Press Release No. 11/3

Press Release: IMF Executive Board Completes Second and Third Reviews Under Djibouti's Extended Credit Facility, Approves US$4.52 Million Disbursement and Extends Arrangement

January 10, 2011

The Executive Board of the International Monetary Fund (IMF) completed today the second and third reviews of Djibouti’s economic performance under the three-year Extended Credit Facility (ECF)¹. The completion of the reviews enables the immediate disbursement of SDR 2.952 million (about US$4.52 million), bringing total disbursements under the program to SDR 8.292 million (US$12.70 million).

Additionally, the IMF Executive Board also approved the authorities' request for a 9-month extension of the ECF arrangement in support of their economic program to June 16, 2012 as well as a rephasing of the remaining disbursements. The ECF arrangement was originally approved on September 17, 2008 for a total amount of US$ 20 million (see Press Release 08/211).

The Board also approved the authorities' request for a waiver of nonobservance of performance criterion on net credit to the government for end-June and end-December 2009 on the grounds of implemented corrective actions, focusing mainly on a better control of expenditures and strengthened public financial management.

Following the Executive Board discussion, Mr. Murilo Portugal, Deputy Managing Director and Acting Chairman, stated:

“The resumption of the program under the Extended Credit Facility following the 2009 fiscal slippage will help foster broad-based economic growth and poverty reduction. Its success depends on the implementation of fiscal consolidation measures, including containing current expenditure while protecting social expenditure and further strengthening revenue collection and tax administration. Sustained efforts are needed to improve public financial management and budget processes, avoid extra-budgetary spending, and eliminate domestic arrears. The authorities’ commitment to fiscal sustainability and prudent debt management is crucial.

“Bank supervision and the regulatory framework are being upgraded in response to the challenges posed by the rapid expansion of the financial sector. Steps have also been taken to strengthen the capacity and the governance structure of the central bank, while significant progress has been made to reinforce the Anti-Money Laundering/Combating the Financing of Terrorism framework.

“The authorities’ efforts are also geared toward securing concessional external assistance, and improving the business climate and the competitiveness of the economy through cost-reducing structural reforms.”

¹ The ECF succeeds the PRGF as the Fund’s main tool for providing medium-term support to LICs, with higher levels of access, more concessional financing terms, more flexible program design features, as well as streamlined and more focused conditionality. Financing under the ECF carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years.