What are the main achievements of Djibouti’s financial sector in recent years?

OSMAN ALI: Djibouti’s financial sector is comprised of 12 banks with increasingly active portfolios across a number of sectors. The rise in financial services activity after reforms in the early 2000s has led to the implementation of a rigorous regulatory framework. The country has a monetary system that provides a healthy and stable financial environment that will enable operators to mature and demonstrate financial discipline, which should allow for greater regulatory liberalisation of the sector in the future. Given the volume of its collective financial flows and its relevance for almost all parts of the economy, corporate banking is the mainstay of Djibouti’s banking sector.

Since 2016 the central bank has also worked alongside the World Bank and other partners to modernise and digitalise the sector, and over the long term this evolution will allow operators to develop and diversify their product portfolio. Most importantly, with a banking penetration rate of 25% in 2017 and a solvency ratio of 13.93% at the end of 2017, this policy will help consolidate the sector through greater accessibility to banking products.

How attractive is the profile of Djibouti’s banking sector to foreign investors?

OSMAN ALI: To position itself alongside its regional neighbours, there has always been a desire domestically to develop Djibouti’s financial attributes. High standards of transparency, a highly-advanced telecommunications infrastructure and a boost in human resource capability have resulted in a more diverse yet sophisticated financial sector. The arrival of foreign banks has also further boosted sector confidence. Overall, the stability of Djibouti’s dollar-backed monetary system combined with the absence of any exchange restrictions mean the financial system now largely consists of stakeholders with foreign capital.

What mechanisms can COMESA adopt to achieve closer economic and financial integration?

OSMAN ALI: As a founding COMESA member state Djibouti is fully committed to its economic obligations to the bloc and also to its fellow member states, particularly to help boost new collaborative integration processes and programmes within the region. In particular, the Central Bank of Djibouti is strongly committed to the COMESA Monetary Integration Programme. Recently, COMESA has made significant progress in the implementation of trade facilitation mechanisms, such as the yellow card insurance scheme, the individual property declaration document and the regional bond guarantee system.

As monetary integration is fundamental to developing a dynamic common market, COMESA created a regional payment and settlement system to fulfil this objective. The multilateral netting system provides a single interactive gateway for all the central banks of COMESA’s member states to carry out payments through a multi-currency platform. This allows importers and exporters to pay and receive payment for goods and services across all member states, facilitating trade flows through the reduction of transaction costs and the improvement in operational efficiency for stakeholders across the bloc.

In March 2018 Djibouti hosted the 23rd meeting of COMESA’s Committee of Central Bank Governors. Through the coordinated development of fiscal policy and institutional frameworks, the body aims to strengthen monetary and financial integration within the common market. Having said that, despite the strong political and economic ties between Djibouti and countries such as Ethiopia, due to their relative sizes, the extent to which both economies can be closely integrated in terms of trade and monetary policy is limited. This is a common issue across the bloc, and precisely because of this, there is much multilateral progress to be made over the long term.