Political sketch
Formerly Afars and Issas and French Somaliland. Independent from France on 27 June 1977.
In 1862 France acquired the town of Obock and the surrounding area; in 1888 it established French Somaliland. The port city of Djibouti was built starting 1888 and became the capital in 1892. A treaty with Ethiopia in 1897 reduced the size of French territorial claims in the region. A railway to connect Djibouti with Addis Ababa, Ethiopia was completed in 1917, and Djibouti remains the main port for Ethiopian trade today. It lost trade to the port of Aseb, Eritrea during the Italian occupation of Ethiopia (1935-1941) and afterwards, when Eritrea was united with Ethiopia (first in a federation, then, from 1952 to 1993, in a political union). During the Second World War, Djibouti initially sided with the French government of Vichy, which was something between neutral and allied with Germany and Italy. Djibouti switched to the Allied side after the British defeated Italian armies in Ethiopia and Eritrea in 1941. On 27 October 1946 French Somaliland became an overseas territory; from 5 July 1967 it was called the French Territory of the Afars and Issas. In 1958 it voted to become an overseas territorial member of the French Community. On 27 June 1977 it became independent as the Republic of Djibouti. The first president, Hassan Gouled Aptidon, remained in office until May 1999. Beginning in 1981 the ruling party was the only legal political party. Multiparty elections for parliament were held in December 1992 and for president in May 1993. A civil war broke out in November 1991, resulting from resentment of the Afar people about domination of the government by the Issas people. The last Afar rebel group signed a peace agreement with the government in May 2001. Djibouti's economy is based largely on trade and services related to Djibouti's status as the main port serving Ethiopia.
Wars since 1500
Second World War in East Africa, 1940-December 1942; Djibouti Civil War of 1991-1994.
Convertibility
The French franc zone:
When the First World War began, France imposed a moratorium of payments on all negotiable instruments starting 1 August 1914. The moratorium was subsequently extended by decrees until 1 March 1915. The central bank, the Bank of France, abandoned the gold standard on 5 August 1914, although no official prohibition on exporting gold existed until by a decree of 3 July 1915, affirmed by a law of 15 November 1915. A decree of 2 April 1918 prohibited capital exports without authorization. A law of 25 June 1928 officially restored the gold standard and repealed exchange controls. When the French franc was an object of currency speculation , a law of 13 August 1936 imposed extensive exchange controls, supplementing some lesser measures that had been implemented in 1935.
France imposed exchange controls on 9 September 1939 by a decree of that date, soon after the Second World War broke out. On 20 May 1940, capital controls within the franc zone were greatly relaxed by a French decree of that date. Exchanges between France and its African colonies were cut off from the time of the Allied invasion of French Morocco and Algeria in November 1942 to about September 1944, by which time the Allies had liberated Paris and the main French port cities. Exchange controls within the franc zone were not removed until 6 June 1946. France had multiple exchange rates from 26 January 1948 until 17 October 1948, and a dual exchange rate from 18 October 1948 to 29 September 1949. On 20 September 1949 it devalued the French franc and unified the exchange rate, taking advantage of the lead offered by the United Kingdom, which had devalued the pound sterling on 18 September 1949.
Djibouti alone:
The Djibouti franc was made fully convertible when it switched from the French franc to the US dollar as its anchor currency in 1949. Unlike other French colonies, French Somaliland (Djibouti) was from that point forward outside the French franc zone of exchange controls.
Other
The French government did not attach French Somaliland (now Djibouti) to the CFA franc zone when the government established the CFA franc on 26 December 1945. Rather, the local franc remained equal to the French franc until the Djibouti franc, linked to the US dollar, came into existence on 20 March 1949. Djibouti was the only French African colony whose notes were issued by a bank whose main business was elsewhere: the Banque de l'Indochine, which served Indochina, France's Pacific Ocean colonies, and Pondicherry, India.
Defaults on or restructurings of debt to the private sector (mainly from Purcell and Kaufman 1993 and Standard & Poor's 2004): None.
Banking crises (data since 1970s mainly from Caprio and Klingebiel 1999 and Frydl 1999): Two of six commercial banks ceased operations in first two years of 1991-1993 period.
No exchange rate data in Reinhart and Rogoff (2003).
References
Primary sources:
--Laws and decrees:
Djibouti. Gazette. 1977-present. Journal officiel de la République de Djibouti. Djibouti: Imprimerie Administrative. Online at <http://www.presidence.dj/page5.htm>, viewed 15 September 2005. (Successor to French Territory of the Afars and Issas gazette.)
