Djibouti - Joint World Bank-IMF Debt Sustainability Analysis

Overview & Synopsis

Djibouti’s overall and external public debt is assessed to be in distress and unsustainable. This assessment reflects the accumulation of sizeable external arrears and protracted breaches of the sustainability thresholds of the present value (PV) of overall and external debt-to-GDP, as well as the external debt service-to-revenues ratios. The Debt Sustainability Analysis (DSA) suggests that Djibouti is susceptible to exports and depreciation shocks; more prolonged and protracted shocks to the economy would also pose downside risks to the debt outlook. The fiscal outlook has improved compared to a year ago, driven by an increase in revenues from military leases and the fiscal consolidation efforts undertaken in 2024. These factors, along with the moratorium with Exim Bank China, effective through 2027, create temporary fiscal space and help prevent the further accumulation of arrears. Additionally, the recent dissolution of the Sovereign Wealth Fund (SWF) presents an opportunity to significantly increase the dividends paid by State-Owned Enterprises (SOEs) to the central government budget. However, finalization of debt negotiations with major creditors, strengthened SOE governance, continued fiscal consolidation and new concessional financing remain essential to entrench debt sustainability. As the authorities continue their negotiations with major creditors to clear arrears and restructure debt, they should strive for a medium term debt strategy with explicit ceilings encompassing all public and publicly guaranteed debt, ambitious revenue mobilization and SOE dividend payments to the budget.