The World Bank In Djibouti

Djibouti is one of the smallest countries in Africa, with an area of 23,200 square kilometers and a population estimated at about 990,000. The size of its economy limits its ability to diversify production and increases its reliance on foreign markets, making it more vulnerable to market downturns and hampering its access to external capital. With less than 1,000 square kilometers of arable land (0.04% of its total land area) and average annual rainfall of only 130 millimeters, Djibouti depends almost completely on imports to meet its food needs. 

Djibouti’s strength lies in its strategic location at the southern entrance to the Red Sea, marking a bridge between Africa and the Middle East. Adjacent to some of the world’s busiest shipping lanes (between Asia and Europe), it hosts military bases for France, the United States, Japan, China, and the North Atlantic Treaty Organization (NATO), as well as for other countries with forces supporting global anti-piracy efforts. 

Djibouti’s economy is driven by a state-of-the-art port complex, among the most sophisticated in the world. Trade through the port is expected to grow rapidly in parallel with the expanding economy of the country’s largest neighbor and main trading partner, Ethiopia. Djibouti has some natural assets that could be used for tourism, untapped marine resources that could support more artisanal fishing, and an infrastructure of undersea telecommunications cables from which it could develop new digital and service industries. Renewable energy could be another source of growth, as Djibouti has geothermal, solar, and eolian potential. 

Djibouti's economy is recovering after the decline observed in 2022. The rebound is mostly driven by renewed trade and logistics demand from its key trade partner, Ethiopia following the signing of a peace agreement between the Ethiopian federal government and the Tigray Rebel movement in November 2022. GDP is slated to increase from 3.1% in 2022 to 4.7% in 2023. Year-on-year inflation has fallen from a high of 11% in July 2022 to a decrease of 1.2% by July 2023. However, Djibouti's fiscal situation is under strain due to diminished tax revenues, recent tax exemptions, and mounting public debt servicing costs. Djibouti's banking sector remains resilient, characterized by stability, increased profitability, and a decline in non-performing loans, even in the face of recent economic shocks. The medium-term economic outlook is positive, with GDP growth projected at 5.1% in 2024 and a further increase to 5.7% in 2025, driven mainly by foreign trade and investments in the public works sector. However, there are looming risks, including the ongoing accumulation of public debt, regional tensions, climatic shocks, and the worsening Middle East conflict, which could potentially disrupt Djibouti's economic stability and growth trajectory.

Last Updated: Dec 18, 2023

The World Bank Group (WBG) approved in September 2021 a new Country Partnership Framework (CPF). The five-year CPF supports Djibouti’s Vision 2035 strategy to reduce extreme poverty and build the foundations for shared growth by harnessing the country’s human and economic potential. It addresses the country’s immediate needs and leverages the WBG’s ongoing engagement in inclusive private sector led growth, human capital development, strengthening governance and institution, supporting much needed regional infrastructure in transport, energy, and digital to enhance regional integration, boost productivity and job creation, while promoting gender parity, and supporting climate actions.

As of November 2023, Djibouti’s active portfolio comprised 21 IDA projects worth about US$452 million. Bank teams have leveraged IDA resources through recipient-executed Trust Funds, with a net commitment value of about $8.9 million. These Trust Fund activities are fully aligned with the IDA-funded portfolio. The portfolio is focused on energy, transports, digital transformation, education, health, social safety nets, energy, rural community development, slums upgrading and urban poverty reduction, the modernization of public administration, governance, and private sector development, with an emphasis on women and youth.

Last Updated: Dec 18, 2023

The global economic impact of the war in Ukraine, the current drought, and the spillover of the conflict in Ethiopia have further worsened Djibouti's economy. The gross domestic product (GDP) growth fell from 5.5% in 2019 to 1.2% in 2020, its lowest level since 2000. Additionally, Djibouti heavily depends on imports for its local consumption, especially food products, which account for 16.5% of Djibouti's total imports.                                                                   

This heavy reliance on imports to satisfy domestic demand makes Djiboutian households extremely vulnerable to international trade shocks. Since February 2022, food prices, particularly for wheat, vegetable oil and fruit and vegetables, have risen sharply disproportionately affecting the poor and vulnerable. Although the government has not authorized an increase in the price of necessities, these inflationary trends are putting pressure on households. Increases in food and fuel prices for basic commodities have a negative impact on poor and vulnerable households, exacerbating their living conditions and eroding their human capital, leading them to resort to negative coping mechanisms.

