Djibouti faces severe climate vulnerabilities that threaten its development trajectory and population of nearly one million. Without swift climate action, the country could lose up to 6% of its GDP annually by 2050 with impacts already visible across multiple sectors.

Located in the Horn of Africa, Djibouti's predominantly arid landscape is increasingly challenged by rising temperatures, decreased rainfall and more frequent extreme weather events. Nearly 89% of the country is desert, with only 10% pasture and 1% forested land, making Djibouti especially vulnerable to climate-related threats including multi-annual droughts, flash floods and sea level rise. Water scarcity is particularly critical, as the country imports nearly all its food due to limited agricultural capacity.

Coastal areas face significant risks, with approximately 70% of the population concentrated in Djibouti City, directly threatened by sea level rise This urban concentration exacerbates vulnerability, as critical economic infrastructure and communities are exposed to coastal flooding and erosion.

Despite these challenges, Djibouti has established ambitious climate goals, including a target to generate 100% of its electricity from renewable resources by 2035. The country is making tangible progress with its first wind farm inaugurated in September 2023 near the Bay of Ghoubet, comprising 17 wind turbines with a 60 MW capacity. Additionally, Djibouti is pursuing geothermal, solar and green hydrogen development to transform its energy landscape.

The country recently established the Regional Research Observatory on the Environment and Climate (RROEC) to monitor climate impacts and support evidence-based decision-making on adaptation and resilience. This initiative uses nuclear techniques to produce data on groundwater vulnerability and climate patterns to inform policy decisions.

While facing substantial challenges, Djibouti's strategic position as a regional port hub provides economic leverage to fund climate initiatives, with infrastructure investments positioning the country to potentially become a resilient regional hub powered increasingly by renewable energy.

Funding needs and gaps

As a small East African nation highly susceptible to climate impacts, Djibouti must navigate complex funding landscapes to build resilience. The World Bank's Country Climate and Development Report estimates Djibouti's overall climate investment needs exceed $2.8 billion, with even a limited set of priority adaptation actions requiring $1.1 billion in additional funds. This substantial financing requirement comes at a time when the country is already managing high public debt levels, making concessional and grant financing crucial.

Djibouti relies heavily on multilateral climate funds and development assistance to address its climate challenges. It participates in several Green Climate Fund (GCF) funded regional initiatives; Global Environment Facility (GEF); the International Development Association (IDA), the World Bank's fund for the poorest countries, has been a key partner in Djibouti's development journey with 22 projects including one to enhance regional connectivity through improved low-cost and clean electricity transmission between Ethiopia and Djibouti.

Financial sustainability challenges

Private sector solutions are recognised as indispensable for Djibouti's climate adaptation and resilience ambitions. Building on investments like the Goubet wind farm, Djibouti aims to unlock critical resources through business climate reforms. However, attracting private climate finance remains challenging due to perceived investment risks and the small market size.

Balancing climate investment needs with debt sustainability is critical for Djibouti. The substantial investments required can be consistent with achieving both growth and debt sustainability only if accompanied by economic reform and if additional adaptation resources are provided on a concessional basis.

Looking ahead, Djibouti needs to strengthen domestic resource mobilisation for climate action while improving its capacity to access international climate finance. The Parliamentarians for Climate Finance project will help to develop bankable projects. Establishing clear institutional frameworks for climate finance will be essential to close the significant funding gaps for both adaptation and mitigation efforts.