France. Gazette. 1762-present. Gazette de France (1762-1789); Gazette nationale de France (1789-1799); Bulletin des lois (1791-1831; a separate publication); La gazette nationale ou le moniteur universel (1799-1810); Moniteur universel (1811-1848); Moniteur universel: journal officiel de la République française (1848-1852); Journal officiel de l'Empire français (1852-1870); Journal officiel de la République française (1871-1941); Journal officiel de l'État français (Vichy France, 1941-1944); Bulletin officiel des Forces françaises libres (Free France, 1940-1941); Journal officiel de la France libre (Free France, 1941); Journal officiel de la France combattante (Free France, 1941-1943); Journal officiel du Haut commissariat de France en Afrique (Free France, 1943); Journal officiel du Commandement en chef français en Afrique (Free France, 1943); Journal officiel de la République française (Free France, 1943-1944; France, 1944-present). Paris (1762-1940, 1944-present); Vichy (1940-1944); London (Free France, 1941-1943); Algiers (Free France, 1943-1944): Imprimerie des Journaux Officiels (1944?-present). Many issues are in France, Legifrance Web site (see below).
France. Legifrance Web site, <http://www.legifrance.gouv.fr>. Reference site for French treaties, laws, and decrees, including the full text for recent items.
France. Overseas gazette. 1887-1961. Bulletin officiel (1887-1953; new series, 1953-1959); Bulletin officiel de l'administration provisoire des services du Ministère de la France d'Outre-Mer (1959-1961). Issued by Ministère des Colonies (1887-1950); Ministère de la France d'Outre-Mer (1950-1961). Paris: Imprimerie Nationale.
French Territory of the Afars and Issas. Gazette. 1967-1977. Journal officiel du Territoire français des Afars et des Issas. Djibouti. (Sucessor to Somaliland [French] Gazette; succeeded by Djibouti gazette.)
Somaliland, French. 1900-1967. Journal officiel de la Côte française des Somalis. Djibouti (Paris, etc.): Charles-Lavauzelle et Compagnie.; succeeded by Djibouti gazette.)
--Publications of monetary authorities:
Banque Centrale de Djibouti. Annual report. 2000?-present. Rapport annuuel. Djiboutii: Banque Centrale de Djibouti. (The first online is 2000; I have not seen older issues in hard copy, if they exist.)
Banque Centrale de Djibouti. Bulletin. 2000?-present. Bulletin trimestriel. Djiboutii: Banque Centrale de Djibouti. (The first online is 2000; I have not seen older issues in hard copy, if they exist.)
Banque de l'Indochine. Annual report. 1875-1967. Assemblée générale. Paris: Banque de l'Indochine.
Banque de l'Indochine. Bulletin. Service des Études Économiques. 1931-? Bulletin mensuel d'information. Paris: Banque de l'Indochine.
--Web site of the current monetary authority (viewed 20 September 2005):
<http://www.banque-centrale.dj>, especially the file "Missions de la BCD."
--Other publications or Web sites:
Banque Nationale de Djibouti. Annual report. 1978-present. Rapport annuel. Djibouti: Banque Nationale de Djibouti. (Report of a leading commercial bank; contains much information on the economy.)
Comité Monétaire de la Zone Franc. Secrétariat. 1953-present. Premier [etc.] rapport annuel du Comité de la zone franc établi en exécution du décret du 5 fevrier 1952 (art. 4, §2) (1953-1956); La zone franc en 1957: cinquième rapport annuel du Comité Monétaire de la Zone Franc (1957); La zone franc en ...: rapport publié par le Secrétariat du Comité Monétaire de la Zone Franc (1958-1983); La zone franc: rapport ...: publié par le Secrétariat du Comité Monétaire de la Zone Franc (1984-1991); La zone franc: rappport annuel ...; publié par le Secrétariat du Comité Monétaire de la Zone Franc (1992-2003; inside page says La zone franc en ...); Rapport annuel de la zone franc (2004-present; inside cover says La zone franc: rapport annuel ...). Paris: Imprimerie Nationale (1953-1956); Secrétariat du Comité Monétaire de la Zone Franc (1957-1991; 1957 is a mimeo with no explicit publication information); Banque de France (1992-present). Recent issues are available on the Web site of the Banque de France, <http://www.banque-france.fr/fr/eurosys/zonefr/zonefr.htm>.
France. Commision de Surveillance des Banques Coloniales. 1875-1939. Rapport au président de la république sur les opérations des banques coloniales d'émission pendant l'exercise ... (1873/1874-1936/1937); Rapport au président de la république sur les opérations des banques coloniales d'émission ... (1927/1929-1936/1937). Paris: Imprimerie Nationale.
Main secondary sources:
Bloch-Lainé, François, and others. 1956. La zone franc. Paris: Presses Universitaires de France.
