IMF Executive Board Completes Second Review Under the PRGF Arrangement with Benin and Approves US$1.3 Million DisbursementPress Release No. 07/127
June 11, 2007
The Executive Board of the International Monetary Fund (IMF) today completed the second review of Benin's economic performance under an SDR 6.19 million (about US$9.3 million) Poverty Reduction and Growth Facility (PRGF)1 arrangement (see Press Release No.05/190), and approved the disbursement of an amount equivalent to SDR 0.88 million (about US$1.3 million).
The Board also approved Benin's request for a waiver pertaining to the non-observance of the structural performance criterion on port reform.
Benin reached the completion point under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative in March 2003, receiving total debt relief of about US$265 million in net present value terms, including US$24.3 million (SDR 18.4 million) from the IMF. In January 2006, Benin received US$52.1 million (SDR 36.1 million) in debt relief from the IMF under the Multilateral Debt Relief Initiative (MDRI).
Following the Executive Board's discussion of Benin, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, stated:
"Benin's macroeconomic situation continues to improve. The budgetary situation and medium-term fiscal prospects are better as a result of fiscal measures being taken and debt relief under the MDRI. A rebound in cotton output is helping to strengthen real GDP growth.
"The macroeconomic program remains on track. Progress in implementing the structural reform agenda has been slower than expected. However, consistent with their revised structural reform timetable, the authorities intend to forge ahead with long-stalled state disengagement from commercial activities in the cotton, telecommunications and energy sectors and with improvements in the port of Cotonou. These reforms are critical to lower production costs, enhancing Benin's competitiveness, and to attract private investment to diversify Benin's production and export base.
"The authorities are committed to expanding the fiscal space for growth-enhancing and poverty-reducing spending. To do so while underpinning debt sustainability, the authorities are seeking to enhance revenue mobilization through improved tax and customs administration. They also plan to implement a medium-term public expenditure management strategy, based on the recommendations of the forthcoming audit of the public finance information systems. Equally important, a strategy for reform of the civil service pension fund is to be completed by end-2007, with the aim of reigning in the fund's deficit. To help preserve debt sustainability, external assistance will need to be sought on highly concessional terms.
"Challenges in the fiscal and structural areas are to be tackled within the framework of the country's Growth Strategy for Poverty Reduction (GSPR). The GSPR provides a good base for implementing the government's growth and poverty reduction strategy. It would be important to continue to strengthen the poverty evaluation framework, develop well-sequenced goals and strategies, and broaden participation and ownership of the strategy," Mr. Portugal said.
1 The PRGF is the IMF's concessional facility for low-income countries. 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.