- Economic growth in Djibouti is projected to have reached 3.0 percent last year, up from 2.6 percent in 2002. Growth however still remains too low to reduce poverty. Poverty in Djibouti was still increasing last year, not reversing the decade-long trend of reduced GDP per capita.
According to the latest review of the Djiboutian economic performance, released today by the International Monetary Fund (IMF), effort to fight poverty are still not showing the desired results. After growing on average at about 1.3 percent per year from 1999-2001, real GDP grew by an estimated 2.6 percent in 2002 and 3.0 percent last year - a level, however, that "barely stabilised the continued decline of real GDP per capita observed during the last decade."
The IMF report noted that, following several years of financial adjustment efforts, "Djibouti continues to face serious challenges." Poverty was found to be "pervasive and increasing," with high unemployment and large groups of the population lacking access to essential social services.
- Economic growth remains too low to contribute to an effective decline in poverty, the IMF assessment said, "and the economy remains highly dependent on the Djibouti port and its associated activities as well as on the foreign military presence."
The IMF analysts considered that macroeconomic performance and progress in implementing reforms during the last poverty reduction and growth programme were mixed. Overall fiscal performance had "lagged well behind the programme objectives, leaving very limited room for higher social expenditures."
Although a number of - mainly fiscal - reforms had been introduced by the Djiboutian government during the last years, "privatisation and work on reforming the investment, labour, and commerce codes did not proceed as envisaged, while recent measures such as the establishment of three new public enterprises are an additional source of concern," the IMF holds, in line with its economic reform recipes for African countries.
Although released today, the IMF assessment mainly considers economic developments in 2002, presenting only vague estimates on trends in 2003. The analysis therefore does not include the radical changes introduced last year, such as the expulsion of a large number of foreigners, estimated to amount to more than one tenth of the country's total population.
If the real GDP growth estimate of 3.0 percent in 2003 is correct, this economic growth is to therefore be seen on the backdrop of a reduced population, producing a large growth per capita last year. According to independent assessments, the results of the expulsion have included lower unemployment, higher salaries (labour costs) and lower housing costs - three factors having a positive effect for the country's poor majority.
The IMF assessment, on the other hand, urges Djiboutian authorities to strengthen the country's external competitiveness to be able to reduce poverty. Key priorities, the IMF says, "should be to reduce high labour costs, dismantle barriers to entry, and improve the regulatory environment for business and investment."
The Djiboutian government on several occasions during the last years has acted against IMF policy advises and recipes. After the IMF obliged the desert country to commercialise its water utility, access to clean water for the poor was dramatically reduced. Djiboutian authorities defied the IMF and re-introduced water subsidies.
In one matter, however, the US-dominated board of directors in the IMF and Djiboutian authorities totally agree - on the deployment of US troops in Djibouti. The IMF directors said they considered that "the large additional revenue from the foreign military now stationed in Djibouti should provide ample room for additional social expenditures and repayment of domestic debt."
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