Gonjo, Yasuo. 1993. Banque coloniale ou Banque d'affaires: la Banque de l'Indochine sous la IIIe République. Ministères de l'Économie et du Budget, Comité pour l'Histoire Économique et financière de la France. Paris: Imprimerie Nationale. Japanese original Furansu-teikokushugi to Azia: Indoshina-Ginkôshi-Kenkyû. Tokyo: University of Tokyo Press.
IMF ARER. 1950-present. International Monetary Fund. Annual Report on Exchange Restrictions (1950-1978), Annual Report on Exchange Arrangements and Exchange Restrictions (1979-1988), Exchange Arrangements and Exchange Restrictions: Annual Report (1989-present). Washington: International Monetary Fund. (Contains information on IMF member countries and some of their dependencies.)
Leduc, Michel. 1965. Les institutions monétaires africaines: pays francophones. Paris: Éditions A. Pedone.
Mazard, Jean. 1953. Histoire monétaire et numismatique des colonies et de l'Union française, 1670-1952. Paris: Émile Bourgey.
Meuleau, Marc. 1990. Des pionniers en Extrême-Orient: histoire de la Banque de l'Indochine (1875-1975). Paris: Librairie Arthème Fayard.
Tschoegl, Adrian. 2001. Maria Theresa's Thaler: A Case of International Money." Eastern Economic Journal, v. 27, no. 4, Fall: 443-62.
World Currency Yearbook. 1984-1990/93. Brooklyn, New York: International Currency Analysis. Previously called Pick's Currency Yearbook (1955-1979) and Pick's World Currency Report (1980-84). New York: Pick Publishing Corporation.
Monetary authorities: Djibouti
| Dates | Type | Name | Source | Remarks |
| 6 January 1908
-16 March 1949 |
private monopoly issue | Banque de l'Indochine (headquarters Paris, France) | France, decree of 21 January 1875 chartering Banque de l'Indochine; decree of 16 May 1900; law of 31 March 1931 extending bank's term of note issuance; all cited in Legifrance | Silver Maria Theresa thaler coins were widely used in Djibouti from about 1800. In 1919, the Chamber of Commerce of Djibouti, on behalf of the government, issued small-denomination government notes called bons de caisse to substitute for coins, which were scarce because inflation had made their value as metal greater than their face value (France, decree of 30 November 1919, cited in Mazard 1953: 81). The first local coins, issued in 1921, were temporary tokens; the first full-fledged local coins were issued in 1948. The Banque de l'Indochine, the private monopoly note-issuing bank for France's Asian and Pacific colonies, established a branch in Djibouti on 6 January 1908 because of the colony's location on the shipping route from France to India and the Pacific via the Suez Canal. The branch was the first bank in the territory. The second bank was the Bank of Abyssinia (headquarters Addis Ababa, Ethiopia), in Djibouti, in December 1927; its local office was an agency, and did not do a full banking business (Meuleau 1990: 293-4, 298). |
| 17 March 1949
-2 December 1977 |
currency board | French Treasury (headquarters Paris, France) / Djibouti Treasury (headquarters Djibouti, Djibouti) from 27 June 1977 | France, Decrees No. 49-374 and 49-377, both 17 March 1949; arrêté of 19 March 1949 | France nationalized the note issue in accord with its policy since the 1930s. It established a currency board, responsible for coins as well as notes, because it desired an "automatic" monetary system to preserve the exchange rate. The Djibouti Treasury took over the operation of the system when Djibouti became independent from France. Djibouti joined the IMF on 29 December 1978. |
| 3 December 1977
-present (2005) |
currency board-like | Banque Centrale de Djibouti (headquarters Djibouti, Djibouti) | Djibouti, ordonnance of 3 December 1977; Decree No. 79.030/PR, 18 April 1979; both cited in Banque Centrale de Djibouti Web site, viewed 30 April 2005 | The monetary authority gained more latitude of action than under the previous arrangement. |
Exchange rate arrangements: Djibouti
| Dates | Official arrangement | Source | Unofficial arrangement, if different | Remarks |
| about 1800
-1862 |
fixed; used silver Maria Theresa thaler | Tschoegl (2001: 444, 446) | The silver Maria Theresa thaler became the most widely accepted coin in customary usage. The starting date is a guess based on the experience of Eritrea and Ethiopia. | |
| 1862
-5 January 1908 |
fixed; 1 silver Maria Theresa thaler = 4.20 French francs and 1 silver Indian rupee = 2 French francs | Commandant of the Colony of Oblock, arrêté of 21 November 1885, cited in Mazard (1953: 76) | French colonization began in 1862. The 1885 arrêté recognized the Maria Theresa thaler, Indian rupee, and French franc as legal tender. The Maria Theresa thaler and Indian rupee were not demonetized until 1943 (Mazard 1953: 80). The French franc was a decimal currency. | |
