to a deficit of 2.4 percent in 2006, despite higher payments from the United States for the lease of their military base. The stock of domestic arrears increased by 0.2 percent of GDP in 2006.

9. After a period of downsizing with the closure of troubled banks, the banking sector has been rapidly expanding. The banking sector is well capitalized and profitable, and banks have progressively reduced their portfolio of nonperforming loans. The arrival of two new foreign banks in 2006, with four more slated in 2007, is expected to foster competition by reducing borrowing costs and widening the range of financial instruments such as off-shore and Islamic type products, and instruments for small- and medium-sized enterprises, away from traditional trade financing.

10. The implementation of structural reforms remained weak. The adoption of a new—more flexible—labor code in December 2005 is yet to be enforced by the adoption of implementation decrees and the renegotiation of sectoral collective agreements. The single registry file for the civil service is well-advanced, but not yet implemented. A civil service reform was initiated in early 2006, but the physical audit of the civil service has not been finalized, and the subsequent phases, the organizational and strategic audit are yet to start.

III. Policy Discussions

11. Medium-term growth prospects have improved considerably as a result of the government’s development strategy to transform Djibouti into a trade and services platform for the COMESA region, centered around a modern deepwater port (Box 3). This made it possible to attract at least US$1.4 billion (equivalent to 180 percent of 2006 GDP) of confirmed foreign financed investment, mostly private, over 2005–11.

12. The authorities are determined to ensure that growth is not limited to an enclave around the port, and that it generates sufficient employment for all Djiboutians and helps reduce poverty. In this context, the president announced in January 2007 a “National Initiative for Social Development” that aims at promoting basic social services particularly to the vulnerable segments of the population, and modernizing production to create more jobs. The mission welcomed the initiative, and encouraged the authorities, with the assistance of the World Bank, to translate it into a time-bound action plan with specific benchmarks defined within a medium-term fiscal framework possibly in the context of the preparation of a draft new PRSP. The mission also urged the authorities to maintain macroeconomic stability, and to implement decisively the structural reforms needed to foster the development of small- and medium-sized enterprises.

Growth Prospects and Key Challenges in Djibouti

Building on its strategic location on the horn of Africa and political stability, Djibouti has succeeded in attracting at least $1.4 billion of confirmed FDI and loans from mostly Arab creditors over 2005–11 (equivalent to 180 percent of its 2006 GDP).1/ These investments are anchored on the development of the port, managed by Dubai Ports World (DPW), and are aimed at transforming Djibouti into a regional service hub through the creation of a modern deep-sea port (with a 240,000 cubic meters storage oil terminal, a container terminal, and a bulk terminal); an upgrade of Northern and Southern roads to Ethiopia, and new access roads to Northern parts of the country; the modernization of the railway to Ethiopia under private management by COMAZAR; the transformation of the airport in a regional cargo hub; and increased competition in telecommunications. These large investments will put the economy on a higher growth path in the range of 5–7 percent annually for the next few years.

uA01fig02Sources: National authorities and Fund staff projections.

The main growth sectors are:

  • Cattle trade for up to 4 million of sheep, camels, and cows per year, from Djibouti, Ethiopia, Kenya, and Somalia, to Saudi Arabia, and potentially other Middle-Eastern countries such as Egypt, Jordan, and Syria;
  • Tourism sector with the construction of one 5-star hotel (to be expanded to 1,000 rooms) and potentially several other 4- and 5-star hotels, and the development of diving sites and casinos;
  • A commercial and industrial Free Trade Zone (FTZ) around the port expected to attract businesses currently in Dubai FTZ to cater for the COMESA market;
  • Construction of private housing and industrial buildings;
  • Banking system with the establishment of at least six new banks, in addition to the two existing French bank subsidiaries, and the provision of new financial products, such as Islamic financing and possibly off-shore banking for the region.

There are, however, considerable challenges ahead to ensure a steady flow of FDI, and generate broad-based, pro-poor growth that is accompanied by the creation of sufficient productive employment opportunities for the local labor force:

  • Continued commitment to macroeconomic stability in the face of large capital inflows, particularly a prudent fiscal stance to contain potential inflationary pressures;
  • Substantial improvement in external competitiveness;
  • Development of the private sector outside of the FTZ, in particular the creation of small- and medium-sized enterprises;
  • Other structural reforms, including reduction in the production cost of electricity; training of the labor force to meet new market needs; and improvement in the business environment and the judiciary system.
1/

Loans are at concessional terms with terms varying from interest rate of 0.75 percent, 10 year grace period, and 50 year maturity, to interest rate of 3 percent, 5 year grace period, and 20 year maturity.

