Press Release No. 22/128

Benin: IMF Staff Reaches Staff Level Agreement on a New 42-Month ECF/EFF and 2022 Article IV Consultation

April 22, 2022

• The Beninese authorities and the IMF team have reached a staff-level agreement on an innovative 42-month blended ECF/EFF to help Benin address pressing financing needs—related to security, COVID-19 scars, and the war in Ukraine—and anchor the country’s National Development Plan.
• Revenue mobilization, the cornerstone of the authorities’ reform program, spending prioritization and improved efficiency will create much-needed fiscal space to support Benin’s significant development needs while preserving debt sustainability.
• Strengthening the AML/CFT framework and enhancing governance and the rule of law would foster trust in domestic institutions and consolidate the foundations of sustained private sector-led growth that benefits all Beninese in a secure environment.

Washington, DC: An International Monetary Fund (IMF) team, led by Constant Lonkeng, held meetings with Beninese representatives in Cotonou during April 4–13 and in Washington D.C. during April 19–22 to negotiate a new program in support of the authorities’ ambitious policy plans and to conduct the 2022 Article IV consultation. The agreement is subject to approval by IMF Management and the Executive Board around mid-June 2022.

At the end of the mission, Mr. Lonkeng issued the following statement:

“I am pleased to announce that the Beninese authorities and the IMF team have reached a staff-level agreement on new 42-month blended Extended Credit Facility (ECF) and Extended Fund Facility (EFF) arrangements to support the authorities’ economic and financial policies. The proposed exceptional access under the ECF/EFF of SDR 484.058 million (equivalent to US$ 658.4 million or 391 percent of quota) seeks to help Benin address pressing financing needs, preserve macroeconomic stability, and anchor the country’s National Development Plan centered on achieving Sustainable Development Goals (SDGs).

“Benin made significant strides in macroeconomic management over the past five years, putting its economy on a strong footing. Fast forward to today, however, the country faces significant headwinds from a deteriorating security situation at its northern borders, scars from the COVID-19 pandemic, and purchasing power erosion amidst the war in Ukraine. IMF staff and the Beninese authorities have reached agreement on an innovative program—first case under the IMF’s High Combined Credit Exposure (HCCE) policy—to support the economy in the near-term while advancing policies and reforms to foster sustained private sector led growth that benefits all Beninese in a secure environment.

“Revenue mobilization is the cornerstone of the authorities’ reform program. This, together with spending prioritization and improved efficiency, will create much-needed fiscal space to support Benin’s significant development and security needs while preserving debt sustainability through a medium-term fiscal consolidation that builds on Benin’s established track record in public finance. This entails reducing the significant tax gap vis-à-vis peers by streamlining tax expenditure in the near-term and expanding the tax base overtime, including through a medium-term revenue mobilization strategy that improves the overall efficiency of the tax system.

“Considering Benin’s relatively large level of income inequality, the authorities’ Fund-supported ECF/EFF is rightly focused on “development with a human face” through enhanced access to basic public services and improved State presence in vulnerable areas, in line with the government’s “civilian approach” to mitigating security risks. Achieving these ambitious goals would require continued commitment to reforms and strong technical and financial support from Benin’s development partners to complement large and front-loaded Fund support.

“Strengthening the AML/CFT framework and enhancing governance and the rule of law would foster trust in domestic institutions and consolidate the foundations of sustained private sector-led growth. Sustaining the digitalization drive and strengthening climate resilience would support Benin’s development goals and further unlock the country’s growth potential.

“The team met with Senior Minister of Economy and Finance Wadagni, Senior Minister of Development and Coordination of the Governmental Action Bio Tchané, National Director of the BCEAO (the regional central bank) Assilamehoo, President Talon’s Special Advisor Dagnon, Director of the military Cabinet of the President General Bada, Ministry of Social Affairs and Microfinance, Abidjan-based WAMU Banking Commission, other senior government officials, the civil society, the business community and various donors, including representatives of the African Development Bank, the World Food Programme and the World Bank.

“The IMF team would like to thank the authorities and various stakeholders for their warm hospitality in Cotonou and continued open and constructive discussions.”