Benin: IMF Executive Board Completes Fifth Reviews of Extended Fund and Extended Credit Facilities and Second Review of Resilience and Sustainability Facility

IMF News, December 17, 2024

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Canonical URL: Benin: IMF Executive Board Completes Fifth Reviews of Extended Fund and Extended Credit Facilities and Second Review of Resilience and Sustainability Facility

The Executive Board completed the Fifth Review under the 42-month blended Extended Fund Facility (EFF) and the Extended Credit Facility (ECF).
The Executive Board completed the Second Review under the Resilience and Sustainability Facility (RSF).
The decision allows for an immediate disbursement of about US$80 million.
Specific disbursements associated with the reviews:
- SDR 31.2 million (about US$41 million) under the EFF/ECF.
- Total disbursements under the EFF/ECF to date: SDR 431.4 million (about US$565 million).
- SDR 29.7 million (about $39 million) under the RSF arrangement.
Program timeline and approvals:
- The EFF/ECF was approved by the IMF Executive Board in July 2022.
- The RSF complemented the program in December 2023.

Economic activity:
- Economic activity is estimated to have expanded by 6.4 percent year-over-year in the first half of this year.
- Growth is expected to remain strong in the near term.
Balance of payments:
- The balance of payments has deteriorated temporarily, due to large investments, including related to the special economic zone (SEZ).
- The balance of payments is expected to recover gradually as the transformation of local commodities at the SEZ boosts exports.
Fiscal policy and budget:
- The 2025 budget recently adopted by Parliament targets compliance with the West African Economic and Monetary Union (WAEMU) fiscal deficit norm of 3 percent of GDP.
- The 2025 budget is supported by sustained domestic revenue mobilization and scaling up social spending.
- Next year is expected to be the last year of fiscal consolidation under the current economic cycle.
- Fiscal adjustment will continue to be revenue-based and anchored in the Medium-Term Revenue Strategy.
Program performance:
- All end-June 2024 quantitative targets were met.
- Structural benchmarks (under the EFF/ECF) were completed.

RSF-related progress:
- The authorities have implemented climate budget tagging under the 2025 budget.
- The authorities adopted a predictable price adjustment mechanism for fuel products and the related compensatory mechanism.
- Water tariff reform in urban areas is now expected by early 2025.
- Benin’s partners pledged financial support for the country’s climate agenda at COP29.
Structural priorities noted:
- New industries are emerging in Benin, with higher value-added goods’ exports and momentum in information technology and tourism.
- The full operationalization of the social registry is emphasized to facilitate coordination of social assistance programs and improve targeting of vulnerable households across regions.

Risks and vigilance:
- Authorities should remain vigilant to risks stemming from global and regional uncertainties, which calls for deliberate contingency planning.
- Remaining vigilant vis-à-vis public and non-public financial sector risks will help preserve macroeconomic stability and limit contingent liability risks.
Debt and financing management:
- Rebalancing the debt portfolio towards domestic debt over time, as contemplated under the recently developed Medium-Term Debt Strategy, together with proactive debt management, will help mitigate external refinancing risks.
Specific policy recommendations and actions (as stated by Mr. Okamura, Deputy Managing Director and acting chair):
- Early implementation of the predictable mechanism for fuel products and the related compensatory mechanism will be important.
- The authorities should strengthen further Benin’s anti-corruption framework to preserve macroeconomic gains and lay the foundations for private sector-led inclusive growth.
- Steadfast implementation of the authorities’ climate change agenda under the RSF will complement the EFF/ECF in supporting overall socio-economic resilience and help Benin capitalize on climate finance pledges by development partners.

Press Release No. 24/481, December 17, 2024