Djibouti: 2025 Article IV Consultation-Press Release; and Staff Report

The 2025 Article IV Consultation discuses that Djibouti’s recent and foreseeable growth remains steady with moderate inflation, supported by Ethiopia’s expansive market and strong trans-shipment amid Red Sea tensions. The fiscal and reserves positions improved in 2024 after a brief period of fiscal overruns. In a challenging global climate, the authorities’ focus on macroeconomic stability, debt sustainability, and economic diversification to support job creation is commendable. Djibouti’s priorities are to reduce debt and continue rebuilding reserves, through ongoing debt negotiations and prudent fiscal management. While government revenues are limited compared to spending needs for development and debt service, segments of the state-owned enterprises exhibit robust profitability. Private sector development is key to boosting formal jobs. Enhancing investment in health and education to strengthen human capital, substantially narrowing tax exemptions, and implementing energy sector reforms, are essential elements in building a more inclusive growth model. In order to sustain progress, it is imperative to ensure the effective implementation of the revenue and expenditure measures outlined in the authorities’ 2024–27 Action Plan for fiscal reforms as well as rationalize tax expenditures associated with the derogatory regimes.