Djibouti - Domestic policy

Guelleh's primary areas of domestic concern include economic development and ethnic harmony. Current statistics reveal that 50% of the labor force remains unemployed, but the overall economy has stabilized after several years of negative growth. The economy remains heavily dependent on foreign aid, and repeated cuts in international aid during the 1990s worsened the overall economic picture. Coupled with these difficulties, increased military expenditures from 1991– 94, to quell an insurgency, resulted in the government's inability to meet its international loan obligations that exceeded US $250 million. International Monetary Fund (IMF) loans worth US $6.8 million could not be disbursed because Djibouti failed to complete economic reforms after riots and strikes ensued. The government failed to meet interest payments in 1996. However, the problem was partially alleviated by a 1998 IMF line of credit for US $2.8 million. In 2002, the European Union (EU) announced a €34.8 million aid package aimed at development projects.

With a lack of natural resources, Guellah's administration has hoped to focus somewhat on trade. Djibouti is a member of the 20-nation Common Market for Eastern and Southern Africa (COMESA). Djibouti has recently joined with 9 other member states to establish a free-trade zone, with hopes to allow free movement for skilled laborers by 2004, free movement for people by 2014, and a single currency by 2025.

A general boost for the economy has come from capital expenditures on port facilities, as the persistent war between Ethiopia and Eritrea have created a shipping boom in Djibouti. As a consequence of the Ethiopia-Eritrea conflict, Ethiopia became increasingly dependent on Djibouti for cargo transport. Based on Guelleh's ties to Ethiopia (his birthplace), a favorable environment for port commerce is likely to continue for the foreseeable future. There are plans to revamp the port's facilities and create an industrial zone and free port to complement the existing free trade zone.

Ethnic tensions between the Afars and the Issas have historically been a threat to domestic stability. But under Guelleh's leadership, there may be a chance for lasting peace. In the 1980s and 1990s, conflict increased to the point that some Afars began to participate in armed conflict against the incumbent government. The FRUD signed a peace accord with the government in December 1994 to end the conflict. Two FRUD members were made cabinet members, and in the presidential elections of 1999, the FRUD campaigned in support of the RPP. In February 2000, another branch of FRUD signed a peace accord with the government. On 12 May 2001, Guelleh presided over the signing of what is termed the final peace accord, officially ending the decade-long civil war between the government and the armed faction of the FRUD.