December 17, 2024
PRESS OFFICER: Julie Ziegler
Phone: +1 202 623-7100Email: MEDIA@IMF.org
Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed the Fifth Reviews under the 42-month blended Extended Fund Facility (EFF) and the Extended Credit Facility (ECF) arrangements, and the Second Review under the Resilience and Sustainability Facility (RSF) arrangement. The EFF/ECF was approved by the IMF Executive Board in July 2022 (see PR 22/252) and complemented by the RSF in December 2023 (see PR 23/452).
The completion of the reviews allows for the immediate disbursement of SDR 31.2 million (about US$41 million) under the EFF/ECF—bringing total disbursements under the program to SDR 431.4 million (about US$565 million)—and of SDR 29.7 million (about $39 million) under the RSF arrangement.
New industries are emerging in Benin, with higher value-added goods’ exports and momentum in information technology and tourism. 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. The balance of payments has deteriorated temporarily, due to large investments, including related to the special economic zone (SEZ). It is expected to recover gradually as the transformation of local commodities at the SEZ boosts exports.
Program performance has been robust, with all end-June 2024 quantitative targets met, and structural benchmarks (under the EFF/ECF) completed. On the RSF front, the authorities have implemented climate budget tagging under the 2025 budget and 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 the recent COP29.
Following the Executive Board discussion on Benin, Mr. Okamura, Deputy Managing Director, and acting chair, issued the following statement[1]:
“Sound macroeconomic management and steadfast reform implementation over the past several years have underpinned promising signs of economic transformation in Benin, including strong growth, credit rating upgrades and continued support from development partners. The authorities should nonetheless remain vigilant to risks stemming from global and regional uncertainties, which calls for deliberate contingency planning.
“Parliament adopted the 2025 budget targeting compliance with the West African Economic and Monetary Union’s (WAEMU) fiscal deficit norm of 3 percent of GDP while scaling up social spending, with next year 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. Rebalancing the debt portfolio towards domestic debt over time, as contemplated under the recently developed Medium-Term Debt Strategy, together with the authorities’ proactive debt management, will help mitigate external refinancing risks.
“The adoption of a predictable mechanism for fuel products that accounts for the specificities of Benin’s local fuel market as well as the related compensatory mechanism is welcome. Early implementation of those schemes will be important.
“The authorities should strengthen further Benin’s anti-corruption framework to preserve hard-won macroeconomic gains and lay the foundations for private sector-led inclusive growth. Remaining vigilant vis-à-vis public and non-public financial sector risks will help preserve macroeconomic stability and limit contingent liability risks.
“A key challenge ahead for Benin is to maintain the reform momentum and further strengthen inclusive policies for an economic transformation that generates jobs and benefits all Beninese. In this context, the full operationalization of the social registry will facilitate the coordination of various social assistance programs and improve targeting of vulnerable households across regions.
“Steadfast implementation of the authorities’ climate change agenda under the Resilience and Sustainability Facility (RSF) will complement the EFF/ECF in supporting overall socio-economic resilience in Benin. This will also help Benin capitalize on climate finance pledges by its development partners at the recent COP29, following the climate finance roundtable in Cotonou.”
[1] 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. An explanation of any qualifiers used in summings-up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.
