VZCZCXRO2040
RR RUEHROV
DE RUEHDJ #0425/01 1211310
ZNR UUUUU ZZH
R 301310Z APR 08
FM AMEMBASSY DJIBOUTI
TO RUEHC/SECSTATE WASHDC 9212
INFO RUCNIAD/IGAD COLLECTIVE

UNCLAS SECTION 01 OF 03 DJIBOUTI 000425 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR AF/E AND EEB/TPP/ABT/ATP JANET SPECK 
USAID/DCHA/FFP FOR J.BORNS 
 
E.O. 12958: N/A 
TAGS: EAGR EAID ETRD ECON PREL PGOV DJ
SUBJECT: RESPONSE: IMPACT OF RISING FOOD/COMMODITY PRICES/DJIBOUTI 
 
REF: STATE 39410 
 
¶1. (U) SUMMARY.  Djibouti imports virtually all of its food.  It has 
long grappled with chronic drought and food insecurity, and is 
fighting extreme poverty rates of over 40 percent.  In this context, 
recent rising food and commodity prices have had a catastrophic 
impact.  The GODJ has developed a national food security strategy 
with USAID support, and has taken action to control rampant 
inflation, including setting allowable profit margins for several 
basic commodities.  However, with no domestic food production to 
speak of and few resources at its disposal, the GODJ has been unable 
to answer the needs of its people, many of whom have already reduced 
their caloric intake below sustainable nutritional levels.  High 
refugee flows from neighboring Somalia further exacerbate the 
problem of local food needs.  Faced with global acute malnutrition 
rates of over 28.6 percent, and worried that high prices may lead to 
food riots, the GODJ has turned to the USG with an urgent appeal for 
emergency food aid.  ForMin called in Charge on April 28 and called 
Ambassador on April 29 to press for immediate USG food assistance, 
stressing both the urgency and depth of Djibouti's need, and the 
inadequate response from other donors to date.  END SUMMARY. 
 
-------------------------------------- 
DEMAND AND SUPPLY: 
AT THE MERCY OF INTERNATIONAL MARKETS 
-------------------------------------- 
 
¶2. (U) Djibouti is almost entirely dependent on imported food. While 
the GODJ and several private investors have recently encouraged the 
development of small scale agricultural projects --including poultry 
farms, greenhouse vegetable cultivation, and date 
plantations--barely 0.04 percent of Djibouti's land is arable.  All 
of the most basic staples of the Djiboutian diet-- such as flour, 
pasta, rice, powdered and condensed milk, cooking oil, and 
sugar--are imported.  With this near total dependence on imported 
foodstuffs, Djiboutian consumers have quickly and painfully felt the 
impact both of rising world commodity prices, and of the rising fuel 
costs of shipping these goods to Djibouti. 
 
--------------------------------------- 
FEWS NET DATA: ALARMING FOOD INSECURITY 
--------------------------------------- 
 
¶3. (U) Prices for basic foodstuffs have skyrocketed over the last 
year.  According to the Djibouti office of the USAID-supported 
Famine Early Warning Systems Network (FEWS NET), staple food prices 
are now 36 percent above the five-year average.  In the past month, 
significant price increases have hit staples like cooking oil (9 
percent increase) and beans (21 percent increase).  Cooking oil is 
currently a staggering 101 percent above the five-year average.  The 
price of milk powder--an important food source for weaning 
children--is now 43 percent above the five-year average.  The price 
of the kerosene most households use to cook their food is 151 
percent above the five-year average.  Kerosene and cooking oil alone 
are now absorbing 36 percent of staple food costs. 
 