13. Medium-term growth prospects are not without risks. A possible worsening of the political and security situation in Somalia and in the rest of the region could adversely affect Djibouti’s development prospects, which are highly dependent on regional trade. In addition, sustaining high levels of investment will require sounder and more effective institutions. On the positive side, the current favorable growth prospects could be considerably enhanced if an oil refinery project of $4–6 billion (equivalent to 7–9 times the 2006 GDP), with a capacity of 250,000 barrels a day, currently under discussion with potential investors, is firmed up.

A. Fiscal Policy

14. Fiscal policy in 2007 will continue to be expansionary. The overall deficit is projected to widen to 3.4 percent of GDP, reflecting planned disbursements of investment loans from Arab donors. The base deficit is assumed to narrow to 3.7 percent of GDP, mostly as result of keeping the wage bill constant in real terms, and limiting expenditure on goods and services to their medium-term level (excluding the one-time spending related to the COMESA summit in 2006). Tax revenues are projected to remain constant in terms of the GDP outside of the FTZ. The authorities also intend to slow down the repayment of domestic arrears to DF 1.2 billion per year, and to increase somewhat the stock of government deposits at banks to facilitate cash management.

15. The authorities aim at a modest reduction of base fiscal deficit in the medium term. The staff argued that this would leave little room for potential slippages, and that the base fiscal balance should be in surplus over the medium term. This would ensure sufficient rebuilding of government reserves at the central bank to help avoid the recurrent emergence of arrears, and allow the repayment of accumulated domestic arrears in line with the original 10-year plan adopted in 2002.

16. The authorities intend to review the overall tax framework with a view to facilitate the creation of new enterprises, starting with the introduction of a value-added tax (VAT) and a Common External Tariff (CET) to replace the existing consumption tax, in the context of the COMESA (Box 4). In cooperation with customs from Dubai and with the help of external technical assistance, they also intend to strengthen revenue administration. The staff concurred on the need for an in-depth review of the tax system ahead of the introduction of a VAT, and against the backdrop of a potential erosion of the tax base resulting from advantages granted in the context of the FTZ.

Tax Reform and the Introduction of VAT

In line with their commitment with the COMESA and the European Union under the Economic Partnership Agreement, the authorities are planning to adopt a Common External Tariff (TEC) and a Value-Added Tax (VAT) in 2008–09 to replace the existing consumption tax.

In that context, the authorities have made some progress in improving tax administration, most notably through the modernization of the department of indirect revenues with the introduction of the MIRSAL and SAS software, and an improvement in the functioning of the Large Taxpayer Office (LTO).

Several key measures need to be taken before the introduction of the VAT, including:

  • In the tax policy area, the adoption of the structure of the CET, the revision of exemption regimes, and the determination of the rates for the VAT;
  • In the tax administration area, the enhancement of the LTO, the adoption and implementation of a strategy to improve tax compliance and recover tax arrears, and enhanced cooperation between customs and tax departments.

A permanent project team in charge of the introduction of the VAT, with external technical assistance, and a clear timetable, is also essential.

17. On the expenditure side, the staff urged the authorities to take additional measures to reduce the size of the wage bill to less than 10 percent of GDP to reduce the base fiscal deficit and finance potential additional spending entailed by the National Initiative for Social Development. While the authorities noted that several measures were currently being contemplated to contain the public wage bill, including increasing the number of hours worked by teachers and possibly extending it to the entire civil service, laying off ghost workers, and rationalizing the system of indemnities, they indicated that no political decision had yet been taken. The staff also urged them to effectively implement the ongoing civil service reform with technical assistance of the World Bank, with a view to reducing the size of the wage bill and increasing substantially productivity, while ensuring that developmental and social needs are covered and that the sustainability of the pension funds is ensured.

18. The authorities indicated that negotiations were under way to purchase oil at a preferential price from Arab countries, and that subsidies or transfers to the Electricity Company would be therefore halted, and electricity tariffs would not be raised further. A grant of about US$7 million had already been received in 2006 for the purchase of fuel in July and August. Investment financed by Arab donors would also help replace inefficient turbines. The staff underscored that if no agreement was reached on preferential oil prices for the electricity company, substantial spending cut elsewhere (up to 1 percent of GDP) will be needed to avoid raising further electricity tariffs, which would hurt the economy and the poor. It also stressed the need to develop a strategy to substantially reduce electricity costs and put the electricity company on a sound financial footing. The authorities indicated that they intended to divest industrial public enterprises.

