Press Release No. 11/287

Press Release No. 11/287
July 20, 2011

An International Monetary Fund (IMF) mission visited Cotonou during July 7–20, 2011 to conduct discussions on the second review of a program supported by the Extended Credit Facility (ECF), which was approved by the IMF Executive Board on June 14, 2010.¹ The first review was concluded by the Executive Board on February 16, 2011 (see Press Release No. 11/xx) allowing the disbursement of a second tranche of SDR 10.61 million (about US$17 million). The mission met with H.E. Dr. Boni Yayi, President of Benin; Mr. Pascal Koupaki, Prime Minister; Mr. Marcel de Souza, Minister of Economic Analysis, Development, and Planning; Ms. Adidjatou Mathys, Minister of Economy and Finance;

Mr. Jonas Gbian, Minister of Energy and Mineral Resources; and other senior officials. The mission also met with members of the National Assembly, and representatives of trade unions and the donor community. Discussions focused on recent economic developments, policy implementation under the ECF, and structural reforms.

At the conclusion of the mission, Mr. Mario de Zamaróczy, mission chief for Benin, issued the following statement:

“Economic growth in 2010 at 2.6 percent was in line with previous estimates. This subdued performance reflected weak aggregate demand in the wake of the global economic slowdown and severe flooding in the latter part of the year. Growth is expected to accelerate to 3.8 percent in 2011, reflecting a rebound in agricultural production and a pick up in the construction, services, and trade sectors. Inflation remained subdued in 2010, well below the convergence criterion of the West African Economic and Monetary Union (WAEMU). Although is it expected to rise slightly in 2011, as a result of higher food prices in the beginning of the year, it is expected to remain contained. The external current account deficit, excluding grants, after improving in 2010, is projected to widen in 2011, as higher international oil prices will be offset only partially by higher cotton prices. As a result, the overall balance of payments is expected to turn from a small surplus in 2010 to a small deficit in 2011.

“Public finances strengthened during the second half of 2010 in spite of the subdued economic activity. While total revenue at the end of the year was below program objective, the government reined in non-priority expenditure thereby meeting the program target for the basic primary balance. However, the target on net domestic financing was narrowly missed.

“Efforts at strengthening public finance continued during the first quarter of 2011. Revenue performance was in line with program objectives and expenditure was kept under control. Thus, all quantitative performance criteria and indicative benchmarks were met at end-March, with the exception of the benchmark on the floor for priority social spending. This benchmark was missed because of a slowdown in public activity during the election period. The government confirmed, however, its intention to meet the end-year target. The mission emphasized, and the government agreed to, the need to maintain a conservative fiscal stance for the remainder of the year and over the medium term to create fiscal space for priority spending. This will require enhanced revenue mobilization and a prudent wage policy.

“The mission noted progress in structural reforms, in particular the launching of the one-stop-window at the Port of Cotonou. Associated with the purchase of scanners and an enhanced program of import value verification, this development is expected to boost customs revenue collection in the second half of the year.

“The mission recommended, however, to accelerate the completion of other critical reforms, some of which are behind schedule. It welcomed ongoing independent studies, which will set the stage for the design of the long-awaited public service reform. The mission invited the authorities to strengthen efforts in this area. It also discussed new structural measures for the period ahead. Key among them will be the completion of two studies before year end for the implementation of an integrated human resources information management system for the civil service.

“The mission discussed with the authorities their recently completed poverty reduction strategy for the period 2011-15. It emphasized that the strategy needed to be supported by sizable investment and that the priority action plan to implement the strategy’s objectives had to be fully aligned with available financial resources.

“Staff will propose to IMF management to recommend consideration of the completion of the second review under the ECF in early September 2011 to the Executive Board.

“The mission would like to thank the authorities for their warm welcome and close cooperation.”

---

¹ The ECF is the IMF’s main tool for medium-term financial support to low-income countries. Financing under the ECF currently carries a zero percent interest rate, with a grace period of 5½ years, and a maturity of 10 years.