Press Release No. 10/116

Press Release No. 10/116
March 26, 2010

A mission from the International Monetary Fund (IMF) led by Joannes Mongardini, visited Cotonou during March 11-26, 2010. The mission held discussions on a program that could be supported by the IMF under the Extended Credit Facility (ECF), and conducted the 2010 Article IV consultation discussions.¹ The mission met with the President of the Republic, His Excellency Dr. Thomas Boni Yayi, the Senior Minister for Prospective, Development, Evaluation of Public Policy, and the Coordination of Government Action, Mr. Pascal I. Koupaki, Minister of Economy and Finance, Mr. Idriss L. Daouda, and other senior officials. It also held fruitful discussions with representatives of civil society, labor unions, donors, and the private sector.

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

“The global economic crisis had a negative impact on Benin in 2009. Notwithstanding the authorities' countercyclical fiscal policies, real GDP growth slowed to 2.7 percent, compared with 5.0 percent in 2008. Inflation came down to an average 2.2 percent, reflecting lower food and fuel prices. Government revenues stagnated mostly because of lower trade activity. A strong fiscal adjustment effort in the second half of 2009 to align expenditures with available financing limited large expenditure overruns. However, domestically financed capital expenditures doubled, and the wage bill increased by 24 percent compared with 2008. These developments widened the overall fiscal deficit (excluding grants) to 7.0 percent of GDP, which was financed through additional budget support from the international community and domestic borrowing. On the external sector, cotton exports declined significantly reflecting lower international prices and workers’ remittances fell. As a result, the current account deficit, excluding grants, widened to 9.3 percent of GDP, compared with 7.0 percent in 2008. While the banking sector experienced some liquidity pressures in the first half of the year, as deposit growth decelerated, it overall weathered the crisis relatively well, and prudential ratios improved.”

“In view of the continued impact of the global economic crisis on Benin, the mission noted that the maintenance of macroeconomic stability required a prudent fiscal policy in 2010. In addition, the mission underscored the need to reduce the fiscal deficit over the medium term to preserve fiscal and debt sustainability and align expenditures with available financing. In this regard, the mission exhorted the authorities to continue reforms in revenue administration and expenditure management. Prudence is also needed regarding developments in the wage bill as further wage increases, like in 2009, would jeopardize fiscal and debt sustainability. In this context, the mission welcomes the implementation of a framework for consultations between the trade unions and the government. It encourages both sides to align wage demands to available resources.

“The mission reached broad understandings on an economic program that could form the basis for the authorities’ request for an Extended Credit Facility (ECF) arrangement. These understandings will be reviewed by IMF management, before being presented to the IMF Executive Board for consideration.”

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¹ Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities.