Q: Djibouti suspended payments on its debt in late 2022. How are discussions with the country’s creditors progressing over debt restructuring?
A: Conversations are proceeding well; we have had solid and productive talks with our creditors. They understand the impact that external shocks have had on our economy, including the internal conflict in our major trading partner Ethiopia (now thankfully heading towards a resolution), the impact of Covid-19 and then the knock-on effect of the war in Ukraine.
The debt that we have incurred is a productive debt, taken on with a view to paying back all loans on time and in full. But the crises that have affected not just us but much of the world have disrupted the implementation of our plans.
Q: The International Monetary Fund talked about the government’s efforts towards “rebuilding much-needed fiscal space” in response to the tightening of global financial conditions, climate change and the consequences of the war in Ukraine. What will these efforts entail?
A: These policies fall under three main pillars, namely improving revenue collection, enhancing expenditure efficiency and improving governance, all the while investing in human capital and working towards economic growth that is inclusive for all.
Linked to this are our efforts to engage more deeply with partners that maintain military bases in our country, such as China, the US, France and Japan, to ensure that there is greater economic connectivity between our countries.
Beyond our existing strengths in transport and logistics, we are also working hard to attract foreign investment from the US and elsewhere into other key sectors to diversify our economy.
Q: What sectors are you targeting for such foreign investment?
A: The development of our renewable energy capacity is one of the country’s largest priorities going forward. We hope that such green energy projects will help to drive down the cost of electricity, which in turn will help encourage the growth in manufacturing and light industry in the country. Tourism and hospitality are other key sectors. Djibouti is a hidden gem that we hope will appeal to tourists from the US and elsewhere who are looking for adventures in comparatively undiscovered locations.
We are also looking at building up our capacity in both telecommunications – building on our extensive undersea cable infrastructure – and financial services, with a view to becoming a hub for the wider region in both sectors.
Q: There are already a number of key markets in east Africa, such as Kenya and Rwanda, that have established themselves as such hubs in financial services and fintech. How can Djibouti effectively compete in this space?
A: Djibouti has the advantage of being a very stable country and economy, strategically located, with free movement of capital with a currency that is pegged to the US dollar, so we think we can effectively serve the region as a financial hub.
The central bank has strengthened the regulatory environment and made efforts to improve credit allocation
Our banking sector has grown in recent years from just two banks to 13, with more competitors set to arrive soon. The Central Bank of Djibouti has strengthened the regulatory environment and made efforts to improve credit allocation to the wider economy and deepen the penetration of banking services in the country. Further reforms are coming which we hope will make the financial services sector yet more attractive to foreign banks and investors.
Q: How confident are you that the situation in Ethiopia is stabilising? And what impact will events in Sudan have on Djibouti?
A: The situation with Ethiopia is improving very fast, and we are confident that the peace agreement signed in November will be implemented in full. Port activity has started to rebound this year following the peace agreement signing, and we expect a continued recovery in economic activity between Djibouti and Ethiopia over the next two years.
While Djibouti has not to date had a major trading relationship with Sudan, we are strong believers in regional economic integration, and hope to see Sudan integrate further with its neighbours, thereby contributing to and benefiting from greater regional economic growth. The current crisis is a terrible development and we hope that mediation efforts succeed in restoring peace in the country.
