São Paulo – This Thursday (24th), the International Monetary Fund (IMF) announced another loan to Djibouti, an Arab country located in the region known as the Horn of Africa. The loan will be worth 6.246 million SDRs, a unit used by the Fund, equivalent to US$ 9.5 million. This is the third instalment in an Extended Credit Facility of 22.26 million SDRs, or US$ 33.9 million. The previous instalment was transferred in early February.
“Since 2011, Djibouti has been hit hard by external challenges including the surge in commodity prices and the drought in the Horn of Africa, which have affected particularly the poorest households,” said the IMF’s deputy managing director, Nemat Shafik, according to a statement.
As a consequence, says she, imports have gone up, especially those of food and fuel, causing the country’s current account deficit and foreign funding needs to go up.
“Nevertheless, the economy grew at a good pace in 2011, thanks to the recovery of transshipment activities and the transit trade to Ethiopia,” said Shafik. Djibouti is located where the Red Sea meets the Arabian Sea, and is located along the path to Ethiopia, which has no access to sea.
The executive claimed that the economy should remain strong this year, driven by port activity, trade with Ethiopia, construction, and foreign direct investment. “However, growth remains concentrated in the port and the free trade zone, and unemployment and poverty remain key challenges,” she said.
Djibouti signed an agreement with the Fund in 2008 in order to have access to the Extended Credit Facility. The facility was designed for poor countries and has special conditions, such as more concessional terms, zero interest rate, and a grace period of five-and-a-half years.
To Shafik, the facility has since helped the country maintain macroeconomic stability, make progress toward economic reform, create jobs and reduce poverty. “The competitiveness of the economy has strengthened through cost-reducing structural reform and an improved business climate, but much remains to be done in this area to support private sector development,” she said.
*Translated by Gabriel Pomerancblum