¶4. (U) Poor urban households can currently afford to satisfy only 66 
percent of their minimum daily food requirements; and household food 
deficits are approaching 34 per cent.  With continuous increases in 
staple food prices over the last twelve months severely limiting 
their purchasing power, poor urban households are now facing 
increasing food insecurity and malnutrition, as well as decreasing 
ability to assist relatives living in rural areas of the country. 
The most vulnerable groups--women and children--are especially 
impacted by poor food access and resulting high malnutrition rates. 
A recent rapid assessment mission conducted by UNICEF, the World 
Food Program (WFP) and the GODJ indicated a global acute 
malnutrition rate of over 28.6 percent, and a severe acute 
malnutrition rate of over 9 percent.  Acute malnutrition is 
currently impacting 25,000 Djiboutian children under the age of 
five. 
 
¶5. (U) With the total expenditure basket approaching DJF 27,000 (USD 
153), low income households are cutting back on caloric intake. 
Since the basket is now running 30 percent over the five-year 
average, middle income households are also feeling extreme economic 
pressure, and are less able to provide assistance to relatives in 
rural areas. 
 
-------------------------- 
ECONOMIC IMPACT: INFLATION 
-------------------------- 
 
¶6. (U) At the end of their recent visit to Djibouti, the IMF noted 
that inflation had risen from 3.5 percent in 2006 to 8.1 percent in 
¶2007.  FEWS NET estimates that over 40 percent of the urban 
population and 100 percent of the rural population of Djibouti are 
especially vulnerable to food insecurity due to rising food prices. 
Effectively, half of Djibouti's citizens are at risk for serious 
 
DJIBOUTI 00000425  002 OF 003 
 
 
food insecurity in the face of rising prices.  Partly because of 
concerns that rising food prices are driving general inflation, the 
GODJ has continued to maintain a lower level of taxes--reduced in 
2004 from 20 percent to 8 percent--on all staple foods. 
 
----------------------------------------- 
ENVIRONMENTAL IMPACT: RETURN TO WOOD FUEL 
----------------------------------------- 
 
¶7. (U) Rising prices for kerosene--the main fuel for cooking food in 
Djibouti--have led some families either to reduce the number of 
times a day they cook food, or to stop cooking food at home 
entirely.  However, many households have also reverted to wood or 
charcoal for cooking fuel.  According to FEWS NET, pastoralists have 
also been intensifying collection and sale of firewood to replace 
lower income and food sources from animal production.  This growing 
demand for wood and charcoal poses a significant risk for Djibouti's 
already sparse vegetation, and could exacerbate desertification. 
 
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GODJ POLICY RESPONSE: COMBAT "SPECULATION" 
------------------------------------------ 
 
¶8. (SBU) In response to widespread public concern over rising food 
prices, the GODJ has acted to control "speculative practices" by 
food sellers.  In January, the GODJ created a special brigade to 
ensure that merchants were abiding by the allowable profit margin 
ceilings set by the government for milk, flour, rice, pasta, and 
cooking oil.  The brigade--composed of representatives from the 
police, the Ministry of Commerce, and customs and tax 
authorities--does not impose true price controls, but rather 
controls on the allowable profit margin for specified goods.  As 
base prices have continued to rise, this control over profit margins 
has largely failed to stabilize actual prices.  As rising energy 
costs combine with rising food costs to take an additional toll on 
household budgets, the GODJ is also currently directly subsidizing 
the purchase of petroleum products. 
 
¶9. (U) To reduce Djibouti's near-total dependence on imported food, 
the GODJ and private investors have launched several initiatives to 
catalyze domestic agricultural production, including a greenhouse 
project in the village of Arta.  A privately-financed 
poultry-farming scheme has more than halved the price of chicken. 
Given Djibouti's natural lack of suitable agricultural land, the 
GODJ has also turned to its neighbors for help in producing food. 
Djibouti has harvested 1,600 metric tons of sorghum from land in 
Sudan ceded to the GODJ for that purpose.  Ethiopia has continued to 
reinforce its cereal export ban, leading Djiboutian wholesalers to 
turn to Somaliland for sorghum imports.  Nevertheless, the GODJ is 
also currently negotiating with the Ethiopian government to cede 
5000 hectares in the Bale area (in the Somali and Oromia regional 
states) to plant cereals for Djiboutian consumption, including wheat 
intended to subsidize local bakers. 
 
