Press Release No. 11/49

Press Release: IMF Executive Board Completes First Review Under ECF Arrangement with Benin and Approves US$16.5 Million Disbursement

February 16, 2011

The Executive Board of the International Monetary Fund (IMF) today completed the first review of Benin’s economic performance under a three-year Extended Credit Facility (ECF) arrangement. The completion of the review enables the disbursement of SDR 10.61 million (about US$16.5 million), which would bring total disbursements under the program to SDR 21.23 million (about US$33 million).

In completing the review, the Executive Board granted a waiver for nonobservance of the performance criterion relating to net domestic financing at end-June 2010 and approved an extension of the arrangement by three months. The three-year ECF arrangement for Benin was approved on June 14, 2010 (see Press Release No. 10/243) in an amount equivalent to SDR 74.28 million (about US$115.5 million).

After the Executive Board’s discussion of Benin, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, made the following statement:

“Amid unfavorable external and internal conditions, real GDP growth has been weaker than expected and performance under the program has been mixed. Revenue collection in the first half of 2010 fell below program targets, and the end-June performance criterion on net domestic financing was missed. These slippages were partially addressed with corrective actions in the second half of 2010. During the latter part of 2010, revenue collection efforts intensified, and expenditure was contained in line with available resources. Structural reforms proceeded, but with some delay.

“In September and October 2010, Benin was hit by the worst flooding in 50 years, which caused a major humanitarian crisis. Preliminary estimates suggest that the floods caused considerable damage, particularly in agriculture, and will require substantial reconstruction in 2011.

“The mixed economic performance in 2010 and the adverse shocks have led to a three-month extension of the program and to a revision of the program’s macroeconomic framework and fiscal objectives. Real GDP growth is now projected to increase to 3.4 percent in 2011 and to improve gradually in the medium term. Achieving the revised objectives of the program will require a major effort to mobilize revenue and contain expenditure. The authorities intend to protect priority social spending, while containing current expenditure in line with reduced revenue expectations and revised deficit targets.

“A timely implementation of the structural reform agenda will be essential to achieve the program objectives. Critical reforms include introduction of a one-stop window at the Port of Cotonou, full adoption of single taxpayer identification numbers, reform of the civil service, and a reform of the energy sector.”