Interview: Ilyas Moussa Dawaleh

How would you assess the resilience of Djibouti’s economy amid global headwinds?

ILYAS MOUSSA DAWALEH: Despite myriad external shocks, from the Covid-19 pandemic to the war in Ukraine and Ethiopia, the national economy has remained resilient, with growth expected to stand at 3.4% in 2022 and inflation stabilising at 6%. The government’s fiscal measures to protect consumer purchasing power, robust domestic consumption, and respective increases in local trade and energy demand of 15% and 10% cushioned the negative impact of headwinds even as container traffic declined by 8% within a year. The ongoing resolution of the conflict in Ethiopia could offer considerable opportunities for Djibouti to reverse the recent decline in port activity through elevated trade volumes. This regional détente, combined with the implementation of investment under the National Development Plan (NDP) 2020-24, informs the growth forecast of 5.1% in 2023 and a projected 7% in 2024.

Accelerating Djibouti’s industrialisation will be critical to enhancing economic resilience. This is underscored by the service sector’s dominance in the national economy, representing 86% of GDP. The secondary sector, conversely, accounts for 13% of GDP, with the agrifood industry representing 2% of economic activity. Fostering economic resilience through industrialisation is a key priority of the NDP, which promotes financial inclusion through the diversification of production and trade, the development of agro-industrial value chains, the processing of seafood products and investment in free zones – particularly for industry.

What measures could help increase the tax base?

DAWALEH: The informal economy remains the main obstacle to broadening the tax base. Digitalising government services will accelerate formalisation by facilitating closer interactions between the private and public sectors and reducing barriers in regulatory procedures. Similarly, the financial inclusion strategy adopted by the government will reduce the size of the informal economy by expanding access to banking services and microfinance, and reducing gender disparities in the use of financial services. Digital technology will also optimise the collection of public revenue, as observed in other countries, through the dematerialisation of procedures and the electronic filing of taxes.

In what ways can public-private partnerships (PPPs) help to diversify the national revenue base?

DAWALEH: The government’s new growth model promotes a more dynamic private sector that supports national growth. Efforts to support this objective are focused on improving the business environment to attract new investment in potentially wealth-creating sectors such as tourism, fisheries and telecommunications. Moreover, to reduce the use of loans for large-scale investment, the government has introduced a regulatory framework for financing through PPPs. This funding model enables the mobilisation of private capital and deploys private sector expertise to execute investment projects efficiently.

Which efforts are needed to strengthen public debt management in Djibouti?

DAWALEH: The importance of public debt management has been reinforced by the increase in debt service resulting from the debt suspension initiative during the pandemic. Ongoing efforts to decrease public debt and create a fiscal buffer for social spending include improving the profitability of strategic infrastructure, strengthening the governance of state-owned enterprises and enhancing domestic revenue mobilisation. Lastly, the creation of the National Public Debt Committee facilitates the management of debt levels and guides borrowing decisions. At the same time, the recently developed integrated financing framework promotes innovative financing solutions such as bond issuance and the mobilisation of domestic savings.