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 1,000,000. 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 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, 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.

Djibouti’s economy is driven by a state-of-the-art port complex, among the most sophisticated in the world. In 2023, Djibouti’s economy rebounded impressively with a GDP growth of +6.7 percent, but Djibouti’s growth model faces vulnerabilities, including heavy dependence on global maritime transport and exposure to conflict in nearby countries. 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 wind potential.

In 2023, Djibouti experienced a robust economic rebound, driven by a 6.7 percent GDP growth fueled by increased port activity, particularly in container traffic, due to renewed trade with Ethiopia after a peace agreement. Despite disruptions in the Red Sea, Djibouti's port activity continued to increase in January 2024, driven by the strong boom in transshipment activity as carriers have rapidly expanded transshipment operations in Djibouti, strategically positioned in the south of the Red Sea. Domestically, construction and public works sectors thrived, with cement sales surging by 80 percent as projects resumed post-COVID-19. Inflation peaked at 11 percent in July 2022 but decelerated to 3.8 percent by December 2023 due to global food price slowdowns and government measures. On the external front, Djibouti's current account surplus grew due to increased trade with Ethiopia, and foreign exchange reserves remained strong. Despite regional uncertainties and Red Sea tensions impacting customs revenue and fuel pricing, Djibouti maintained confidence in its strategic position and port complex.

The economic outlook is promising, with GDP forecasted to remain strong at 5.1 percent from 2024 to 2026, driven by continued Ethiopian demand for transport and logistics services. Development projects like the Damerjog Industrial Park and infrastructure programs under the National Development Plan are expected to boost investment. Fiscal consolidation measures aim to reduce the budget deficit to 1.4 percent of GDP by 2025-2026, with projected declines in poverty rates. However, risks including public debt accumulation, regional tensions, and climatic shocks could challenge Djibouti's ability to fund essential public services, given its reliance on trade with Ethiopia.

Last Updated: May 02, 2024

The World Bank Group approved a new Country Partnership Framework (CPF) for Djibouti in September 2021. 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 institutions, and supporting much needed regional infrastructure in transport, energy, and digital services, and boosting productivity and job creation, while promoting gender parity and supporting climate action.

As of March 2024, Djibouti’s active portfolio comprised 19 IDA projects worth US$335 million, and three trust-funded operations. Bank teams have leveraged IDA resources through recipient-executed trust funds, with a net commitment value of about US$28million. The portfolio is focused on energy, transport, digital transformation, education, health, social safety nets, and rural community development.

International Finance Corporation (IFC)

In 2021, IFC initiated  a Private Sector Diagnostic (PSD), which has informed the WBG's country engagement process in the country. 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.

As of March 2024, IFC has one active investment, three advisory projects, and one pipeline investment.

Multilateral Investment Guarantee Agency (MIGA)

MIGA has two active guarantees in Djibouti: in FY18, US$24.3 million in support of Swiss company Horafia SA's investment in a real estate project, Mezz Tower; and in FY20, US$91.6 million to a 60MW wind farm in Ghoubet, the first utility-scale wind project and first IPP in Djibouti.

Djibouti’s active portfolio:

Last Updated: May 02, 2024

Social Protection Emergency Crises Response Project     

A 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 is rolling out a comprehensive education reform to increase access, quality and learning. The Expanding Opportunities for Learning Project 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.  The Ministry’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.

Development Response to Displacement Impacts Project in the Horn of Africa  

Djibouti has traditionally been a host country for populations from neighboring countries. As of February 2024,[1] Djibouti hosts 31,532 registered refugees and asylum-seekers, of which 85% live within the refugee villages. Registered refugees and asylum-seekers come from Somalia (13,537), Ethiopia (13,018), Yemen (3,420), Eritrea (1,478) and others (79).

Protracted and new displacement has further exacerbated the situation of communities that host refugees with increased competition for scarce social services, economic opportunities, and natural resources. The forcibly displaced - both refugees and internally displaced persons (IDPs) - are growing at a steady pace due to conflicts in neighboring countries and the persistent drought in the region. The influx of refugees puts even greater pressure on host communities, especially in rural areas that are already struggling with weak service delivery and few socio-economic opportunities. Across all the sites, the surrounding host population faces greater food insecurity and has limited access to basic social services and livelihood opportunities. Women and girls are disproportionately exposed to economic and social vulnerabilities and face multiple challenges associated with poorer health, lower education, and labor market outcomes primarily in the informal economy compared to refugee men.

In consultation with UNHCR, the World Bank has determined that the Government of Djibouti has articulated a strategic approach to move towards long-term solutions that benefit refugees and host communities, while managing broader migration issues, including those issues facing undocumented economic migrants.

Against this backdrop, the Development Response to Displacement Impacts project has made US$30 million (US$ 20 million initial financing and US$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 as of March 2024 include:

·         135,830 people have benefitted from improved access to basic services such as education, healthcare, and renewable energy;

·         54,437 people have been provided with access to renewable energy;

·         51,794 workdays were created for short-term employment in the sub-projects;

·         5,588 people, including beneficiaries of livelihoods support involving business grants and entrepreneurship trainings and beneficiaries of productive agricultural kits, reported an increase in income. 

^{[1] UNHCR, Djibouti Operational Update, February 2024}

Last Updated: May 02, 2024