DJIBOUTI

RISK RATING
High
Default High Risk Score 6.00
Normal Average 4.16
Weighted Average 4.26
RISK RATING HISTORY
RISK RATING SCALE

Risk Rating Scale

Severe: 8.0 to 10
High: 6.0 to 7.9
Elevated: 4.0 to 5.9
Moderate: 2.0 to 3.9
Low: 0.0 to 1.9
EXCHANGE RATE
Country Outlook

Djibouti has sought to transform itself into a major commercial trade hub for the Horn of Africa region by seeking Chinese financing in the Belt and Road Initiative. This partnership has boosted Djibouti’s economic growth and development. However, China’s influence has now compromised the health of Djibouti’s economy, debt sustainability, and political sovereignty as it turns to battle COVID-19. Moreover, the government’s seizure of the Doraleh Container Terminal from DP World in 2019 over a dispute dating back to at least 2012 has raised questions over Djibouti’s attitude to foreign investment. On the one hand, the government is becoming increasingly nationalist and seems to be promoting statist interventions in the economy. Meanwhile, Djibouti is favouring preferred development partners, arguably in violation of existing contractual arrangements.

  • With President Guelleh having been in power since 1999, calls for a succession plan have only mounted. The list of potential successors includes family members, with the most favoured candidate being the president‚Äôs stepson, Naguib Abdallah Kamil. Regardless, with Kamil being a close relative and even senior advisor to the president, any succession plan is likely to be mere window dressing as President Guelleh is unlikely to give up any hold on power. This is particularly the case as the president‚Äôs family dominates the construction, logistics, telecommunications, and tourism sectors throughout the country. Moreover, despite the potential for anti-government grievances this year, the ruling administration is likely retaining its hold on power, particularly as opposition parties have been successively weakened by the heavy-handed approach of government over the past two decades.
  • The presence of US and French forces makes the country a potential target for Islamist terrorists. Militant groups such as al-Qaeda and its Somalia-based regional affiliate al-Shabaab identify Djibouti as a target. Moreover, growing political repression is likely to foster unrest. Although Djibouti has a multi-party-political system and opposition parties can exist, government handling of political dissent frequently attracts criticism from international organisations like Human Rights Watch and western governments. Such opposition is unlikely to pose security risks to the foreign military bases, yet defence agreements are more likely to be revised in case of a change in government.
  • Djibouti‚Äôs macroeconomic performance and outlook have until recently been broadly favourable. Much of this has been driven by high levels of investment in the country‚Äôs infrastructure, buoyed by China. However, such growth has also resulted in several fragilities within the country‚Äôs economic and political spheres that are likely to be placed under additional pressure considering COVID-19. While total public debt and publicly guaranteed external debt were starting to drop over the past two years ‚Äď estimated to have reached around 66 percent of GDP last year ‚Äď debt was still deemed to be too high. With the arrival of COVID-19, debt is now expected to rise again to around 72 percent this year. The IMF has therefore classified Djibouti as being at ‚Äúhigh risk of debt distress‚ÄĚ. Financial support in the form of grants is required as is debt restructuring with external creditors, including China.
CUMULATIVE AND DAILY COVID-19 INFECTIONS AND DEATH RATE
INTERNATIONAL MONETARY FUND | DATAMAPPER
Risk Perils
Political Instability
4.0
Expropriation, Nationalisation, Confiscation & Deprivation
5.0
Contract Frustration & Breach
4.5
Taxation
4.0
Bribery & Corruption
6.0
Regulatory Burden
4.0
Strikes, Riots & Civil Commotion
2.5
Security
1.8
Sovereign Default
4.8
Economic Volatiliy
5.0

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