IMF Executive Board Concludes 2012 Article IV Consultation with Benin

Public Information Notice (PIN) No. 12/132
November 26, 2012

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

On November 9, 2012, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Benin.1 The Board also approved the fourth review under the Extended Credit Facility (ECF) arrangement during the same meeting (See Press Release No. 12/425).


Benin has consolidated and reinforced recent gains in macroeconomic management, but significant challenges remain in accelerating economic growth and reducing poverty. Prudent fiscal policy has kept fiscal deficits at manageable levels and has averaged a basic primary surplus over the period 2010–June 2012. This policy, combined with the benefits of the Heavily Indebted Poor Countries (HIPC) and the Multilateral Debt Reduction Initiatives (MDRI), has kept public debt low, at about 32 percent of GDP. The external current account deficit has remained broadly stable, and the balance of payments deficit was about 5 percent of GDP in 2011.

Real growth rebounded after the 2010 floods, to about 3½ percent in 2011 and is anticipated to maintain this rate through 2012. Authorities have made some progress on structural reforms and significantly improved disbursements of priority social expenditure. Challenges remain in achieving public investment targets, infrastructure development, and promotion of private sector activity.

Appropriate monetary policy by the Central Bank of West African States (BCEAO) has helped keep inflation low at about 2½ percent in 2010-11. A significant increase in fuel prices imported from Nigeria in January 2012 resulted in a jump in the consumer price index, but does not appear to have a persistent inflationary impact. The recent spike in international food prices has not had a notable impact in Benin, given the country’s ability to supply basic staples with domestic production. Inflation is projected to remain below 3 percent in the medium term.

Recent events at the port of Cotonou and in the cotton sector have added uncertainty to the current economic environment. The government took more direct operational control of the cotton sector this spring because of governance concerns and anticipates an improved harvest this year. Difficulties at the port with reform implementation, and governance concerns led to the suspension of the import-verification program.

Benin’s commercial banking system is generally liquid. Provision of banking services is supplemented by a large number of microfinance institutions, which account for 9½ percent of total financial sector loans and supply services to households and microenterprises. To further develop and strengthen the financial sector, better-defined property rights and more reliable contract enforcement are priorities, together with improved supervision of banks and microfinance institutions.

Executive Board Assessment

Executive Directors commended the authorities for their prudent macroeconomic management. Directors noted that, while Benin’s medium term economic outlook is favorable, it remains vulnerable to regional and global developments. To address the challenges ahead and to consolidate the gains thus far, they underscored the importance of continued commitment to sound policies. Timely implementation of structural reforms will be necessary to boost growth prospects and reduce poverty.

Directors commended the authorities’ overall prudent fiscal conduct. They welcomed progress in revenue mobilization and improvements in expenditure management, which allowed the authorities to meet their fiscal targets and undertake poverty related spending. These advances, if maintained, will provide space for needed infrastructure investment and safeguard the low level of debt. In this context, Directors underscored that wage policy should remain consistent with medium term fiscal objectives. Directors also agreed that broad based customs reforms will strengthen revenue collection. Accordingly, they called for a well designed reimplementation of the import verification program.

Directors welcomed the enhanced review of the financial system and stressed that continued efforts to strengthen financial sector stability are necessary to preserve a sound macroeconomic environment and accelerate growth. They underscored the need to intensify financial sector oversight and adopt measures to broaden access to financial services. In particular, strengthening supervision of microfinancial institutions should be a priority.

Directors emphasized that structural reforms remain critical for improving competitiveness and inclusive growth. They encouraged the authorities to make further efforts to enhance the business environment, including through implementation of a revised framework for the cotton sector, support private sector development, and address the infrastructure gap.

Benin: Selected Economic Indicators, 2009–12
  2009 2010 2011 2012
      Est. Proj.
(Annual percentage change)

Income and Prices


GDP at constant prices

2.7 2.6 3.5 3.5

Consumer price index (average)

0.9 2.1 2.7 6.6

Real effective exchange rate (minus = depreciation)

-0.7 -6.5 -0.7

Money and credit


Net domestic assets 1

7.1 5.2 9.8 10.4

Broad money (M2)

6.2 11.6 9.0 7.4

Credit to the nongovernment sector 1

5.9 5.3 5.7 9.3

Net claims on central government 1

6.6 -0.9 6.9 1.2
(Percent of GDP)

Investment and Saving


Gross investment

20.9 17.6 18.7 19.1

Gross national saving

11.9 10.3 8.7 9.6

External sector


Current account balance (excl. grants)

-11.2 -8.2 -10.3 -10.3

Overall balance of payments

-1.6 0.8 -4.9 -1.8

Central government finance


Total revenue

18.5 18.6 17.6 18.9

Expenditure and net lending

26.0 21.6 21.9 22.5

Primary balance 2

-7.0 -2.5 -3.9 -3.0

Overall fiscal deficit (payment order basis, excl. grants)

-7.5 -3.1 -4.3 -3.6

Sources: Beninese authorities; IMF staff estimates and projections.

1 Change in percent of beginning-of-period broad money.

2 Total revenue minus current primary expenditure, capital expenditure, and net lending.

1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here:


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