Benin: An African Pioneer

IMF News, January 31, 2025

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IMF support included a $650 million blended Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangement, complemented by a $200 million Resilience and Sustainability Facility (RSF) in 2023.
The IMF disbursed more than 40 percent of the total financing envelope of about 400 percent of Benin’s quota in the first 6 months of the 42-month program to smooth out fiscal adjustment.
The RSF complemented the EFF/ECF at 120 percent of Benin’s quota to help enhance the country’s socio-economic resilience.
Development partners’ budget support consistently exceeded expectations, and Benin re-accessed the international capital market following a two-year hiatus, with several sovereign credit rating upgrades in recent years.
Program design emphasized balancing financing and fiscal adjustment in a shock-prone environment and drew on Benin’s established track record in macroeconomic management.

Growth has been strong, with growth averaging more than 6.5 percent in recent years.
Benin navigated negative spillovers in 2022, including a deteriorating regional security situation at its northern border, lingering scars of COVID-19, and higher living costs amid the war in Ukraine.
Fiscal adjustment has proceeded while allowing for a significant increase in social spending.
Benin has been re-building policy space with domestic revenue mobilization as a cornerstone of the reform program.

A frontloaded tax policy reform under the program complemented efforts to digitalize the tax system to boost revenue collection.
Benin’s tax-to-GDP ratio increased by more than 2 percentage points during 2022–24, far exceeding the average improvement of other countries in this timeframe.
Continued expansion of the tax base, drawing on the country’s recently developed medium-term revenue strategy, is highlighted as critical to fund large development needs and improve debt carrying capacity.

The Government Action Program (PAG 2021–26) emphasizes enhancing human capital.
The Integrated School Feeding Program currently provides free meals to students in 95 percent of elementary schools in rural areas (more than 1.3 million children), with full coverage targeted this year.
Lower education is now tuition-free for girls across all of Benin’s 77 communes (estimated 2 million girls), with an ongoing pilot to extend to upper secondary school.
Emphasis is being placed on technical education and vocational training to prepare the large youth population for high value-added activities.
The Insurance for Human Capital Enhancement (ARCH) seeks to foster social resilience through programs including micro-credits, access to healthcare, and pensions.
A social registry—established under the EFF/ECF with World Bank technical support—is an essential tool for targeting support to the most vulnerable.

A first wave of reforms laid foundations; a second wave seeks to consolidate achievements and climb up value chains by processing commodities locally.
The Glo-Djigbé Industrial Zone is dedicated to local transformation of agricultural products including cotton, cashews, and soybeans and plays a strategic role.
Priorities include further developing the industrial zone, modernizing and enhancing resilience of agriculture, unlocking tourism potential, and modernizing the Port of Cotonou.
Sound public finances, reliable energy, and infrastructure—including digital—are identified as key prerequisites for sustained economic expansion.

Benin developed an SDG bond framework aligned with the country’s social and climate priorities.
The framework facilitated issuance of a €500 million SDG bond in 2021, described as a first in the region.
The SDG bond has financed key social and energy transition projects and is intended to catalyze financing for climate change adaptation, resilient agriculture, sustainable ecosystem management, and the energy transition.
Climate financing pledges were secured from partners during COP29, following a climate finance roundtable co-convened in Cotonou with the IMF and the World Bank.

Program ownership and public consultation under the National Development Plan and the Government Action Program were key to program engagement.
A key lesson is that sound governance is critical to economic transformation.
Main challenges and priorities ahead:
- Continued expansion of the tax base to fund development needs (the country’s median age is 18) and preserve debt sustainability.
- Move away from a traditional transit-centered growth model toward private sector job creation in higher value-added activities for the large youth population.
- Enhance resilience to climate change and maintain the digitalization drive to support long-term socio-economic resilience.
- Expand social safety nets to reach as many vulnerable people as possible.

Source: Benin: An African Pioneer — IMF NEWS, January 31, 2025.