The economy of Djibouti is based on service activities connected with the country's strategic location and status as a free trade zone in northeast Africa. Two-thirds of the inhabitants live in the capital city, the remainder being mostly nomadic herders. Scant rainfall limits crop production to fruits and vegetables, and most food must be imported.
In April 2005, the United Nations World Food Programme warned that 30,000 people in Djibouti face serious food shortages following three years of poor rains.
Djibouti provides services as both a transit port for the region and an international transshipment and refueling center. It has few natural resources and little industry. The nation is, therefore, heavily dependent on foreign assistance to help support its balance of payments and to finance development projects. Salt Investment, a Djiboutian company, is overseeing a $70 million operation to industrialize the collection of Djibouti’s plentiful salt in the Region Lake Asal.
There are gold miners from India, geothermal experts from Iceland, Turkish hotel managers, Saudi oil engineers, French bankers and American military contractors. Investors from Dubai have leased the country's port, in an effort to develop the area as a gateway to the region. Saudi investors are reportedly exploring the possibility of linking the Horn of Africa with the Arabian Peninsula via an 18-mile (29 km) long oversea bridge referred to as the Bridge of the Horns. Tarek bin Laden, half brother of Osama bin Laden, has been linked to the project.
An unemployment rate of 40% to 50% continues to be a major problem. Inflation is not a concern, however, because of the fixed tie of the franc to the U.S. dollar. Per capita consumption dropped an estimated 35% over the last seven years because of recession, civil war, and a high population growth rate (including immigrants and refugees). The secession of Eritrea from Ethiopia has been beneficial to
