- Djibouti is one of the 22 African countries that the World Bank labeled as “in financial distress
- Early this year, the country was forced to suspend a debt payment to China of nearly $1.4 billion
Image: HANDOUT
African leaders are advocating for a fair and standard global financial setup, using the just concluded United Nations General Assembly (UNGA) to drive the point home.
Djibouti used the stage to lobby for financial inclusivity and bolstering of multilateral ties after the UN’s Security Council members snubbed the event.
The country’s foreign minister Mahmoud Ali Youssouf stressed the need for a reformed international financial structure to enable developing nations to grow their economies.
He said that costly loans sought after by developing countries against falling public revenues not only result in the likelihood of unmanageable public debts and increased possibility of default in repayment, but also hinder the nations from investing in the UN’s Sustainable Development Goals (SDGs).
He downplayed the common practice of ‘multilateralism’ – countries grouping together in clubs, such as the BRICS, saying it is a threat to inclusive multilateralism, which is poised to help restore trust and rebuild the deteriorating relevance of the UN among member states.
Djibouti is one of the 22 African countries that the World Bank labeled as “in financial distress,” in 2022 for poor management of public debt in a Debt sustainability analysis (DSA).
The world institution also flagged the country for a “large unexpected increase in public debt in the last five years.”
Early this year, the country was forced to suspend a debt payment to China of nearly $1.4 billion, but the minister believes the country is on the right path to achieving sustainable development goals, which include maintaining a manageable public debt ceiling.
Youssouf highlighted that Djibouti has taken notable steps in addressing the country’s perennial challenges such as malnutrition and the adverse effects of the Covid19 pandemic.
“Despite the deterioration of the world economic situation, Djibouti has worked unwaveringly to achieve the SDGs, and has made notable progress in a number of areas such as reducing malnutrition and undernutrition, and has effectively managed the pandemic,” he said.
This is despite the fact that the US State Department issued a warning to Djibouti on arbitrary arrests a month ago.
The minister further noted that Djibouti is integrating the UN’s SDGs into the country’s development agenda.
“Djibouti integrated the SDGs in our national development plans and in our strategies, such as the 2035 Djibouti Vision.” However, no data has been recorded for the past 20 years for SDG 6 Clean water and sanitation for all and more than 35 per cent of the population lacks access to SDG 7 - electricity''.
Also more than 35 per cent of the population does not have access to SDG7 electricity.
The country's views marries those of Kenya and other countries in the continent.
Speaking during the inaugural Africa Climate Summit in Nairobi, President William Ruto of Kenya asked for a fair financial trading system to help ease debt vulnerability in poor nations.
The Djiboutian minister referred to the recently commissioned first renewable energy power station in the country, with a ticket of $ 122 million, the Ghoubet Wind Power Station, projected to produce about 60 megawatts of electricity.
But all this is coming at the backlash of the country’s financial struggles at the center of its port’s operations.
The country boasts one of the busiest seaports in the world, owing to its strategic location.
The port is however least benefiting the country and has been the cause of an ugly court battle, which is further threatening the country’s financial nerve.
Djibouti has been fighting a lawsuit filed at the District of Columbia Court in the USA, by a Dubai-based international port operating company DP World.
Recently, the company applied to the court for subpoenas to 10 banks seeking to seize all bank assets greater than $25,000 and belonging to the Djiboutian state or entities.
Djibouti has made a request to the court to quash the subpoenas, but the US court has since denied granting the request, putting to light its financial management which many say involves mainly the family of the ruler.
The court battle stretches back to 2012, with the London Court of International Arbitration previously ruling that DP World’s concession to operate the terminal is legal and binding, and ordering it be restored.
The country’s sitting president’s leadership is also affecting the country’s path to sustainable development.
The president is allegedly swindling port revenues to his personal accounts and encouraging illegal activities through shoddy deals with foreign security agencies present in the country.
Omar Guelleh is alleged to have amassed unexplainable wealth, with the South African authorities recently seizing assets worth $2.3b deposited in various banks in the country.
More than 338 accounts related to the ruling family, totaling over $8.4 million have been found at Barclays API alone.
Ethiopia, a crucial player in Djibouti’s port business, is reportedly seeking alternatives to diversify access to ports, as per the government’s 30-year integrated transport master plan, adopted in 2021,and in the wake of the country’s growing volume of foreign trade.
“Ethiopia is one of Africa’s fastest-growing economies, and as such, the country requires an alternative to Djibouti’s main seaport,” explained Ethiopia’s transport and logistics minister Sime Alemu while visiting Hargeisa.
A senior diplomat at Ethiopia’s Ministry of Foreign Affairs also justified the need for port diversification, while speaking anonymously to the Addis Standard.
Currently, close to 95 per cent of the war-torn country’s import-export cargo goes through Djibouti’s ports, with the remainder shipped through Port Sudan and Berbera, resulting in $2 billion in port fees annually.
Djibouti is not only fighting the financial crisis but also the effects of conflicts surrounding the country.
It has been trying to capitalise on its VIP tenants and rekindling its ties with Somalia.
However, neighbouring instability only creates more risk for this small economy based on fishing and salt. The country is in dispute with Eritrea over the Doumeira Islands, in which it accuses Eritrea of occupying the region since the Qatari peacekeepers were withdrawn a few years ago.
All these aspects point to the need for internal reforms for Djibouti first, before championing international financial reforms.
A more inclusive financial framework at the international level will be of little impact to Djibouti if these internal challenges are not cured.