Press Release: IMF Completes Review Under Benin's PRGF Arrangement and Approves US$2 Million Disbursement
March 29, 2004
The Executive Board of the International Monetary Fund (IMF) today completed the sixth review of Benin's economic performance under a SDR 27 million (about US$40 million) Poverty Reduction and Growth Facility (PRGF) arrangement (see Press release No. 00/43). The completion of the review enables the release of a further SDR 1.35 million (about US$2 million), which will bring the total amount drawn under the arrangement to SDR 27 million (about US$40 million).
The PRGF is the IMF's 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 PRSP. This is intended to ensure that PRGF-supported programs are consistent with a comprehensive framework 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 on principal payments.
Following the Executive Board's discussion on Benin's economic performance, Anne Krueger, Acting Managing Director and Chair, stated:
"Benin's economic activity remained buoyant in 2003, inflation was low, and overall fiscal performance was satisfactory. Measures were taken to improve expenditure management and strengthen the banking sector, and discussions on a new civil service strategy were initiated with the trade unions in the second half of the year. However, the privatization of the public ginning company, a key element of the structural reform agenda, incurred further delays.
"During 2004 the authorities intend to push ahead strongly with the implementation of the poverty reduction strategy that was adopted in December 2002. Emphasis will be on fiscal consolidation, deepening of structural reforms, and increasing poverty-reducing outlays. The budget for 2004 reflects the poverty reduction strategy's priorities, and was prepared with the support of all major donors in an effort to align donor financial assistance to the government budgetary process. It emphasizes strong implementation of action plans aimed at improving tax and customs administration, and continuation of efforts to rein in non-priority current spending and increase the level of execution of priority expenditure. The authorities would need to be cautious about further wage concessions in 2004. Before adopting a supplementary budget to finance the Junior Pan-African soccer tournament, which Benin will host in 2005, the authorities will seek an agreement with all major donors on the magnitude and financing of the project so that the disbursement of external assistance for 2004 would not be jeopardized.
"The authorities intend to pursue vigorously the structural reform program, which is essential to achieving sustained high economic growth and reducing poverty. To this end, privatization of the public utilities, the public ginning company, and the state-owned bank would need to be implemented in a timely and transparent manner, and a new civil service reform strategy would need to be rapidly defined and adopted.
"Following the completion of their Poverty Reduction Strategy Paper (PRSP) at end-2002, the authorities have begun to deepen their analysis of the poverty situation and strengthen the mechanisms for monitoring and evaluating PRSP implementation. A progress report on the implementation of the PRSP during 2003 is expected to be completed shortly," Ms. Krueger said.