IMF Reaches Staff-Level Agreement with Benin on a New Program under the Resilience and Sustainability Facility (RSF) and the Third Review under the Extended Fund Facility and the Extended Credit Facility Arrangements

IMF News, October 26, 2023

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Published: October 26, 2023

Agreement and Program Scope

IMF reached staff-level agreement with Benin on:
- the Third Review of Benin’s ongoing EFF/ECF (42-month blended EFF/ECF), and
- a new program under the Resilience and Sustainability Facility (RSF) (24-month RSF).
Staff-level agreement is subject to IMF Management and Executive Board approval.
Completion of the EFF/ECF review would allow the disbursement of SDR 101.59 million (about $134 million) or 82 percent of Benin’s quota.

Mission and Timeline

IMF team led by Constant Lonkeng visited Cotonou during October 17–26.
End-of-mission statement issued by Mr. Lonkeng.
All quantitative targets for end-June 2023 were met.

Economic Outlook and Risks

Economic activity is now expected to expand by 5.6 percent this year (down from 6 percent earlier), reflecting ongoing shocks.
The outlook is subject to downside risks, including:
- a prolonged Niger border closure,
- tightening financing conditions, and
- weather-related events.
Benin faces headwinds from Niger border closure and post-electoral policy shifts in Nigeria; the authorities should remain vigilant vis-à-vis the socio-economic and financial fallout from those shocks.

Fiscal Policy and Budget

The budget law for 2024 submitted to Parliament is in line with the authorities’ objective to converge to the West African Economic and Monetary Union (WAEMU) overall fiscal deficit norm of 3 percent of GDP by 2025.
Fiscal consolidation is underway.
The authorities have mobilized additional concessional budget support, allowing for a slightly larger fiscal deficit this year, a flexibility built into the program at inception.
Medium-term fiscal consolidation will rely on revenue collection informed by the recently developed medium-term revenue mobilization strategy (MTRS).

Structural Reforms, Governance, and AML/CFT

Structural reform agenda is advancing.
Mission underscored need to move swiftly to the consultation with civil society on the action plan for implementing recommendations from the IMF governance diagnostic; consultation has been delayed while some recommendations are already being implemented.
Program conditionality is being augmented to support authorities’ efforts to strengthen the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) framework, transparency, and the business climate.

RSF Reform Pillars and Climate Agenda

The RSF seeks to support the authorities’ ambitious climate agenda and to complement the EFF/ECF in enhancing socio-economic resilience.
RSF reform measures are centered on four main pillars:

1. mainstreaming climate considerations in policymaking; 2. enhancing adaptation to climate change, including resilience building at the community level and climate-proof social safety nets; 3. mitigating transition risks, notably through a comprehensive energy subsidy reform; and 4. mobilizing private climate finance via the development of a climate financial information architecture.

RSF reviews will be aligned with the EFF/ECF’s.
The new RSF builds on Benin’s strong legal and institutional foundations for climate action, diagnostic reports by the IMF and the World Bank, as well as inputs from the Global Center on Adaptation (GCA).

Stakeholder Engagement and Next Steps

The team met with: Senior Minister of Economy and Finance Wadagni; Senior Minister of Development and Coordination of the Governmental Action Bio Tchané; Special Advisor to the President Dagnon; Minister of Justice and Legislation Detchenou; National Director of the BCEAO Assilamehoo; Director of the Military Cabinet of the President General Bada; other senior government officials; civil society; the opposition; labor unions; university students; the donor community; multilateral and regional development banks; the banking association; and other private sector representatives.
The mission will prepare a staff report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.

Press Release No. 23/362 — October 26, 2023