19. The staff urged the authorities to strengthen considerably public financial management and fiscal transparency in order to avoid unbudgeted expenditures and the recurrent emergence of arrears by tightening cash management, streamlining government accounts with a view to introducing a single treasury account, incorporating extra budgetary funds and accounts in the budget, revising budget classification in line with 2001 GFS Manual, and reinforcing controls on budget execution. The staff also stressed the need to develop a medium-term budget framework. The authorities noted that they will review the bidding process for public projects with the assistance of the World Bank.

20. The authorities concurred with the staff that the ongoing rapid accumulation of new debt put the country at a high risk of debt distress (Appendix I). Notwithstanding the fact that most of the projected investment is privately financed, the stock of public debt would increase substantially from 56 percent of GDP in 2006 to 71 percent in 2011. The staff therefore urged the authorities to reevaluate the prioritization of new projects and their effectiveness in reducing poverty in the context of their forthcoming medium-term strategy. It also stressed the need to receive external financing mostly in the form of grants or highly concessional loans, and to strengthen considerably debt management, including through the development of a medium-term debt strategy.

B. Exchange Rate, Monetary, and Financial Policies

21. The authorities view the currency board arrangement as appropriate to maintain financial stability and to develop Djibouti as a financial center. They noted that the currency board and stable parity since 1973 have helped maintain low inflation, attract large deposits from neighboring countries, and encourage a large flow of foreign investment. The staff agreed that maintaining the currency board arrangement—as opposed to moving to a more flexible exchange rate policy—would be more appropriate at present in view of the high degree of dollarization in the economy and the limited development of financial markets. However, staff noted that despite recent developments further improvement in competitiveness is needed, and this will require macroeconomic and structural measures (Box 2).

22. The authorities view the development of monetary instruments as useful to mitigate possible inflationary pressures in coordination with tighter fiscal policy. The staff urged them to consider introducing new instruments such as reserve requirements within the framework allowed by the Banking Law, financial securities issued by the central bank. To preserve the integrity of the currency board, which does not allow for the financing of government deficit, the authorities would not favor the issuance of Treasury bills. Increased competition among banks should also lead to a reduction of the spread between lending and deposit rates.

23. The authorities are aware of the challenges stemming from the expansion of the banking system, particularly with regard to Islamic and offshore operations. They view these developments as potentially stimulating competition among banks and widening the offer of financial products. The staff reiterated the importance of strengthening the financial sector. In this context, it supported the authorities’ request for an evaluation program under the joint Fund-World Bank Financial Stability Assessment Program, scheduled for the Fall 2007, to assess the vulnerabilities of the newly enlarged banking system, and develop recommendations regarding its architecture.

23. The authorities concurred on the need to strengthen banking supervision. The staff underscored the importance of (i) amending the banking law to incorporate accounting and regulations standards appropriate for banks that operate in accordance with Islamic principles; (ii) conducting risk self assessments of banks; (iii) improving the central bank’s staffing and staff skills in banking supervision and draw a plan for more regular onsite and offsite supervision; (iv) developing an early warning system to detect bank vulnerability and crisis situations; (v) granting banking licenses in line with Basle core principles; and (vi) developing an action plan to deal expeditiously with troubled banks. The authorities also intend to take steps to modernize the payments system.

24. The authorities are taking steps to strengthen Anti-Money Laundering regulations, notably to incorporate references to the financing of terrorism with the assistance of the United Nations Office on Drugs and Crime. The mandate of the Financial Intelligence Unit in place at the Central Bank since 2006 will also be clarified.

C. Structural Reforms and Poverty Reduction Strategy

25. Discussions on structural issues focused on reforms needed to enhance competitiveness and on the authorities’ Poverty Reduction Strategy (PRS). The staff, in coordination with the World Bank, stressed the need to develop without delays an overall strategy in the energy sector to reduce production costs and integrate various ongoing initiatives, such as the planned connection with the Ethiopian grid, the installation of wind farms, the development of geothermal energy, and the possible installation of an oil refinery. Reducing energy costs is also important to give to the poor greater access to basic services. The staff welcomed the adoption of the new labor code as a first step towards enhancing the flexibility of labor markets, and urged the authorities to speed up its full implementation. The staff also underscored the need to enhance the efficiency of the judiciary system.

