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Press Release: IMF Approves Three-Year, US$35.7 Million PRGF Loan for Benin
July 18, 2000
The International Monetary Fund (IMF) approved a three-year arrangement for Benin under the Poverty Reduction and Growth Facility (PRGF)1 in a total amount equivalent to SDR 27 million (about US$35.7 million) to support the government's 2000-03 economic program. The decision will enable Benin to draw an amount equivalent to SDR 6.8 million (about US$9 million) immediately.
In commenting on the Executive Board's discussion, Eduard Aninat, Deputy Managing Director and Acting Chairman of the Board, said:
"The Beninese authorities are to be commended for the progress achieved under the 1996-99 program supported by a three-year arrangement under the poverty reduction and growth facility (PRGF). Robust real GDP growth led to a marked increase in per capita income, inflation continued to be moderate, and fiscal performance remained strong.
"The authorities are placing increased emphasis on reducing Benin's still widespread poverty, and are developing policies through broad-based consultation with civil society. They have prepared an interim Poverty Reduction Strategy Paper (PRSP), and a full PRSP is scheduled to be completed by April 2001.
"Under the new medium-term program, the authorities are determined to accelerate the implementation of their unfinished structural reform agenda while maintaining macroeconomic stability and improving social conditions in the country. Important reforms include the participation of the private sector in management of public utilities and the liberalization of the cotton sector. As further steps to improve public resource management and transparency, and reduce corruption, the authorities are strengthening budget preparation and execution procedures and reforming the civil service. With the successful implementation of these reforms, Benin will be well-placed to enter a sustained period of high growth and poverty reduction. Nevertheless, there will be a continued need for substantial international assistance on concessional terms," Aninat said.
ANNEX
Program Summary
Benin's economic and financial performance under the 1998-99 program was broadly satisfactory, although the financial situation in the cotton sector deteriorated sharply and implementation of key structural reforms was delayed.
However, the government has taken corrective measures and is accelerating the pace of reforms under the new program. Economic and financial developments in 1999 and early 2000 were broadly in line with the program. In spite of a drop in cotton production, real GDP growth is estimated to have risen to about 5 percent in 1999 from 4.5 percent in 1998, and is projected to increase to 5.6 percent in 2000, with cotton production estimated to increase by 8 percent.
The government is determined to implement a medium-term program aimed at achieving high and sustainable economic growth, maintaining financial stability, and reducing poverty over the period 2000-03. The objectives are to achieve real GDP growth of 5-6 percent and contain inflation below 3 percent. The external current account deficit is expected to widen by a 1.5 percentage point of GDP to just over 7 percent in 2000 before narrowing to 5.5 percent of GDP the following years.
Fiscal policy is geared toward maintaining a balanced overall fiscal position, including grants. It focuses on improving tax administration and public resource utilization, and provides for increased budget appropriations for programs to reduce poverty and develop human capital. The government has continued to reduce domestic arrears in line with the program, settling the equivalent of 0.8 percent of GDP in 1999. It is further preparing a plan for settling remaining arrears over the next few years. On the expenditure side, the goals are to ensure that actual spending reflects the government priorities for the social sector and infrastructure. The government is also taking action to improve the efficiency of tax administration and to reduce tax fraud and corruption.
The structural reforms under the program focus on strengthening public resource management, implementing a prudently flexible wage policy for the civil service, pursuing the government divestiture program to enhance resource allocation and promote private investment, expanding social programs, and reducing poverty. The government intends to reform public administration, including the civil service, improve its efficiency, increase its focus on core government activities, and bring it closer to the public. Furthermore, it plans to pursue the price liberalization policy begun in the early 1990s. The government also intends to continue reducing public sector involvement in production and commercial activities, and to develop a regulatory framework promoting competition in sectors to be privatized.
On overall poverty reduction, the government is expected to complete the formulation of a broad strategy by April 2001 with the participation of elected officials, civil society, nongovernmental organizations and development partners. Pending the elaboration of this overall strategy, the government has adopted a series of measures in education, health, and social protection, which are reflected in the interim PRSP and are to be implemented over the next 12 months in the context of the completion point of the enhanced HIPC Initiative.
Benin joined the IMF on July 10, 1963; its quota2 is SDR 61.90 million (about US$82 million). Benin's outstanding use of IMF credit totals SDR 63.73 million (about US$84 million).
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