Djibouti Economy Facts
Djibouti’s economy is almost entirely based on the service sector, especially revenues from the port, the railway to Ethiopia’s capital Addis Ababa and from the foreign military. The economy has grown rapidly since the turn of the millennium, thanks in large part to money from foreign military bases and new investments in port traffic. However, the income comes only a small elite in the capital.
Despite the growing economy, Djibouti is poor and dependent on foreign aid. The old colonial power France pays about $ 30 million a year for its naval base, one sixth of which goes to the Djiboutian defense and the rest to various development projects. At the same time, the French forces do not have to pay any income tax or import duties.
- Countryaah.com: Major imports by Djibouti, covering a full list of top products imported by the country and trade value for each product category.
The United States pays $ 63 million a year for its base and has also increased its other aid to Djibouti. In recent years, support from Japan, China, the EU and Arab countries, such as Saudi Arabia, has also grown.
In order to grant new loans to the country, the IMF has, among other things, demanded that the government tighten the economy, not least by cutting the public sector and reducing government and foreign debt. Plans are also in place for the privatization of the largest state-owned companies. Demands have also been made for the government to address the widespread corruption.
- Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including DJU which represents the country of Djibouti. Check findjobdescriptions to learn more about Djibouti.
The slow pace of these changes led to the IMF freezing its loans in 2003-2007. After some improvement, the IMF repaid loans in 2008, but the old financial tightening requirements remained. Djibouti could then enter into an agreement with the so-called Paris Club for a debt relief of $ 69 million. An IMF-funded program for poverty reduction, among other things, expired in 2012 with satisfactory results according to the Fund, which has, however, continued to warn of weaknesses in the Djibouti economy: large budget deficits, high indebtedness and deep social and economic gaps in the population.
Not least, the IMF has expressed concern over growing debt to China in the 2010s. Djibouti’s total external debt grew from 97 percent in 2016 to 121 percent in 2019. Most of the increase in debt was made up of loans from China.
Revenues from military bases, railways and ports are primarily a political and economic elite, while nearly a quarter of rural residents live in extreme poverty, according to UN agency Ocha. The IMF states that just over 40 percent of the population is extremely poor. The World Bank is active in the country with projects in, for example, water and electricity supply, agricultural development and poverty reduction.
During the war between Ethiopia and Eritrea in 1998–2000, more and more Ethiopian goods were shipped via the port of Djibouti. Even after the end of the war, Djibouti remained the most important port for Ethiopia’s foreign trade. Djibouti also has Ethiopia’s merchant fleet. In 2009, almost four-fifths of the goods that passed the port were on their way to or from Ethiopia. However, in the summer of 2018, Ethiopia warned that up to two-thirds of the country’s foreign trade would be gradually moved from Djibouti to Eritrea as part of a peace process between the two countries.
The port of Djibouti was privatized in 2000 but was again state-owned in 2018 following a conflict between the state and the private owner. Tax-free zones for businesses and free-trade zones have been created, as well as a new port facility, Doraleh, north of the capital to receive large container vessels. China has, among other things, financed the construction of a port for livestock exports and one for salt exports in Damerjog.
Many French companies have left Djibouti, while the Ethiopian and Chinese companies have become more. Djibouti imports almost all its food, most of it from Ethiopia. When the harvesters in the neighboring country fail, Djibouti also suffers from food shortages and increased prices. In the second half of the 2010, over half of the Djibouti in rural areas suffered from food shortages, according to the UN agency Ocha.
Djibouti has for many years had a deficit in trade with the outside world, that is, imports exceed exports. Exports mainly consist of livestock, hides and skins as well as the re-export of goods from many African countries via the large port. The most important import goods are food, qat (khat; a drug with a narcotic effect such as chewing gum), oil products and machinery. Also the current account (including current account exports and imports of services) is included in the deficit. The Djiboutian franc is tied to the US dollar.
Much of the trade is done with Ethiopia, but the full extent of the exchange is not visible in the official figures. A large part of the trade with the Somali outbreak state Somaliland is also not visible in the statistics. The figures for exports can give a somewhat misleading picture since such a large proportion (80 per cent) is re-export of various goods.
FACTS – FINANCE
GDP per person
US $ 2,050 (2018)
US $ 1 966 million (2018)
6.0 percent (2018)
Agriculture’s share of GDP
2.3 percent (2018)
Manufacturing industry’s share of GDP
4.4 percent (2018)
The service sector’s share of GDP
71.7 percent (2018)
2.2 percent (2019)
Government debt’s share of GDP
48.0 percent (2018)
US $ 2,057 million (2017)
US $ 142 million (2017)
US $ 768 million (2017)
– US $ 294 million (2017)
Commodity trade’s share of GDP
49 percent (2018)
Main export goods
re-export of goods, livestock, hides and skins
Largest trading partner
Ethiopia, Saudi Arabia, China, United Arab Emirates (2016)
President Guelleh re-elected
President Ismael Omar Guelleh from the Issa-dominated RPP is the only candidate in the presidential election and is elected for a second six-year term.