Overview

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Context
Strategy
Results

Djibouti is a small country in which more than 23% of the population lives in extreme poverty. With less than 1,000 km2 of arable land (0.04% of 23,200 km2) and an average annual rainfall of 5.1 inches, Djibouti has a chronic food deficit and is totally dependent on imports to meet its food needs. As such, it is highly sensitive to external shocks such as spikes in food and fuel prices and natural disasters such as floods and droughts. Djibouti’s economy is dependent on foreign financing, Foreign Direct Investments, rents from foreign countries’ military bases, and port services, which capitalize on both the strategic position at the southern entrance to the Red Sea and as Ethiopia’s main import-export route.
Port activities, transport service, and constructions are the driving force of growth. GDP growth is estimated at 6.5 percent in 2016, primarily driven by transport activities, continued capital-intensive activities in port development, and the constructions of the railway to Ethiopia and a new free zone (that was inaugurated on January 3, 2017). Inflation accelerated up to 3.5 percent in 2016 from 2.6 percent in 2015, spurred mainly by demand for housing and services. Fiscal and external deficits are estimated to have improved in 2016, respectively to 15.7 percent of GDP in 2016, from 21.9 percent in 2015 and to 105 percent of GDP in 2016, from 120 percent in 2015, given the softening of capital expenditures and related imports, as the infrastructure projects near completion. FDI remained strong in 2016, estimated at 9.1 percent of GDP, compared to 7.2 percent in 2015, stimulated by industrial development in the new free zone and operations of the newly constructed railway. The banking sector remained weak with deteriorating loan portfolio of commercial banks and rising nonperforming loans (NPLs). The ratio of NPLs to total loans increased from 14 percent in 2013 to 23 percent in 2016. The authorities attribute this to the introduction of stricter loan classification requirements. Nevertheless, foreign reserves remain sufficient for broad money and currency board coverage.
Poverty and unemployment remain a big concern in Djibouti. The most recent national extreme poverty rate was 23 percent in 2013, with rural areas showing higher rates (44 percent). Unemployment remains widespread with the rate reaching 39 percent in 2015 according to official estimates. The rate is higher among women (49 percent) and in rural areas (59 percent). Meanwhile, the labor force participation rate is less than 25 percent.

Last Updated: Apr 01, 2017
The 2014-2017 Country Partnership Strategy combines the resources and expertise of the International Development Association (IDA), International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA). The Strategy supports the government’s vision 2035 to reduce extreme poverty and build the foundations for shared growth by harnessing the country’s human and economic potential. It rests on two pillars—reducing vulnerability and strengthening the business environment—while focusing on institutional strengthening and gender as cross-cutting themes.

In March 2016, a Bank review of the program reflected that progress has been made in the implementation of the ongoing strategy, in particular with reference to strengthening the business environment, creating jobs, supporting rural communities, and increasing access to energy for the population.

As of March 2017, the active portfolio for Djibouti comprises eight IDA projects, for a total commitment of US$81 million and with an undisbursed balance of about $47 million. WBG teams have continued to leverage IDA resources through recipient executed trust funds with a net commitment value of about $21 million and an undisbursed amount of $18 million. Trust-funded activities are fully aligned with, and complementary to, the IDA-funded portfolio. The program – both IDA and trust funds – focuses on social safety nets, energy, rural community development, urban poverty reduction, health, education, governance and private sector development. All projects place particular emphasis on women and youth.

IFC has no active investment portfolio in Djibouti. MIGA has supported one project in Djibouti thus far and conducted a mission in March 2017 to assess a new investment project in the real estate and real estate management services sector.
Social Protection:
An innovative social safety nets project reached over 10,000 women and children who participated in the nutrition program and provided about 400,000 person-days of short-term employment opportunities. The program contributed to diet diversification and improved nutrition practices among beneficiary households and strengthened female empowerment. At project level, an integrated Management Information System covering the nutrition, as well as the workfare component has been developed to ensure efficient implementation of the social safety net project in Djibouti. At the national level, the project is supporting the development of a social registry that will be used by multiple programs and stakeholders, creating a database containing socio-economic/demographic characteristics of the population to target resources to the most needed; the social registry will spearhead, and eventually feed into, a national ID system.

Rural Development:
The ongoing Rural Community Development and Water Mobilization Project (PRODERMO, 2012-2019), is the first project in Djibouti to support small scale fisheries activities. More than 6,122 households benefited from the water mobilized so far and 160 fishermen are benefiting from the recently rehabilitated Ice unit, allowing better fish conservation and improved quality.