International Monetary Fund (IMF) Reaches Staff-Level Agreement with Benin on the Second Review under the Extended Fund Facility and the Extended Credit Facility Arrangements
IMF reaches staff-level agreement with Benin on policies for the completion of the Second Review under the EFF/ECF. Upon completion of the review by the IMF Executive Board, Benin will have access to $68 million, bringing cumulative disbursements under the program to about $360 million.
After three years of warranted policy accommodation, fiscal consolidation is underway, underpinned by robust tax collection and spending reprioritization to shield social programs and help meet Benin’s large development and security-related needs.
The ongoing full operationalization of the social registry will help channel targeted support to vulnerable households in a world more prone to shocks, proven to disproportionally affect the poor.
An International Monetary Fund (IMF) team, led by Constant Lonkeng, visited Cotonou from March 22–April 5 to assess recent economic developments and Benin’s progress on commitments under its Fund-supported program. The IMF Executive Board approved, on July 8, 2022, a blended arrangement under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) for Benin in the amount of US$638 million, equivalent of 391 percent of quota (see Press Release No 22/252 ), to help address pressing financing needs and support the country’s progress towards the Sustainable Development Goals (see IMF Country Focus ).
At the end of the mission, Mr. Lonkeng issued the following statement:
“The Beninese economy is gaining strength. The authorities’ balanced policy response to external shocks, supported by frontloaded financing under the EEF/ECF, has boosted business confidence. Economic activity is estimated to have expanded by 6.3 percent in 2022, buoyed by construction and good harvest. While the outlook is favorable, supported by the expansion of the special economic zone and the modernization of the Port of Cotonou, geoeconomic fragmentation poses an important risk, with the protracted war in Ukraine and the challenging regional security situation straining external accounts and threatening food security.
“Program performance has been robust—all quantitative targets for end-September and end-December 2022 were met. Faced with the high budgetary cost associated with the war in Ukraine and security spillovers from the Sahel, the authorities stepped up tax collection efforts and re-prioritized spending to remain within the parameters of the fiscal program. They further expanded the coverage of the school feeding program to fend off food insecurity risks.
“Fiscal consolidation is underway, after three years of warranted policy accommodation amidst repeated and severe exogenous shocks. At the same time, and in line with the West African Economic and Monetary Union-wide stance, convergence to the overall fiscal deficit of 3 percent of GDP is being postponed from 2024 to 2025 under the program. In tandem with sustained domestic revenue mobilization—anchored in the authorities’ pending Medium-Term Revenue Mobilization Strategy—this will help meet Benin’s large development needs while maintaining credibility of the medium-term fiscal framework.
“The structural reform agenda is advancing. In particular, the authorities published the recently completed IMF governance diagnostic and adopted a financial inclusion strategy. They are developing a homegrown action plan to implement key recommendations from the recent governance diagnostic. Relatedly, reforms under the program are being augmented with the operationalization of the anti-corruption agency and the commercial court of appeal, and the streamlining of government bank accounts as part of the ongoing reform of the Single Treasury Account.
“The mission underscored the need to accelerate the operationalization of the social registry identifying poor households across Benin in a world more prone to shocks, proven to disproportionally affect the poor. The social registry infrastructure will help implement various social assistance programs as the government phases out temporary price controls and subsidy measures introduced to protect the purchasing power of populations.
“The team met with Senior Minister of Economy and Finance Wadagni, Senior Minister of Development and Coordination of the Governmental Action Bio Tchané, the Special Advisor to the President Dagnon, Minister of Justice and Legislation Quenum, National Director of the Central Bank of West African States (BCEAO) Assilamehoo, Director of the Military Cabinet of the President General Bada, other senior government officials, representatives of the National Assembly, the civil society, the donor community, the farmers’ association, the banking association, and other private sector representatives, as well as university students.
“The IMF team would like to thank the Beninese authorities and various stakeholders for their hospitality and candid discussions.”
Distributed by APO Group on behalf of International Monetary Fund (IMF).