Djibouti sets up sovereign wealth fund, targets $1.5 bln in 10 years

NAIROBI, June 25 (Reuters) – Djibouti is setting up a sovereign wealth fund for domestic and regional investment, aiming to fund it to the tune of $1.5 billion over the next decade, the government said on Thursday.

Wealthy nations traditionally use sovereign wealth funds to invest surplus billions overseas to prevent inflation at home, diversify income streams and accumulate savings.

Djibouti will however use its fund to finance domestic investment including in the telecoms, logistics and infrastructure sectors. It will also prioritize investments in the Horn of Africa region, the government said.

The tiny nation is home to both Chinese and U.S. naval bases. Its strategic position on the Gulf of Aden means it overlooks the world’s busiest shipping lanes for oil cargos.

The fund, whose sole shareholder is the government, will be required to reinvest all its net profits.

The government did not say how it will raise the cash for the fund, only stating that there will be “significant initial investment with recurring resources”.

“Despite the global health crisis related to the coronavirus pandemic, the country is determined, more than ever, to invest in the future and tomorrow’s economy,” the government said.

Reporting by Giulia Paravicini Editing by Duncan Miriri and Nick Macfie