The French Territory of the Afars and the Issas became Djibouti in 1977. A peace accord in 1994 ended a three-year uprising by Afars rebels. The economy 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. Scanty rainfall limits crop production to fruits and vegetables, and most food must be imported. 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. 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 US 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). Also, renewed fighting between Ethiopia and Eritrea has disturbed normal external channels of commerce. Faced with a multitude of economic difficulties, the government has fallen in arrears on long-term external debt and has been struggling to meet the stipulations of foreign aid donors.
The Department of Defense and the national police force share responsibility for road safety in Djibouti. Due to narrow, poorly maintained, and poorly lit streets, drivers and pedestrians in Djibouti City should exercise extreme caution to avoid accidents. Excessive speed, unpredictable local driving habits, pedestrians and livestock in the roadway, and the lack of basic safety equipment on many vehicles are daily hazards. Speed limits are posted occasionally, but they are not enforced. The stimulant drug khat is widely used, particularly in the afternoons, creating another traffic hazard. Travelers should be aware that police set up wire coils as roadblocks on some of the major roads, and these may be difficult to see at night.
There are only two forms of public inter-city travel: by bus and by a ferry operating between Djibouti City and the towns of Tadjoureh and Obock. The buses are poorly maintained, and their operators often drive erratically with little regard for passenger safety. There have been incidents of sabotage and derailment on the Djibouti/Ethiopia railway.
Travelers should exercise caution when traveling to any remote area of the country, including the borders with Eritrea, Ethiopia, and Somalia, since the Djiboutian security forces do not have a widespread presence in those regions. Overland travel should be undertaken only during daylight hours in a convoy of four-wheel-drive vehicles equipped with sufficient water.
Credit cards are not widely accepted in Djibouti. There are only 6 ATMs in Djibouti (three in Djibouti City and one each in Ali Sabieh, Tadjourah and Plateau de Marabout) and they accept Visa cards only. The ATMs are frequently broken and should not be relied upon as one's sole means for obtaining currency.