| 6 January 1908
-1941 |
pegged; 1 local franc = 1 French franc | France, decree of 16 May 1900, cited in Legifrance; Meuleau (1990: 293-4) | The Banque de l'Indochine established a branch, so the exchange rate changed from fixed to pegged. Djibouti franc not legally a separate currency in this period. | |
| 1941
-7 February 1944 |
pegged; 176.625 local francs = UKŁ1 (and later 43.80 local francs = US$1) | Anglo-Free French agreement of 19 March 1941, cited in Mazard (1953: 105) | Preserved the prewar exchange rate of the French franc with the pound sterling (and later with the US dollar, when the United States entered the Second World War). There was a currency confiscation on 18 February 1943 (French Somaliland, arrêté 18 February 1943, confirmed by ordonnance of 11 May 1943). It occurred in connection with switch from Vichy to Free French control and a desire to punish speculation in contraband goods. Stamped notes were exchanged for new notes at a loss of 20%; deposits at a loss of 50%; and unstamped notes were demonetized without compensation, for a loss of 100%. | |
| 8 February 1944
-5 December 1944 |
pegged; 200 local francs = UKŁ1, or 50 local francs = US$1 | Anglo-Free French agreement of 8 February 1944, cited in Mazard (1953: 106) | The Anglo-French agreement devalued the French franc slightly to the level already prevailing in other territories under Free French control. | |
| 6 December 1944
-19 March 1949 |
pegged; 1 local franc = 1 French franc | Anglo-Free French agreement of 8 February 1944, cited in Mazard (1953: 106) | Following the liberation of most of France by the Allies during the Second World War, the metropolitan French franc was devalued to the level of the overseas francs under Free French control. Doing so in effect restored the French franc as the anchor currency. France did not attach Djibouti to the CFA franc zone when France established the CFA franc on 26 December 1945. Rather, the Djibouti franc remained equal to the French franc. | |
| 20 March 1949
-15 August 1971 |
fixed; 1 Djibouti franc = 0.00414507g gold; implicitly, 214.392 Djibouti francs = US$1 | France, Decrees No. 49-374, 49-375, and 49-376, all 17 March 1949; arrêté of 19 March 1949 | The Djibouti franc was created. The name "franc" for the currency came from the French franc. The Djibouti franc was attached to the US dollar as its anchor currency, at the prevailing cross rate with the French franc, to better serve Djibouti's status as a port catering extensively to Ethiopian trade. Decree No. 49-376 made the Djibouti franc fully convertible into the US dollar; the French franc was not fully convertible. | |
| 16 August 1971
-17 December 1971 |
fixed; 1 Djibouti franc = 0.00414507g gold (nominally); implicitly, 214.392 Djibouti francs = US$1 | no action by Djibouti | Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. | |
| 18 December 1971
-12 February 1973 |
fixed; 1 Djibouti franc = 0.00414507g gold (nominally); implicitly, 197.466 Djibouti francs = US$1 | none: France, arrêté of 19 March 1949, specified only a gold parity, not a value in terms of US dollar | Did not follow the devaluation of the US dollar on 18 December 1971. | |
| 13 February 1973
-2 December 1977 |
fixed; 1 Djibouti franc = 0.00414507g gold (nominally); implicitly, 177.721 Djibouti francs = US$1 | none: France, arrêté of 19 March 1949, specified only a gold parity, not a value in terms of US dollar | World Currency Yearbook (1985: 239) shows parallel exchange rates beginning in 1976; premiums ranged up to the mid teens. | Did not follow the devaluation of the US dollar on 13 February 1973. |
| 3 December 1977
-31 March 1978 |
pegged; 1 Djibouti franc = 0.00414507g gold (nominally); implicitly, 177.721 Djibouti francs = US$1 | Djibouti, ordonnance of 3 December 1977, cited in Banque Centrale de Djibouti Web site, viewed 30 April 2005 | World Currency Yearbook (1985: 239) shows parallel premiums up to the mid teens. | A currency board-like system replaced the currency board, so the exchange rate changed from fixed to pegged. The central bank is allowed to grant loans to the government. |
| 1 April 1978
present (2005) |
pegged; 177.721 Djibouti francs = US$1 | International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ("Second Amendment") | World Currency Yearbook (1985: 239; 1988-1989: 69; 1990-1993: 69) shows parallel premiums ranging from zero or negative (!) to about 30% until data end in 1993. | The system of gold par values officially ended by agreement of IMF members. |