Press Release: IMF Completes Review Under Benin's PRGF Arrangement and Approves US$3.7 Million Disbursement
September 11, 2003
The Executive Board of the International Monetary Fund (IMF) has completed the fifth review of Benin's performance under a Poverty Reduction and Growth Facility (PRGF) arrangement. The Board also granted a waiver for the non observance of performance criteria pertaining to the net bank credit to the government and the deficit of the government at end-March 2003. As a result, Benin will be able to draw up to SDR 2.69 million (about US$3.7 Million).
Benin's PRGF arrangement was approved on July 17, 2000 (see Press Release No. 00/43, for SDR 27 million (about US$37.4 million). On July 15, 2002, the arrangement was extended through March 31, 2004. So far, Benin has drawn SDR 22.96 million (about US$31.8 million).
The PRGF is the IMF's most concessional facility for low income countries. PRGF-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a Poverty Reduction Strategy Paper (PRSP). This is intended to ensure that PRGF-supported programs are consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5 ½-year grace period.After the Executive Board's discussion on Benin on September 10, 2003, Agustin Carstens, Deputy Managing Director and Acting Chairman, stated:
"Benin continued to enjoy robust economic growth and subdued inflation, during the first half of 2003. Strong fiscal measures during the second quarter of 2003 put the program back on track, after a weakening of fiscal performance in early 2003, in part reflecting election-related spending overruns. To address the fiscal slippages, the authorities strengthened customs administration and made spending cuts in nonpriority areas, allowing scope for improved execution of poverty-reducing expenditure. Although the reform process in the cotton sector is well advanced, the authorities had to adopt new timetables for the divestiture of the public utility companies, as a result of the delays incurred during the first quarter of 2003. The authorities are still working on generating the necessary consensus for civil service reform.
"During the remainder of 2003 and over the medium term, the authorities intend to vigorously implement the ambitious economic framework underpinning the poverty-reduction strategy adopted in December 2002, which commits them to pursuing prudent macroeconomic policies, fiscal consolidation, and a deep structural reform agenda. The primary fiscal objective for the remainder of 2003 is to strengthen the fiscal position, while increasing social spending by broadening the tax base, limiting nonpriority outlays, and strengthening public expenditure management. Higher expenditure in priority sectors in 2004 will be contingent upon securing grants or concessional financing consistent with the objective of debt sustainability.
"Structural reforms are crucial to achieve sustained high economic growth and diversification, and to reduce poverty. In particular, the authorities are committed to adhering to the schedule for divestiture of public utilities, the state-owned bank, and the state-owned ginning enterprise; to defining a civil service reform strategy rapidly; and to ensuring that the rules governing the new private sector institutions in the cotton sector are fully enforced.
"Following the completion of their Poverty Reduction Strategy Paper (PRSP) at end-2002, the authorities have undertaken deeper analysis of the poverty situation in Benin and begun to reinforce the mechanisms to monitor implementation of poverty-reducing measures and evaluate outcomes. They intend to complete the first progress report on PRSP implementation shortly and to finalize the first annual assessment of the poverty reduction strategy in early 2004," stated Mr. Carstens.