Economy of Djibouti

Economy - overview: The economy of Djibouti is based on service activities connected with the country's strategic location and status as a free trade zone in northeast Africa. Two-thirds of the inhabitants live in the capital city, the remainder being mostly nomadic herders. Scanty rainfall limits crop production to fruits and vegetables, and most food must be imported. Djibouti provides services as both a transit port for the region and an international transshipment and refueling center. It has few natural resources and little industry. The nation is, therefore, heavily dependent on foreign assistance to help support its balance of payments and to finance development projects. An unemployment rate of 40% to 50% continues to be a major problem. Inflation is not a concern, however, because of the fixed tie of the franc to the US dollar. Per capita consumption dropped an estimated 35% over the last seven years because of recession, civil war, and a high population growth rate (including immigrants and refugees). Also, renewed fighting between Ethiopia and Eritrea has disturbed normal external channels of commerce. Faced with a multitude of economic difficulties, the government has fallen in arrears on long-term external debt and has been struggling to meet the stipulations of foreign aid donors.

Djibouti's fledgling economy depends on a large foreign expatriate community, the maritime and commercial activities of the Port of Djibouti, its airport, and the operation of the Addis Ababa-Djibouti railroad. During the civil war (1991-94), there was a significant diversion of government budgetary resources from developmental and social services to military needs. France is insisting that future aid be conditional on an overhaul of Djibouti's dilapidated state finances in conjunction with the International Monetary Fund. Agriculture and industry are little developed, in part due to the harsh climate, high production costs, unskilled labor[?], and limited natural resources. Only a few mineral deposits exist in the country, and the arid soil is unproductive--89% is desert wasteland, 10% is pasture, and 1% is forested. Services and commerce provide most of the gross domestic product.

Djibouti's most important economic asset is its strategic location on the shipping routes between the Mediterranean Sea and the Indian Ocean--the Republic lies on the west side of the Bab-el-Mandeb, which connects the Red Sea and the Gulf of Aden. Its port is an important transshipment point for containers. It also functions as a bunkering port and a small French naval facility. Business increased at Djibouti port when hostilities between Eritrea and Ethiopia denied Ethiopia access to the Eritrean port of Assab. Djibouti became the only significant port for landlocked Ethiopia, handling all its imports and exports, including huge shipments of U.S. food aid in 2000 during the drought and famine. In 2000, Jebel Ali Port Mangers, who manage the port of Dubai, took over management of Djibouti’s port. This was part of a regional management scheme that also included the port of Beirut. As a result, the Port of Djibouti has increased its efficiency and is positioned to be a major port and transshipment port for the Red Sea.

The Addis Ababa-Djibouti railroad[?] is the only line serving central and southeastern Ethiopia. The single-track railway--a prime source of employment--occupies a prominent place in Ethiopia's internal distribution system for domestic commodities such as cement, cotton textiles, sugar, cereals and charcoal.

Principal exports from the region transiting Djibouti are coffee, salt, hides, dried beans, cereals, other agricultural products, and wax. Djibouti itself has few exports, and the majority of its imports come from France. Most imports are consumed in Djibouti, and the remainder goes to Ethiopia and northwestern Somalia. Djibouti's unfavorable balance of trade is offset partially by invisible earnings such as transit taxes and harbor dues. In 1999, U.S. exports to Djibouti totaled $26.7 million while U.S. imports from Djibouti were less than $100,000.

The city of Djibouti has the only paved airport in the republic. Djibouti has one of the most liberal economic regimes in Africa, with almost unrestricted banking and commerce sectors.

GDP: purchasing power parity - $550 million (1999 est.)

GDP - real growth rate: 2% (1999 est.)

GDP - per capita: purchasing power parity - $1,200 (1999 est.)

GDP - composition by sector:
agriculture: 3%
industry: 20%
services: 77% (1996 est.)

Population below poverty line: NA%

Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%

Inflation rate (consumer prices): 0% (1999 est.)

Labor force: 282,000

Labor force - by occupation: agriculture 75%, industry 11%, services 14% (1991 est.)

Unemployment rate: 40%-50% (1996 est.)

Budget:
revenues: $156 million
expenditures: $175 million, including capital expenditures of $NA (1997 est.)

Industries: limited to a few small-scale enterprises, such as dairy products and mineral-water bottling

Industrial production growth rate: 3% (1996 est.)

Electricity - production: 177 million kWh (1998)

Electricity - production by source:
fossil fuel: 100%
hydro: 0%
nuclear: 0%
other: 0% (1998)

Electricity - consumption: 165 million kWh (1998)

Electricity - exports: 0 kWh (1998)

Electricity - imports: 0 kWh (1998)

Agriculture - products: fruits, vegetables; goats, sheep, camels

Exports: $260 million (f.o.b., 1999 est.)

Exports - commodities: reexports, hides and skins, coffee (in transit)

Exports - partners: Somalia 53%, Yemen 23%, Ethiopia 5%, (1998)

Imports: $440 million (f.o.b., 1999 est.)

Imports - commodities: foods, beverages, transport equipment, chemicals, petroleum products

Imports - partners: France 13%, Ethiopia 12%, Italy 9%, Saudi Arabia 6%, UK 6% (1998)

Debt - external: $350 million (1999 est.)

Economic aid - recipient: $106.3 million (1995)

Currency: 1 Djiboutian franc (DF) = 100 centimes

Exchange rates: Djiboutian francs (DF) per US$1 - 177.721 (fixed rate since 1973)

Fiscal year: calendar year

See also : Djibouti