The $30 million project provides cash and in-kind transfers to crisis-affected households while strengthening adaptive social protection mechanisms to enhance preparedness for communities to respond to future crises and contribute to the fight against poverty.

Specific results include:

Through the project, 15,000 households and 2,200 students are receiving emergency support cash and in-kind transfers, and students’ stipends respectively. In total, emergency safety net transfers currently reach 86,200 beneficiaries, of which 34,480 are women.

Through establishment of adaptive social protection mechanisms, support also includes creation of awareness among the communities on crises, building institutional and community capacities to prepare for the crises and respond when the latter happen.

As a result of the project, 75% of targeted localities will be equipped with improved mechanisms for linking social protection to crisis response.

In addition, the project contributes to community strengthening and development through the establishment of village credit unions and the creation of income-generating activities.

Furthermore, 60% of the beneficiaries of safety net transfers in rural areas have now an account in an acceptable financial institution which will go a long way in promoting economic empowerment of the poor and vulnerable households.

Expanding Opportunities for Learning

The Government of Djibouti has placed human capital and education and at the center of development policies. The Ministry of Education and Vocational Training (MENFOP) is rolling out a comprehensive education reform to increase access, quality and learning. The Expanding Opportunities for Learning Project (PRODA) is one of the largest and highest performing projects in the Djibouti portfolio, with financing of US$30.35m from IDA, the refugee window, the Global Partnership for Education and Education Above All Foundation, Qatar. Started in February 2020, just before the COVID-19 pandemic, the project has supported the achievement of a series of results including:

Increasing access and inclusion: over 13,000 out-of-school children have been enrolled in school so far with a further 20,000 targeted over the next two years.  This reflects renewed efforts to increase enrolment from a low base, including a new program of accelerated learning to provide catch-up learning for students who dropped out early and strategies to enhance girls’ enrolment and integrate children with special needs into public schools.

Reducing repetition and improving efficiency: repetition in Grade 5 has decreased sharply from 24% to 6% reflecting commitment from the Ministry to improve retention through policy changes to promote continuous assessment, facilitate progression from one academic year to the next and strengthen accountability at the school level.  This progress significantly increases the efficiency of the education sector and use of scarce resources.

Expanding pre-school education to improve school readiness: pre-school education is a new area for Djibouti. The project has supported the Ministry to lay the foundations of pre-school policy spanning the establishment of quality standards to regulate public and private provision, revision of the pre-school curriculum, development of training modules and a mechanism to quality assure all pre-schools.  Provision is targeted at rural areas and vulnerable children, where the return on investment is highest.  To date, the project has supported the construction, rehabilitation and equipment of 43 new pre-school classrooms, facilitating the enrolment of over 1075 pre-school children.  MENFOP’s commitment to provide 1 year of preschool to all children by 2035 represents a concerted effort to ensure that all children can benefit from early development of cognitive and socioemotional skills.

Improving learning outcomes: the Ministry is implementing a package of measures to prioritize learning. The revision of the curriculum has been rolled out for all grades of primary and lower secondary with a focus on the building blocks of literacy and numeracy in the early years, life skills and relevant content. All teachers benefit from professional development with regular follow up from pedagogic advisers and school principals to support more student-oriented teaching practices.  There has been a major push on conducting learning assessments to measure progress on learning, identify areas for additional attention and strengthen institutional capacity. Results of a recent Early Grade Reading Assessment demonstrate improvements in student learning outcomes in reading, making Djibouti one of only a few countries to show an increase in learning during COVID-19.

Promoting education for refugees: Djibouti has a progressive policy for refugees to access schooling including making the curriculum and learning materials available in refugee languages.

Introducing the reforms as an integrated package, building understanding of the reform among education officials, teachers, and parents down to the school level along with reorganizing the selection of competent educational leaders have been central to embedding the reform and promoting systemic impact.

Last Updated: Dec 18, 2023