Djibouti faces intensifying regional pressure as Ethiopia’s engagement with Somaliland challenges existing port dependencies and draws the country deeper into polarized alignments with Somalia and Egypt. France has secured long-term military and infrastructural access through a renewed defense agreement, reinforcing its regional footprint while limiting Djibouti’s leverage in bilateral terms.
On the economic front, output remains anchored in sovereign-led investment and logistics, but vulnerabilities persist due to external debt exposure, weak domestic fiscal mobilization, and continued reliance on Ethiopian trade flows.
On 23 April 2025, Egyptian President Abdel Fattah Al Sisi visited Djibouti and met with President Ismail Omar Guelleh. The two leaders reaffirmed their position on Red Sea security and expressed concern over unilateral actions that could destabilize maritime access. Egypt’s position is closely tied to its opposition to Ethiopia’s handling of the Grand Ethiopian Renaissance Dam and its broader regional posture. Djibouti’s decision to host this visit and expand naval cooperation reflects its alignment with Egypt’s interest in curbing unchecked Ethiopian expansionism (see Djibouti: Strong Push to Reduce Dependence on Ethiopia amid Somaliland Port Competition).
Separately, on 20 December 2024, French President Emmanuel Macron visited Djibouti to mark the renewal of France’s military defense agreement, which now extends its presence in the country for an additional 20 years. This move came at a time when France’s military footprint has been rolled back across West and Central Africa following forced withdrawals from Mali, Burkina Faso, Niger, Senegal, Chad, and the Ivory Coast between 2022 and 2024.
Domestically, the African Development Bank projected gross domestic product (GDP) growth at 6.6 percent for the year. This outlook rests on revived port throughput, expanded fuel terminal capacity, and public sector stimulus. However, the economy remains concentrated in sectors with low employment intensity, exposed to regional volatility, and constrained by weak monetary buffers.
PANGEA-RISK assesses Djibouti’s regional diplomacy in response to Ethiopia’s port realignment, France’s renewed military agreements, and developing macroeconomic conditions.
Growing pressure from Ethiopia’s maritime pivot
Djibouti has accelerated diplomatic engagement to counter Ethiopia’s growing maritime ambitions. Djibouti did not issue a formal position on Ethiopia’s January deal with Somaliland but took steps to reinforce security coordination with Somalia. In April 2025, President Hassan Sheikh Mohamud met with Djiboutian officials to expand cooperation in intelligence and regional stabilization.
Djibouti’s refusal to endorse Ethiopia’s arrangement with Somaliland while intensifying its engagement with Somalia confirms a calculated alignment with international legal norms on territorial integrity. However, it reflects a balancing act: preserving the transit relationship with Ethiopia while avoiding direct confrontation over the port access issue.
Djibouti also proposed offering Ethiopia exclusive access to the Port of Tadjourah in late 2024. As of May 2025, Ethiopia has not responded. The absence of a public reaction suggests that Addis Ababa is using the Berbera agreement to extract strategic leverage without fully abandoning Djibouti’s port network. Ethiopia’s silence also reflects its current advantage: having two port access points under discussion without binding commitments to either.
Separately, on 1 January 2025, the African Union Support and Stabilization Mission in Somalia (AUSSOM) replaced the African Union Transition Mission in Somalia (ATMIS). Djibouti contributes 1,520 troops to AUSSOM, focused on logistics and operational support in southern and central Somalia. Djibouti’s continued involvement in AUSSOM confirms its role as a core regional security provider and signals support for Mogadishu’s authority over contested territories, including Somaliland (see Eritrea: Escalating Rift with Ethiopia Drives Military Build-Up and Regional Uncertainty).
Djibouti remains the host of military installations from France, the United States, China, and Japan. All four states use these facilities for maritime surveillance and anti-piracy operations. In the current environment, this positioning allows Djibouti to act as an intelligence node and a logistics provider for multiple security actors. However, it also places Djibouti at the intersection of competing interests, particularly as Red Sea militarization increases and alignment between Egypt and the Gulf states evolves.
The geopolitical configuration around Djibouti is more fragmented than at any point in the past decade. Ethiopia’s move toward Berbera threatens to alter regional trade flows. Somalia’s reaction draws Djibouti into a sovereignty dispute it previously avoided. Egypt’s increased engagement reflects a broader maritime containment strategy targeting Ethiopian ambitions.
Djibouti’s attempt to maintain open access and neutrality is now constrained by the regional polarization around maritime infrastructure, sovereignty disputes, and shifting military partnerships. Each external alignment now carries operational consequences. Djibouti’s central position in the Horn is no longer protected by geography alone. Its role will depend on its ability to manage regional fragmentation without becoming isolated by the very alliances it seeks to maintain.
France reengages as geopolitical competition tightens
The updated French agreement with Djibouti secures long-term access to Camp Lemonnier and broader usage rights over Djiboutian air and port infrastructure, offering France its only remaining large-scale African military platform with operational reach into both the Red Sea and western Indian Ocean.
As part of the renegotiated arrangement, Djibouti secured a French commitment to finance the construction of a new airport. While no official figures were disclosed, sources close to the negotiations estimate project financing to exceed USD 300 million. The agreement also includes France’s support for the development of a Djiboutian national space agency.
