Economy of Djibouti

Economy of Djibouti Last updated on Tuesday 20th April 2010

The economy is based on service activities related to the country's strategic location and status as a free trade zone in northeast Africa. About 66% of the inhabitants live in the capital city, the remainder being mostly nomadic herders. Due to scanty rainfall crop production is limited to fruits and vegetables, and most food should be imported. Djibouti provides services as 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, reliant on foreign assistance to help support its balance of payments and to finance development projects. Unemployment is a major problem. However, inflation is not a concern because of the fixed tie of the franc to the US dollar.

Because of recession, per capita consumption dropped at 35% over the last seven years. Civil war and a high population growth rate, including immigrants and refugees, disturbed normal external channels of commerce and so did the conflict between Ethiopia and Eritrea. In addition to the existing economic difficulties, the government has fallen in arrears on long-term external debt and has been struggling to meet the criteria of foreign aid donors.

The capital and only urban center in the republic is the city of Djibouti. The country's economy depends upon the port of Djibouti, which is linked by rail with Addis Ababa in Ethiopia.

Though less than 10% of the land is pastureland, nomads graze their cattle, sheep and goats on it. Date palms are cultivated on small areas of irrigated land. There is some fishing and salt taken from the sea is the major resource.

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