Press Release: IMF Executive Board Completes Fifth Review Under PRGF Arrangement with Benin and Approves US$1.3 Million Disbursement
December 15, 2008Press Release No. 08/323
December 15, 2008
The Executive Board of the International Monetary Fund (IMF) has completed the fifth review of Benin's economic performance under the SDR 15.48 million (about US$23.1 million) Poverty Reduction and Growth Facility (PRGF) arrangement. The arrangement was approved on August 5, 2005 (see Press Release No. 05/190), and subsequently extended to August 4, 2009. In June 2008 it was augmented by 150 percent in order to help the country deal with rising food and oil prices.
In completing the review, the Board approved Benin's request for waivers of the non-observance of two performance criteria pertaining to net domestic financing and to the contracting of new non-concessional external debt. The completion of the review enables Benin to draw an amount equivalent to SDR 0.88 million (about US$1.3 million).
Following the Executive Board's discussion, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, stated:
"Supported by prudent fiscal policies, economic growth in Benin continues to strengthen, while the inflationary impact of higher international food and fuel prices is subsiding. The authorities are cognizant of the need to keep the momentum on fiscal consolidation and structural reforms, in order to preserve macroeconomic stability and to raise growth further to help reduce poverty. These efforts have become more crucial with the weakening of the global economy.
"The authorities have allowed full pass-through of international prices, accompanied by well-targeted safety net measures. This will help the economy adjust and foster a positive agricultural supply response. The authorities are persevering in their efforts to improve governance in the revenue agencies and strengthen tax and customs administration. It will also be critical to improve public expenditure management and bolster civil service reform. These reforms will create increased fiscal space for poverty reduction and growth-supporting expenditures.
"The preservation of fiscal and public debt sustainability will require continued prudent public debt management, reliance on highly concessional external financing, and limited recourse to nonconcessional financing in the regional financial market.
"Further structural reforms are needed to free Benin's growth potential. The recent privatization of SONAPRA's ginning activities and Continental Bank-Benin will help strengthen Benin's competitiveness. The authorities are encouraged to complete the comprehensive reform strategy for the cotton sector, restructure the state-owned telecommunications and electricity companies, and enhance the competitiveness of the port of Cotonou. These reforms are critical to improving the delivery of public services, lowering production costs, and alleviating capacity constraints," Mr. Portugal said.