IMF Sees robust growth in Djibouti amid Ethiopia peace deal, but warns of risks
June 5, 2024
The Executive Board of the International Monetary Fund (IMF) disclosed that the November 2022 peace agreement in Ethiopia bolstered the Djiboutian economy.
The Board of Directors emphasized that the debt service moratorium with China provides a window of opportunity for Djibouti to continue to engage with creditors transparently on a strategy to fully address the unsustainable debt burden.
The IMF statement disclosed that growth is expected to have reached about 7 percent in 2023, supported by the rebound in port activity and construction.
Inflation is expected to have averaged around 1.8 percent in 2023 and projected to remain subdued, which is one of the most stable in the world.
The IMF statement stated that the economic outlook remains cautiously optimistic for 2024 and the medium-term albeit subject to considerable uncertainty, “Regional risks, including potential trade disruptions, pose challenges in a context of tight budgetary resources.”
It added that stronger-than-expected trade from Ethiopia could support growth, and fully addressing the debt burden could improve debt sustainability and create fiscal space.
The Executive directors welcomed Djibouti’s recovery in 2023, supported by the peace agreement in Ethiopia, which generated a significant expansion in port activities, train traffic, construction, and energy production.
However, given the considerable external risks, including Ethiopia’s economic trajectory, possible increases in regional migration and refugees, and potentially increased disruptions in the Red Sea, Directors agreed that concerted efforts were needed to address fiscal vulnerabilities, enhance governance, boost job creation, and implement structural reforms.