¶10. (U) As income gaps widen and the poorest households are 
disproportionately impacted by rising food prices, the GODJ has 
moved to reinforce its National Initiative for Social Development 
(INDS).  When he named his new cabinet at the end of March, 
President Guelleh created the new position of Secretary of State in 
Charge of National Solidarity, who is tasked with coordinating 
interdepartmental efforts to implement the INDS. 
 
¶11. (U) The GODJ's responses to rising food prices have all been in 
line with the food security strategy recently developed by the GODJ 
in collaboration with financing and technical assistance from 
USAID. 
 
¶12. (U) Regional USAID Food for Peace experts and nutritionists from 
AID/W assessed the drought and food security situation in February 
2008 and recommended food aid worth USD1 million to support the 
GODJ, with a second assessment to follow in early June 2008.  With a 
very weak pipeline, World Food Program (WFP) Djibouti needs food to 
distribute to over 80,000 persons within the next three months.  The 
most important shortfall is for vegetable oil, of which the WFP has 
no stock.  For 80,000 persons, the WFP would need 207 metric tons of 
vegetable oil for the next three months.  The second most important 
need is cereals.  WFP needs 3000 metric tons for the 80,000 in need. 
 Also needed are 200 metric tons of pulses and 150 metric tones of 
Corn Soya Blend (CSB).  WFP is expecting food from other 
donors--such as dates from Saudi Arabia and cereals from the 
European Union (EU), as well as purchases from its own budget in 
late July 2008. 
 
¶13. (SBU) Of note is the USAID preposition warehouse situated at the 
Djibouti Free Zone, containing over 25,000 metric tons of food 
(lentils, CSB, vegetable oil, rice, and flour).  The GODJ and WFP 
are aware of the food stockpile at the preposition warehouse, and 
have requested 180 metric tons of oil from the warehouse stocks. 
 
 
DJIBOUTI 00000425  003 OF 003 
 
 
--------------------------------------------- -- 
POLITICAL IMPACT: CALM SO FAR, BUT REAL CONCERN 
--------------------------------------------- -- 
 
¶14. (SBU) There have not yet been any incidents of civil unrest 
related to food prices.  However, given Djibouti's almost total 
vulnerability to external price hikes and the GODJ's meager 
available resources to cushion social impacts, there is a real risk 
that the population will grow frustrated with the government's 
inability to improve the situation.  Increasing refugee flows from 
Somalia, as well as a recent border dispute with Eritrea in 
Djibouti's drought-and-famine stricken north have complicated the 
GODJ's efforts to adequately respond to the food crisis.  With 
serious food insecurity threatening half of the population, the GODJ 
has understandably tried to showcase its efforts to tackle the food 
price problem.  State-run media have prominently showcased cabinet 
discussions on food prices, government efforts to prevent 
"speculative practices," and charity drives headed up by the First 
Lady. 
 
------------------------------------------ 
IMPACT ON POST PROGRAMS & POLICY PROPOSALS 
------------------------------------------ 
 
¶15. (SBU) COMMENT: The Minister of Foreign Affairs has repeatedly 
appealed to Post to request significant, immediate USG food 
aid--both to alleviate widespread human suffering, and to avoid 
"food riots."  His concern underlines the potentially serious 
consequences of growing food insecurity in Djibouti.  USG assistance 
to Djibouti in the face of this food crisis will cement a strong 
Djibouti-U.S. partnership, and ensure that food insecurity does not 
undermine Djibouti's fragile stability and security.  Likewise, our 
failure to respond to Djibouti's real need will leave the GODJ 
questioning the value of U.S. friendship, and the door open to 
possible popular unrest.  Djibouti needs food aid right now.  In the 
long term, Djibouti also needs substantial investment of time and 
resources to help implement its national food security strategy and 
sustainably meet the basic needs of its traditionally nomadic 
people.  END COMMENT. 
 
SYMINGTON