Djibouti

Djibouti is one of the smallest countries in Africa, with an area of 23,200 square kilometers and a population estimated at 1,100,000. 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 percent of its total land area) and average annual rainfall of only 130 millimeters, Djibouti depends on imports to meet its food needs.

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

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Economic activity in Djibouti remained resilient, although moderated in 2025. Real GDP growth is estimated at 6.5 percent, down from 7.0 percent in 2024, supported by strong performance in services, particularly port operations, logistics, and related trade activities. This resilience was observed in a context of global trade uncertainty and rising regional security pressures. Inflation remained contained, declining from 2.2 percent in 2024 to near-zero in early 2025, due in part to food price stabilization and the role of the currency board arrangements in limiting imported inflation.

Fiscal performance improved in 2025. The overall fiscal balance returned to a surplus of 0.9 percent of GDP, supported by stronger domestic revenue mobilization, including VAT collection, and continued discipline in current spending. This contributed to improved debt dynamics, with total public debt declining to below 65 percent of GDP.

Looking ahead, GDP growth is projected to ease to 5.9 percent in 2026. This reflects the impact of regional tensions and disruptions in the Red Sea and along the Hormuz Strait, which are affecting maritime traffic and increasing freight and energy costs. These disruptions are expected to put pressure on the Djibouti–Ethiopia corridor, weigh on port activities and trade flows, which remain central to Djibouti’s growth model and role as a regional hub. These dynamics are already affecting households, notably through rising living costs, and are likely to weigh most heavily on poor and vulnerable groups.

Labor market conditions remain a key structural constraint. Growth continues to be concentrated in capital-intensive sectors that generate limited employment opportunities. Unemployment remains high, and labor force participation is low, especially among youth and women. A large share of the population relies on informal employment with unstable earnings, making livelihoods highly vulnerable to economic shocks.

Poverty in Djibouti is largely urban and closely linked to weak labor market outcomes. Many households live near the poverty line and are therefore highly sensitive to increases in food and energy prices. The current context of rising costs and uncertainty is further constraining opportunities, particularly for young people, reinforcing long‑standing challenges related to inclusion, social mobility, and economic resilience.

Strengthening job creation, expanding social protection, and improving resilience to external shocks will be essential for translating economic growth into sustained poverty reduction.

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Djiboutian households are extremely vulnerable to international trade shocks due to a heavy reliance on imports to meet domestic demand. To address this issue, the $30 million Social Protection Emergency Crises Response Project provides cash and in-kind transfers to crisis-affected households. The project also strengthens adaptive social protection mechanisms to enhance preparedness for the government and communities to respond to future crises. Through the project, 15,000 households and 2,200 students are receiving support in form of emergency cash transfers 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.

The Government of Djibouti has placed human capital and education and at the center of development policies. The Ministry of Education and Vocational Training is rolling out a comprehensive education reform to increase access, quality and learning. The Expanding Opportunities for Learning Project, with financing of $30.35m from IDA, the refugee window, the Global Partnership for Education (GPE) and Education Above All Foundation (EAA), Qatar, has supported the achievement of a series of results including improving access and inclusion .More than 22,000 out-of-school children have been enrolled to date, and Ministry of National Education and Vocational Training plans to reach the target of 35,000 pupils in total by 2025.

The Development Response to Displacement Impacts project has made $30 million ($20 million initial financing and $10 million additional financing) available to improve access to basic social services, expand economic opportunities, and enhance environmental management for refugee-hosting communities. The project has implemented an integrated local development approach supporting long-term solutions benefitting refugee-hosting communities through its focus on integrated investments in social and economic infrastructure, improved natural resource management in refugee hosting areas, and regional learning and knowledge sharing on forced displacement. Results include 135,830 people who have benefitted from improved access to basic services such as education, healthcare, and renewable energy; 54,437 people who have been provided with access to renewable energy; and 5,588 people, including beneficiaries of livelihoods support involving business grants and entrepreneurship trainings and beneficiaries of productive agricultural kits, who have reported an increase in income.

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The Country Partnership Framework (CPF) for FY22‑FY27 was approved in September 2021 to support the government’s overarching Vision 2035 and the priorities of the national strategy, Djibouti Institutions‑Connectivity‑Inclusion (ICI) for 2020‑24.

Djibouti Country Partnership Framework for the period FY2022 - FY2027

The CPF has two focus areas: promoting inclusive private sector‑led growth in job creation and human capital; and strengthening the role and capacity of the state.

