Djibouti

A new partnership agreement was signed between the European Union and ACP countries in Cotonou on 23 June 2000. This agreement lays the foundations for the preparation of a country strategy paper (CSP), which will provide the framework for EC support to Djibouti under the 10th EDF. In keeping with the spirit and the principles of the Cotonou agreement, the government of Djibouti (GoD) and the EC have jointly prepared this document in consultation with state and non-state players and main donors, primarily EU Member States. The result of this process is a CSP based on Djibouti’s policy objectives and the EU’s specific development cooperation objectives.

The CSP draws attention to the difficult situation facing Djibouti, a country held back by a series of structural restrictions, limited natural and human resources, an arid climate as well as the specific limitations it faces as a small country. However, it also highlights the advantages of the country – including the fact that its location on the eastern point of the Horn of Africa and at the entry to the Red Sea gives its strategic infrastructure (ports and free zones) regional importance.

The domestic political situation is characterised by a level of stability which is exceptional in the region. The government has taken steps towards gradual decentralisation, under which the regions would gain greater autonomy, the dual goal being to promote regional economic development and to strengthen unity within the country.

By the end of 2003, Djibouti had introduced macro-economic and fiscal stability reforms as part of two IMF programs and had benefited from budgetary support from the EC. Since then, weaknesses in macro-economic management have prevented the implementation of new IMF programmes and the mobilisation of resources allocated to budgetary support under the 9th EDF. Efforts have been made by both the private and public sectors to stimulate growth, but despite increased growth rates and a reduction in inflation, fiscal management in Djibouti continues to be weak, with the persistence of overseas arrears and the accumulation of domestic arrears. The management of public finances also needs to be significantly improved.

A middle-income country (GDP per capita estimated at $1 030 in 2006), Djibouti is characterised by high rates of poverty (84% in towns, where the majority of the population live) and by social indicators well below those of countries with a comparable income. A poverty reduction strategy paper (PRSP) was approved in June 2004, but was not accompanied either by a redirection of public spending to benefit social services, or by a transparent system of scrutiny based on indicators of results. The population is generally still poor and social indicators low. On this basis, in January 2007 the GoD launched the National Initiative for Social Development (NISD), aimed at reducing poverty, the scheme being funded using the permanent resources included in the national budget.

The Community cooperation strategy depends on the general framework provided by the 2004 PRSP, currently being reviewed and updated, as well as on the NISD. Its role is to support the country as regards the implementation of poverty reduction policies and will also contribute to the introduction of decentralisation. In global terms, the strategy meets the EU's general cooperation objectives. It was produced following an analysis of the situation in the country, its future prospects and the challenges it faces and reflects the lessons learned from the EC’s experience in Djibouti. The aid to be provided is based on an indicative allocation of EUR 36.8 million (envelope A) plus an amount of additional aid (envelope B) to allow for external shocks. The CSP has identified a single focal centre (“Water/sanitation and energy”) and a non-focal sector, relating primarily to aid for the implementation of decentralisation, for civil society and regional integration and economic partnership agreements (EPAs). These resources could be supplemented by the mobilisation of aid from budget lines, ECHO resources, EIB operations and regional integration assistance.