26. With the technical assistance of the World Bank, the authorities are finalizing a Progress Report for the first PRS paper covering the period 2004–06. A draft full PRS paper covering the period 2008–10 is expected to be finalized by end-2007, and a full PRSP will be prepared in 2008 on the basis of a new population census and household income and expenditure survey.

D. Data and Other Issues

27. Data provision is barely adequate for surveillance purposes. Weaknesses are particularly significant in the area of national accounts, the trade balance, and external debt management. In addition, key data, particularly inflation and fiscal data, are produced with considerable lag. The staff welcomed the authorities’ metadata submissions, which will eventually lead to Djibouti’s participation in the General Data Dissemination System.

28. Djibouti participated in its first WTO trade policy review in 2006. Although some progress was recognized by the WTO, several concerns were raised, such as Djibouti’s high consumption tax which is not paid on domestically produced goods and services. This concern should be allayed by the planned introduction of a value-added tax (VAT) by 2008–09.

29. The authorities have expressed the wish to begin discussions on a PRGF-supported program. They consider such a program as potentially enhancing Djibouti’s attractiveness to foreign investors and helping mobilize donor assistance to reduce poverty.

IV. Staff Appraisal

30. Medium-term growth prospects are favorable, but may not be sufficient to lead to a significant reduction in unemployment and poverty. While the authorities’ strategy to attract foreign direct investment is starting to bear fruit, reforms to enhance Djibouti’s competitiveness and prudent economic policies are critical to ensure a broad-based growth that is accompanied by sufficient employment creation. It is important that these challenges be addressed in the new National Initiative for Social Development.

31. Containing potential inflationary pressures and ensuring fiscal and debt sustainability will require a cautious fiscal stance. In light of the erosion of the tax base related to the FTZ regime, it is essential to enhance tax revenues by a simplification of the tax system, a reduction of tax exemptions, and effective preparation for the introduction of the VAT. The size of the wage bill should be reduced over time by a decisive implementation of the ongoing civil service reform, including the elimination of all ghost workers and putting in place meaningful controls on hiring. It is also essential to strengthen debt management in the period ahead given the high risk of debt distress.

32. Greater fiscal discipline and transparency is needed through strict adherence to the budget. Keeping expenditure within the budget ceiling is particularly important given the risk posed by possible losses of the electricity company. Cash management should also be greatly improved, and the accumulation of any new external or domestic arrears avoided.

33. The rapid expansion of the financial system is expected to lead to increased competition, but will require a strengthening of the role of the central bank. In particular, it is essential that the central bank reinforces substantially its supervision capacities, and that central bank and banking laws and regulations be adapted to tailor for the introduction of new financial instruments. The central bank should also start developing monetary policy instruments.

34. The staff agrees with the authorities’ decision to maintain the existing peg to the dollar under the currency board arrangement—as opposed to moving to a more flexible exchange rate policy—given the high degree of dollarization of the economy, the limited domestic financial markets, and the lack of available monetary instruments. However, while improving in recent years, competitiveness of the economy needs to be strengthened further through macroeconomic and structural reform measures. The latter should include, inter alia, the adoption of a strategy to reduce electricity production costs, full implementation of the new labor code through the completion of sectoral collective agreements, improvement in the functioning of the judiciary, and good governance.

35. Improving the statistical base is essential to facilitate the formulation and monitoring of macroeconomic policies. The development of an effective strategy to alleviate poverty and reduce unemployment will also be greatly facilitated by the planned population census, and labor market and household income and expenditure surveys.

36. Regarding the authorities’ wish to begin discussions on a PRGF-supported program, staff agrees that such program would enhance prospects of structural reforms. While discussions could be initiated as soon as key structural benchmarks not met under the 2005 SMP have been implemented and the authorities have prepared a medium-term reform strategy, agreement on a potential new PRGF arrangement would require the authorities to produce a new PRSP document, and on agreement on measures to improve data provision, strengthen fiscal discipline, and enhance external competitiveness.

37. It is proposed that the next Article IV consultation discussions with Djibouti be held on the standard 12-month cycle.

Table 1.

Djibouti: Selected Economic and Financial Indicators, 2003–07

(Quota: SDR 15.9 millions)

(Per-capita GDP: $894)

(Unemployment rate: 56 percent (2002))

(Poverty rate: 42 percent (2002))

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Sources: Djibouti authorities; and Fund staff estimates and projections.

Includes external arrears on amortizations.

Domestic arrears include wage arrears and arrears to private and public suppliers for goods and services, to the pension fund, and to public enterprises. External arrears include arrears on interest only (arrears on principal are counted as an item of “external financing”).