It addresses Djibouti’s immediate needs and leverages the World Bank Group’s ongoing engagement in several key areas. These include promoting inclusive private sector‑led growth, developing human capital, and strengthening governance and institutions.

Additionally, the CPF supports regional infrastructure projects in transport, energy, and digital services. It also focuses on boosting productivity and job creation, while promoting gender parity and supporting climate action.

The Performance and Learning Review (PLR) approved in October 2024, confirmed alignment with the CPF objectives. The program leverages Djibouti's eligibility for the Small States Exception (SSE), giving it access to fully concessional IDA grants and to the Private Sector Window (PSW) financing starting FY25. The PLR recommended and confirmed the extension of the CPF period by an additional year, through June 2027. This extension will provide sufficient time to respond to emerging demands and priorities and to ensure continuity in delivery, including during the anticipated leadership transition in 2026.

As of November 12, the portfolio for Djibouti includes 13 projects, 4 standalone Trust Funds, and 3 regional operations, totaling approximately US$ 483 million in IDA of which US$ 147.5 million in grants, and US$ 32.3 million in trust funds (RETFs). In FY25, a Country Climate and Development Report (CCDR) was delivered. In FY26, a Public Finance Review and a Poverty Assessment are underway.

The portfolio focuses on various sectors, including energy, transport, urban development, digital transformation, education, health, social protection, employment and skills, agriculture and food security and governance and public finance management. The above RETFs have also expanded to new areas of engagement, such as supporting children with disabilities to promote inclusion in access to services among target beneficiaries.

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In 2021, International Finance Corporation (IFC)  initiated a Private Sector Diagnostic (PSD), which has informed the World Bank Group's country engagement process. The PSD was widely disseminated in March 2023. Building on the PSD, IFC developed a five-year Djibouti Country Strategy (CS) (FY22-26) to anchor its future engagements in the country. IFC's current strategy in Djibouti aims to support the country's economic transformation to unlock inclusive private sector-led growth and create quality jobs.

IFC’s focus areas are to address key constraints holding back private sector development in the country, notably in the areas of (i) governance, (ii) access to affordable electricity, (iii) access to affordable telecommunications, (iv) access to finance; (v) the business environment; and (vi) skills.

Priority areas in the country strategy are to: (i) support sustainable infrastructure (ICT, energy, and port infrastructure); (ii) promote financial access and inclusion (including affordable housing); and (iii) unlock jobs and economic diversification (tourism and fisheries).

Cross-cutting priorities are focused on enhancing the investment climate and regulatory reforms in coordination with the World Bank.  IFC has completed an investment trade finance project with East African Bank (EBA), supported by an advisory engagement. This engagement helped EAB enhance its global risk management, credit management, and trade operations capacities and skills.

IFC currently has a Business Enabling Environment project, two ongoing advisory projects and two technical assistances :

A Business Enabling Environment project: to develop IFC's roadmap in the financial services sector to assess potential investment opportunities with the country's first financial institution to offer leasing.

Two Advisory projects:

• Affordable housing to assist Government of Djibouti in structuring and implementing a bankable and commercially viable public-private partnership (PPP). The Advisory Mandate was signed in June 2022.
• Tiryaki Agro: IFC signed on January 22, 2025 an agreement with this group, the largest agribusiness exporter in Türkiye which manages key food commodities like wheat and other grains through Djibouti. IFC will support the company's development of a port storage facility in Djibouti through an Upstream engagement.

Two Technical assistances:

• In October 2024, IFC signed a cooperation agreement with the Central Bank of Djibouti (CBD) to enhance the legal and regulatory framework for leasing.
• In January 2025, IFC signed another agreement with the CBD to modernize the movable collateral registry.

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The Multilateral Investment Guarantee Agency (MIGA) has two active guarantees in Djibouti in the real estate and energy sectors. In FY17, MIGA issued $24.3 million in guarantees covering the Mezz Tower office building project, which was built according to EDGE green building certification. In FY20, MIGA issued guarantees of $100.81 million to support the Ghoubet Wind Farm project - with 60MW installed capacity, Djibouti’s first utility-scale wind project and first independent power project (IPP). The commercial operation of the Ghoubet Wind Farm since December 2023 is an important stride toward Djibouti’s goal of energy independence using 100 percent renewables by 2035. Moving forward, MIGA sees opportunities to mobilize foreign direct investment into Djibouti’s energy sector, particularly solar, as well as telecom and digital infrastructure. MIGA’s ability to support projects in Djibouti should be enhanced through the deployment of the World Bank Group Guarantee Platform.

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