## Benin: Harnessing the Power of Economic Diversification

_IMF News, December 12, 2017_

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**Canonical URL:** [Benin: Harnessing the Power of Economic Diversification](https://www.imf.org/en/news/articles/2017/12/11/sp121117-md-benin-speech)

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## Bibliographic details
- Authors: Christine Lagarde
- Published: December 12, 2017

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### I. Introduction and Theme
- Economic diversification framed as building a more complex, more resilient economic “fabric” that benefits families and communities.
- Diversification reduces vulnerability to sector-specific shocks that can cause unemployment, falling wages, lower revenue, and rising debt.
- Diversification requires:
  - Entrepreneurs launching new ventures in promising areas.
  - Workers upgrading skills for higher-productivity firms.
  - Policymakers and community leaders creating the right environment.
- IMF supports country-specific diversification efforts and identifies common policy threads that increase chances of success.

### II. Boosting Economic Diversification in Sub-Saharan Africa
a) Transitions and Challenges
- Progress over the past generation due to improved policies and institutions.
- Select regional outcomes and statistics:
  - Over the past 25 years, life expectancy has increased by a fifth.
  - Infant and maternal mortality rates have halved.
  - Primary school enrolment is up to 80 percent.
  - This year, 12 of 45 countries in sub Saharan Africa—home to about 400 million people—are expected to see negative per capita income growth.
  - By 2030, half of the annual increase in the global working age population is expected to come from sub-Saharan Africa.
- Policy focus needed on job creation and skill development to capture a potential demographic dividend.

b) Diversification Is Key
- IMF analysis finding:
  - A small increase in export diversification—roughly the difference between Senegal and Thailand—can lead to a one percentage point increase in per capita GDP growth.
- Country examples of successful shifts:
  - Rwanda: shift from basic agriculture to higher-value activity, especially services.
  - Botswana: expanded along the diamond value chain into trading, cutting, polishing, and retailing.
  - Mauritius: moved from single-crop farming in the 1960s to tourism, manufacturing, and financial services.
- Common policy threads that support diversification:
  - Macroeconomic stability.
  - Access to credit and a sound business environment.
  - Quality infrastructure.
    - African Development Bank estimate: $93 billion annually over the medium term for Africa’s infrastructure financing requirements.
  - Openness and trade integration.
  - Foreign direct investment for technology transfer, skills development, and competition.
  - Lower income inequality and higher gender equality.
    - IMF staff research: increasing gender equality can lift a country from the lowest rank for export diversification closer to the median.
    - Quotation: “Our booming economies in Africa need more female engineers, teachers and doctors to prosper and sustain growth.” — Angelique Kidjo

c) IMF as Partner
- IMF engagement modalities:
  - Financial assistance.
  - Analysis and policy advice.
  - Capacity development for economic management.
- Regional emphasis:
  - Sub-Saharan Africa is the largest recipient of IMF capacity development efforts.
- Example policy linkages:
  - Strengthening revenue collection to finance infrastructure, education, training, and research and development.
  - Support for the Compact with Africa (a joint initiative between the G20 and seven African nations, including Benin) to boost private investment and create jobs.
- IMF membership scope: 189 member countries.

### III. Harnessing Economic Diversification in Benin
- Benin strengths and outlook:
  - Political stability and reform orientation.
  - Growth is expected to accelerate this year to 5.5 percent, and is expected to remain strong over the medium term.
- Structural challenge:
  - Agriculture employs about 70 percent of Benin’s workforce.
- Government diversification priorities:
  - Transform agricultural sector to focus on high-value-added crops and develop food processing.
  - Unlock tourism potential as a new engine of growth and employment.
- Major policy threads recommended/underway:
  - Macroeconomic stability:
    - IMF Executive Board approved a three-year arrangement totaling $150 million under the Extended Credit Facility to reduce the fiscal deficit, strengthen revenue collection, and support diversification.
    - Capacity building focus: tax policy, revenue administration, and public financial management.
  - Boosting infrastructure investment:
    - Priorities: reliable electricity supply, upgraded road networks, a new international airport, and modernization of the Port of Cotonou.
    - Financing: higher public and private investment, including through the Compact with Africa.
    - Strengthening revenue collection to scale up public investment while maintaining sustainable debt.
    - Public investment governance: estimated potential to increase investment efficiency by 55 percent on average with the same amount of investment.
  - Improving the business environment:
    - Cut red tape and boost transparency in public administration.
    - Combat corruption to restore investor confidence; private sector responsibility emphasized as well.
    - Regulatory strengthening against money laundering and recommendation to implement an effective asset declaration regime.
    - Fighting corruption characterized as a multi-year, multi-generational struggle.
  - Promoting more inclusive growth:
    - Inequality drivers: high informality and low agricultural productivity.
    - Policy measures: strengthen land tenure, boost irrigation, foster rural food security.
    - Increase fiscal transfers to disadvantaged areas and adopt cost-effective safety nets such as e-vouchers and mobile transfers.
    - Investment in health and education to raise worker productivity.
    - Gender empowerment:
      - Benin ranks 7th out of 144 countries in a sub-ranking of female labor force participation in the World Economic Forum’s Gender Gap Index.
      - Overall WEF Gender Gap index ranking: 116 (out of 144) due to very low rankings in education, health & political empowerment.
      - Priority: close the gender gap in education so women can access secondary education and universities and move into higher-paying formal sectors.

### IV. Conclusion
- Closing message: actions taken today will be “etched in history” and matter for future generations.
- Call to action: work together as partners to weave a better economic fabric that benefits all.

*By Christine Lagarde, IMF Managing Director; Chamber of Commerce, Cotonou, December 12, 2017 — IMF Communications Department*

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## References

- [Christine Lagarde](https://www.imf.org/en/About/senior-officials/Bios/christine-lagarde)
- [Benin and the IMF](http://www.imf.org/external/country/BEN/index.htm)
- [The IMF and Good Governance -- A Factsheet](https://www.imf.org/en/about/factsheets/sheets/2023/the-imf-and-good-governance)
- [Speeches](https://www.imf.org/en/news/searchnews)
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_Source: https://www.imf.org/en/news/articles/2017/12/11/sp121117-md-benin-speech_