Statement by an IMF Staff Mission to BeninPress Release No. 06/131
June 16, 2006
Mr. Mbuyamu Matungulu, International Monetary Fund (IMF) mission chief to Benin, made the following statement on June 14, in Cotonou:
"An IMF mission team visited Cotonou during May 31-June 14, 2006 to assess progress in the implementation of the program supported under the Poverty Reduction and Growth Facility (PRGF).1 This was the first IMF mission since the presidential elections in March 2006. The mission liaised with a parallel World Bank team and held discussions with the Minister of Development, Economy and Finance, other senior officials of the government and the central bank, as well as with members of the donor community.
"Economic growth weakened in 2005 to below 3 percent, mainly reflecting a sharp drop in cotton production and delays in carrying out growth-enhancing structural reforms. Inflationary pressures eased late in the year as the rise in food prices slowed with the gradual resolution of the recent food crisis in neighboring countries. The fiscal situation remained relatively favorable, with spending kept broadly under control against the backdrop of a weaker-than-programmed revenue outturn.
"The staff team made significant progress in discussions of the 2006 macroeconomic framework. Reflecting a recovery in cotton production, real GDP growth is projected to rebound to 4.5 percent, somewhat higher than initially anticipated; average inflation would decline below the regional target of 3 percent, despite the negative impact of higher oil prices. Domestic price developments are benefiting from improved food availability, including in hitherto crisis-afflicted neighboring countries. Broad understandings were reached with the authorities on key fiscal targets for 2006, which are projected to remain broadly consistent with initial program expectations. Strong measures, including avoidance of extra-budgetary expenditures, will be needed to address fiscal slippages incurred in the early months of the year.
"The new authorities expressed their commitment to structural reform. In particular, they stressed their determination to expedite state disengagement from commercial activities in the key cotton, electricity and telecommunication sectors. Relevant reform measures and the time table for their implementation are to be approved by the government in the coming months. Putting in place a strong structural reform program will be a key step for the completion of the first review under the PRGF arrangement later in 2006.
"The mission reiterated the IMF's continued readiness to support Benin in its efforts to boost economic growth and reduce poverty, with a view to helping the country achieve the Millennium Development Goals."
1 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 the country's Poverty Reduction Strategy Paper. 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 on principal payments.