- IMF Board completed the Second Review under the 42-month blended EFF/ECF arrangement for Benin, providing the country with immediate access to about US$68 million.
- Program performance has been robust, with all end-September and end-December 2022 performance criteria and indicative targets met and all structural benchmarks implemented.
- After three years of warranted policy accommodation, fiscal consolidation is underway, underpinned by robust tax collection and spending reprioritization to shield social programs and help meet Benin's large development and security-related needs.
Washington, DC: On May 17, 2023, the Executive Board of the International Monetary Fund completed the Second Review of Benin's Fund-supported program. The 42-month blended EFF/ECF, approved on July 8, 2022 (seePR 22/252), seeks to help Benin address pressing financing needs, support the country's National Development Plan centered on achieving the Sustainable Development Goals (SDGs), and catalyze donor support. This review completion allows for the immediate disbursement of SDR 50.82 million (about US$68 million) toward budget support, bringing total disbursements under the program so far to SDR 267.42 million (about US$360 million).
The Beninese economy is gaining strength despite multiple exogenous shocks and challenges. Economic activity is estimated to have expanded by 6.3 percent in 2022, buoyed by construction and a good harvest season. While the outlook is favorable, supported by the expansion of the new special economic zone and the modernization of the Port of Cotonou, the protracted war in Ukraine and the challenging regional security situation pose important risks to external accounts and food security.
Following the Executive Board discussion, Mr. Okamura, Deputy Managing Director and Acting Chair, issued the following statement:
"The authorities' balanced policy response to external shocks, supported by frontloaded financing under the EFF/ECF, has allowed Benin to meet unanticipated spending needs related to the protracted war in Ukraine and spillovers from regional security risks while preserving macroeconomic stability.
"Revenue-based fiscal consolidation is underway, after three years of warranted policy accommodation amidst repeated and severe exogenous shocks. The fiscal strategy, with convergence to an overall fiscal deficit of 3 percent of GDP by 2025, is consistent with the West African Economic and Monetary Union-wide stance and the program's debt sustainability objectives.
"The pending Medium-Term Revenue Mobilization Strategy (MTRS), aimed at expanding the tax base and enhancing the overall efficiency of the tax system, will create fiscal space for Benin's large development needs over time and help preserve debt sustainability.
"The recently established social registry is much-needed to channel timely support to vulnerable households in a world more prone to shocks. Its swift full operationalization is critical to improve the targeting and efficiency of social programs as their coverage expands.
"The structural reform agenda is advancing, including with the completion and publication of the IMF governance diagnostic, the adoption of a financial inclusion strategy, the digitalization of land title requests, and the submission to Parliament of a draft law to ensure the sustainability of the authorities' flagship school feeding program.
Going forward, the authorities' demonstrated commitment to reform is a mitigating factor vis-à-vis heightened global uncertainty, regional security risks and longstanding and intensifying climate change vulnerabilities."