Defined as domestic revenue minus expenditure financed from domestic sources.

Includes external arrears and debt owed to Italy and Spain.

Gross foreign assets of the Central Bank of Djibouti (CBD), in percent of monetary liabilities (reserve money and government deposits at CBD).

Table 2.

Djibouti: Central Government Fiscal Operations, 2003–07

(In millions of Djibouti francs)

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Sources: Djibouti authorities; and Fund staff estimates and projections.

Projections are based on the 2007 budget.

Excluding the French contribution.

Previously included in transfers.

Estimates for 2006 are preliminary, and reflect mostly expenditure related to the COMESA meeting in November 2006. Some of this spending might need to be reclassified as investment expenditure.

Excluding housing subsidies. In 2006, it includes subsidies to the EDD for DF 500 million to cover losses incurred in 2005. These subsidies are not projected to reoccur in the medium term, as the EDD intends to contain costs by purchasing oil at concessional prices from Arab donors, as in 2006, and by developing alternative sources of energy.

For 2007, it is assumed that the government will repay all outstanding arrears, excluding those relating to debt toward Spain and Italy that has not been restructured.

Defined as domestic revenue minus expenditure financed from domestic sources.

Table 3.

Djibouti: Central Government Fiscal Operations, 2003–07

(In percent of GDP)

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Sources: Djibouti authorities; and Fund staff estimates and projections.

Projections are based on the 2007 budget.

Excluding the French contribution.

Previously included in transfers.

Estimates for 2006 are preliminary, and reflect mostly expenditure related to the COMESA meeting in November 2006. Some of this spending might need to be reclassified as investment expenditure.

Excluding housing subsidies. In 2006, it includes subsidies to the EDD for DF 500 million to cover losses incurred in 2005. These subsidies are not projected to reoccur in the medium term, as the EDD intends to contain costs by purchasing oil at concessional prices from Arab donors, as in 2006, and by developing alternative sources of energy.

For 2007, it is assumed that the government will repay all outstanding arrears, excluding those relating to debt toward Spain and Italy that has not been restructured.

Defined as domestic revenue minus expenditure financed from domestic sources.

Table 4.

Djibouti: Monetary Survey and Banking Sector Indicators, 2003–07

(End-of-period, in millions of Djibouti francs; unless otherwise indicated)

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Sources: Djibouti authorities; and IMF staff estimates and projections.
Table 5.

Djibouti: Balance of Payments, 2003–11

(In millions of dollars, unless otherwise indicated)

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Sources: Data provided by the authorities; and IMF staff estimates and projections.

The increase since 2007 derives from enhanced exports of cattle and fish.

Includes value-added produced in the free-trade zone.

The increase in imports during the projection period reflects rising investment on the new port facility and free zone, as well as imports of cattle for re-export.

Includes the French and U.S. contributions for the military bases.

Previously counted as errors and omissions.

Outflows in 2003 reflect an exceptional repatriation of illegal immigrants (authorities’ estimates).

Reflects FDI on oil terminal, the new port facility, the free zone, and other projects (hotels, cattle exports, etc).

Including repayments to the IMF.

Includes both changes in overdue and non-overdue obligations, secured debt relief, and program financing from IMF, AMF, World Bank, and AfDB. Positive values after 2006 are related to the accumulation of arrears on debt service obligations to Spain under dispute.

Equal to the NFA of the banking system minus gross external debt.

Based on obligations after rescheduling.

Table 6.

Djibouti: Medium-Term Macroeconomic Projections, 2005–11

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Sources: Djibouti authorities; and Fund staff estimates and projections.

Includes external arrears on amortizations.

Domestic arrears include wage arrears and arrears to private and public suppliers for goods and services, to the pension fund, and to public enterprises. External arrears include arrears on interest only (arrears on principal are counted as an item of “external financing”).

Defined as domestic revenue minus expenditure financed from domestic sources.

Table 7.

Djibouti: Financial Soundness Indicators, 2000–06

(In percent unless otherwise indicated)

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Sources: Central Bank of Djibouti; and Fund staff estimates.

Nonperforming loans include three loan classifications: watch, doubtful, and loss.

Maximum single borrower limit is defined as 25 percent of capital (K3-1).

From 2000-03, three banks reporting; from 2004 onward two banks reporting.

Table 10.

Djibouti: Selected Income and Social Indicators

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Sources: Djibouti authorities; and Fund and World Bank staff estimates.

Data correspond to 2003.

1985.

WDI data, in line with recent updates by the United Nations Population Division.

1991

2004