The initiative, while unlikely to result in operational space capabilities for Djibouti itself, allows France to secure a symbolic and institutionalized presence in domains contested by emerging actors such as Türkiye, which signed a space cooperation agreement with Somalia in 2024. France’s push to formalize access in dual-use sectors such as aerospace reflects a deliberate expansion of influence beyond traditional military basing.
The renewal of the defense treaty formalizes French access to Djibouti’s territory for forward deployment and crisis response operations across the Red Sea corridor and Indo-Pacific. The timing aligns with increasing threat activity from non-state actors such as the Houthis, Somali-based maritime piracy groups, and transnational jihadist formations in south-central Somalia.
France retains 1,500 military personnel in Djibouti, supported by air, land, and naval assets. These units played a pivotal role in evacuation operations from Sudan in April 2023, demonstrating the continuing operational utility of the base in regional contingencies. France’s strategic calculus clearly centers on maintaining one dependable outpost east of Suez amid deteriorating access across its former West African network (see Burkina Faso: Military Junta Plays off France Versus Russia in High-Stakes Gamble).
Djibouti benefits tactically from this recalibration. The agreement elevates the value of its geography at a moment when the country faces regional port competition from Somaliland and infrastructure-driven overtures from the United Arab Emirates (UAE) and China. However, the bilateral asymmetry remains evident.
France retains operational autonomy, while the rent terms and strategic conditions of use remain opaque. Over two years of negotiations leading up to the December 2024 agreement, Djibouti sought higher base fees and infrastructure commitments. The eventual inclusion of the airport and space agency project appears to be the result of these demands.
France’s strategic posture in the Horn is not occurring in isolation. It is shaped by a broader deterioration of its regional position and the emergence of rival actors. China maintains a base in Djibouti adjacent to the French and US installations, while Russia and Türkiye have advanced defense and economic partnerships with Eritrea and Somalia, respectively. France’s ability to operate freely in this environment may become constrained as host-state balancing intensifies and diplomatic hedging reduces privileged bilateral access.
France’s renewed engagement also reflects a broader strategic orientation toward integrating its Indian Ocean overseas territories into regional planning. Réunion and Mayotte, both administered by France, depend on Red Sea and Mozambique Channel access routes.
Forward-deployed capabilities in Djibouti provide contingency coverage, especially in scenarios involving maritime interdiction or the evacuation of nationals. France views Djibouti not merely as an African post but as a maritime anchor for Indo-Pacific projection, justifying increased investment despite political reversals elsewhere on the continent.
Export-led growth sustained by sovereign investment
On 28 March 2025, Djibouti’s sovereign wealth fund, the Fonds Souverain de Djibouti (FSD), confirmed its assets under management had exceeded USD 1 billion. This milestone underscored the government’s reliance on sovereign-led investment to drive output expansion in logistics, energy, and telecommunications.
On 17 April 2025, the Djibouti Forum convened in Djibouti City with participation from 51 countries and institutional investors representing USD 2.6 trillion in assets. While it demonstrated capital appetite for sovereign-led infrastructure plays, no new large-scale private sector commitments were announced. Investor interest remains tied to state-aligned channels, and sovereign risk perception is still driven by Ethiopia’s macroeconomic and political trajectory.
Furthermore, growth in 2025 is once again heavily dependent on Djibouti’s logistics corridor with Ethiopia. The Doraleh Container Terminal’s expanded capacity, 1.8 million twenty-foot equivalent units as of January 2025, strengthens throughput potential. The Damerjog Oil Jetty, operational since April 2025, increases refined fuel handling capability.
These additions support short-term real GDP expansion, yet reinforce structural dependence on transit flows from Ethiopia, which remains politically volatile and economically fragile. Ethiopian trade accounted for over 90 percent of port volume in 2024. Any disruption to this bilateral corridor, such as through the Berbera corridor in Somaliland or sustained domestic instability in Ethiopia, would materially affect Djibouti’s external position.
On the other hand, the energy sector presents both resilience and dependency. As of May 2025, approximately 80 percent of electricity is derived from renewable sources, primarily imported from Ethiopia and supported by the Ghoubet Wind Power Station, commissioned in September 2023.
The Amea Grand Bara Solar Power Station, a 25-megawatt solar plant under construction since 2023, is scheduled to commence operations in Q3 2025. These projects reduce carbon intensity but do not yet ensure autonomous supply. Interconnection exposure persists, and no domestic utility-scale storage capacity exists to mitigate import disruptions.
The 2024 trade surplus reached 10.1 percent of GDP; however, the Central Bank’s reserve coverage ratio fell to 72.9 percent of broad money by September 2024. This is materially below the 100 percent threshold necessary to support Djibouti’s currency board. The reserve position has been eroded by external debt servicing, including bilateral obligations to Chinese and Gulf lenders. The currency regime, nominally stable, is unhedged against further shocks to trade volumes or maritime risk premiums in the Bab el-Mandeb.
Public finances exhibit rising dependency on extrabudgetary revenue. The FSD receives approximately USD 25 million annually from military base leases, including those from the United States, China, France, and Japan. These rents provide stable inflows but lack integration into fiscal policy frameworks. Domestic revenue mobilization remains limited.
As of Q1 2025, no structural tax reform had been initiated. Tax-to-GDP remains under 17 percent, below the East African average, and reliance on import duties constrains countercyclical fiscal space.
