A staff team from the International Monetary Fund (IMF) led by Luc Eyraud
visited Cotonou from April 25 to May 6, 2019 to hold discussions on the
2019 Article IV Consultation and the fourth review of the three-year
economic and financial program supported by the IMF under the Extended
Credit Facility (ECF)[1] arrangement with the Republic of Benin. The discussions covered recent
economic, fiscal, and financial developments, as well as policies needed to
foster high and inclusive growth, preserve debt sustainability, enhance
governance, and promote financial stability.
At the end of the visit, Mr. Eyraud issued the following statement:
“The discussions on the fourth review under the ECF-supported program have
allowed the authorities and the IMF team to reach a staff level agreement,
subject to approval by IMF management and the Executive Board.
Consideration by the IMF’s Executive Board is expected in June 2019.
“Based on preliminary estimations, GDP grew by 6.7 percent in 2018 driven
by strong agriculture production and port activity. Inflation remained
subdued at about 1.0 percent, well below the 3 percent regional ceiling of
the Western Africa Economic and Monetary Union (WAEMU). The current account
deficit improved significantly last year reflecting a boom in agricultural
exports. The 2018 fiscal deficit stood at 4.0 percent of GDP compared to
the program target of 4.7 percent of GDP.
“The medium-term outlook continues to be favorable, with economic growth
projected at 6.7 percent over 2019-2024, driven by high agriculture
production, rising private investment, and the development of new sectors
such as tourism and the digital economy. Inflation is expected to remain
contained. Staff welcomes the authorities’ commitment to keep the fiscal
deficit within the WAEMU regional norm of 3 percent of GDP in 2019 and
beyond.
“Performance under the IMF-supported program was satisfactory in 2018. All
program monitoring indicators (quantitative and structural) at end-December
2018 were met. Sound policies implemented by the authorities in the context
of the program and the country’s good economic performance have supported a
successful Eurobond issuance in March 2019.
“Benin has a high medium-term growth potential. To realize this potential,
IMF staff emphasized the importance of speeding up reforms aimed at
improving the business environment and infrastructure, strengthening the
governance framework, diversifying the economy, promoting high-quality
education and health, and addressing the vulnerabilities of the banking
sector, in particular the weak bank profitability. The mission noted recent
improvements in these areas and encouraged the government to pursue their
efforts.
“The authorities and the IMF staff agreed on the need to continue to
increase government revenues. Greater revenue mobilization is essential to
finance transfers to the poor and social insurance programs, such as the
new health insurance system, which has recently entered in its pilot phase.
Higher revenues will also create space to finance the infrastructure
projects of the Government Action Program.
“IMF staff welcomed the projected decline in public debt ratio in 2019.
Maintaining debt on a firm downward path will require continuing the
prudent borrowing strategy and strengthening the proactive and modernized
debt management. The Eurobond paves the way for access to non-concessional
international bond markets in the future. This will contribute to the
diversification of the financing structure and create opportunities for
extending the debt maturity. Nevertheless, it may also generate
vulnerabilities that the authorities are determined to assess and mitigate.
“The IMF team thanks the authorities for their hospitality and productive discussions.
“The team met with Abdoulaye Bio Tchané, Minister of State for Planning and
Development; Romuald Wadagni, Minister of Economy and Finance; Benjamin
Hounkpatin, Minister of Health; Alain Komaclo, National Director of the
regional central bank, BCEAO; and other senior government officials.”
[1]
The Benin’s ECF-supported program was approved by the IMF Executive
Board in April 2017. The ECF
is a lending arrangement that provides sustained program engagement
over the medium to long term in case of protracted balance of
payments problems.
