IMF Executive Board Completes the Second Review under the Extended Fund Facility and the Extended Credit Facility Arrangements for Benin and Approves US$68 million Disbursement

IMF News, May 17, 2023

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Canonical URL: IMF Executive Board Completes the Second Review under the Extended Fund Facility and the Extended Credit Facility Arrangements for Benin and Approves US$68 million Disbursement

Executive Board completed the Second Review of Benin’s Fund-supported program on May 17, 2023.
Arrangement: 42-month blended EFF/ECF, approved on July 8, 2022.
Immediate disbursement: SDR 50.82 million (about US$68 million) toward budget support.
Total disbursements under the program so far: SDR 267.42 million (about US$360 million).

Program performance described as robust:
- All end-September and end-December 2022 performance criteria and indicative targets met.
- All structural benchmarks implemented.
Growth and activity:
- Economic activity estimated to have expanded by 6.3 percent in 2022, buoyed by construction and a good harvest season.
Outlook drivers and risks:
- Outlook supported by expansion of the new special economic zone and modernization of the Port of Cotonou.
- Material risks: protracted war in Ukraine, challenging regional security situation, with implications for external accounts and food security.

Policy stance:
- After three years of warranted policy accommodation, fiscal consolidation is underway.
- Consolidation is underpinned by robust tax collection and spending reprioritization to shield social programs and meet development and security-related needs.
Fiscal target:
- Fiscal strategy aims for convergence to an overall fiscal deficit of 3 percent of GDP by 2025, consistent with the West African Economic and Monetary Union-wide stance and the program’s debt sustainability objectives.
Revenue mobilization:
- Pending Medium-Term Revenue Mobilization Strategy (MTRS) targeted at expanding the tax base and enhancing the overall efficiency of the tax system to create fiscal space and help preserve debt sustainability.

Social protection:
- Recently established social registry intended to channel timely support to vulnerable households; swift full operationalization is critical to improve targeting and efficiency of social programs as coverage expands.
Structural reform progress (examples noted):
- Completion and publication of the IMF governance diagnostic.
- Adoption of a financial inclusion strategy.
- Digitalization of land title requests.
- Submission to Parliament of a draft law to ensure the sustainability of the authorities’ flagship school feeding program.
Authorities’ commitment:
- Authorities’ demonstrated commitment to reform cited as a mitigating factor against heightened global uncertainty, regional security risks, and climate change vulnerabilities.

“The authorities’ balanced policy response to external shocks, supported by frontloaded financing under the EFF/ECF, has allowed Benin to meet unanticipated spending needs related to the protracted war in Ukraine and spillovers from regional security risks while preserving macroeconomic stability.”
“Revenue-based fiscal consolidation is underway, after three years of warranted policy accommodation amidst repeated and severe exogenous shocks.”
“The pending Medium-Term Revenue Mobilization Strategy (MTRS) … will create fiscal space for Benin’s large development needs over time and help preserve debt sustainability.”
“The recently established social registry is much-needed to channel timely support to vulnerable households in a world more prone to shocks. Its swift full operationalization is critical to improve the targeting and efficiency of social programs as their coverage expands.”

IMF Press Release No. 23/158, May 17, 2023.