IMF Concludes 2017 Article IV Consultation with Benin
December 8, 2017
On December 1, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV Consultation [1] with Benin.
Benin has shown mixed macroeconomic performance in 2016, with the economy weathering negative spillover stemming from a difficult external environment. Growth was about 4 percent, but a recovery is expected in 2017-18, owing to strong agricultural production, an increase in public investment, and a buoyant tertiary sector. Economic growth is accelerating and inflation remained negative in 2016 and through end-August 2017 but is forecasted to average 0.6 percent in 2017.
The medium-term outlook continues to show favorable signs, with high economic growth and low inflation. Cuts in recurrent spending have contributed to a smaller than programmed budget deficit of 6.0 percent of GDP in 2016 from 8.0 percent in 2015. The fiscal consolidation path foresees a further reduction of the deficit to 1.8 percent of GDP in 2019, below the West African Economic and Monetary Union convergence criterion of 3 percent of GDP.
Despite the favorable medium-term economic outlook, some challenges remain that need to be addressed going forward. These include prioritizing public expenditures to foster inclusive growth and to reduce poverty; accelerating the tax and customs administration reforms to mobilize more domestic resources; making public investment more efficient to sustain the expected growth over the medium term, addressing the rising burden of domestic debt service, and strengthening debt management to preserve public debt sustainability.
Executive Board Assessment [2]
Executive Directors agreed with the thrust of the staff appraisal. They commended the authorities for maintaining a stable macroeconomic environment despite negative regional spillovers in 2016. However, they noted that poverty remains a major challenge to reducing inequality and broadening support for the reform agenda. Directors, therefore, underscored the need to continue to steadfastly implement policies and structural reforms to preserve macroeconomic stability and foster inclusive growth.
Directors welcomed the strong performance in domestic revenue collection, which has contributed to better program outcomes in 2017. They encouraged the authorities to sustain these efforts to support their goal of increasing public investment and boosting poverty‑reducing spending. Sustained implementation of ongoing tax and customs administration reforms will be essential for achieving the regional fiscal convergence criterion. Directors urged the authorities to pursue prudent debt management practices and monitor the debt of state‑owned enterprises and potential fiscal risks linked to public‑private partnership projects to preserve public debt sustainability. They also underscored the need to enhance public investment efficiency.
Directors welcomed the authorities’ commitment to prioritize spending and allocate more resources to priority social sectors. They underscored the need to ensure that economic diversification takes hold and the benefits of growth reach more of the population. They encouraged the authorities to pursue the implementation of well‑targeted measures to protect the most vulnerable segments of the population.
Directors underscored the need to improve the business environment to provide critical support for achieving the objectives of Benin’s Economic Development Document. They encouraged the authorities to remove impediments that restrain the business environment, as well as fight corruption and strengthen governance and transparency to foster greater private sector participation in financing the Government’s Action Program 2016‑21. Directors also welcomed Benin’s participation in the G20 Compact with Africa initiative.
Directors highlighted the importance of financial inclusion in supporting economic growth. They commended the progress made in removing key barriers to more efficient financial intermediation and the consolidation of information on microfinance institutions. They noted that further steps are needed to mitigate the stability risks arising from the large number of unauthorized microfinance institutions and address non‑performing loans in the banking sector.
Directors encouraged the authorities to continue to address data gaps and further improve the quality and timeliness of economic statistics, including the revision of the national accounts.
It is expected that the next Article IV consultation with Benin will be
held in accordance with the Executive Board decision on the consultation
cycles for members with Fund arrangements.
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Table 1. Benin: Selected Economic and Financial Indicators, 2014-22 |
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|
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
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|
Est. |
Program |
Projections |
|||||||||
|
(Annual percentage change) |
|||||||||||
|
National income |
|||||||||||
|
GDP at current prices |
6.1 |
2.2 |
3.7 |
6.0 |
8.4 |
9.1 |
9.6 |
10.0 |
8.9 |
||
|
GDP at constant prices |
6.4 |
2.1 |
4.0 |
5.6 |
6.0 |
6.3 |
6.7 |
7.1 |
6.2 |
||
|
GDP deflator |
-0.2 |
0.1 |
-0.3 |
0.4 |
2.3 |
2.6 |
2.7 |
2.8 |
2.0 |
||
|
Consumer price index (average) |
-1.1 |
0.3 |
-0.8 |
0.6 |
2.5 |
2.8 |
2.8 |
2.8 |
2.8 |
||
|
Consumer price index (end of period) |
-0.8 |
2.3 |
-2.7 |
2.8 |
2.2 |
3.2 |
2.5 |
3.1 |
2.6 |
||
|
Central government finance |
|||||||||||
|
Total revenue |
-1.9 |
5.0 |
-9.0 |
21.7 |
12.6 |
8.3 |
13.4 |
13.1 |
11.2 |
||
|
Expenditure and net lending |
-3.7 |
35.5 |
-12.6 |
21.0 |
4.8 |
-2.8 |
5.5 |
6.1 |
6.2 |
||
|
External sector |
|||||||||||
|
Exports of goods and services |
8.3 |
15.9 |
-8.5 |
16.0 |
14.4 |
13.0 |
4.3 |
14.7 |
8.9 |
||
|
Imports of goods and services |
16.4 |
-0.8 |
-5.0 |
18.7 |
8.4 |
8.3 |
5.4 |
10.7 |
7.0 |
||
|
Terms of trade (minus = deterioration) |
1.0 |
2.1 |
1.7 |
0.4 |
-0.7 |
0.4 |
1.8 |
0.8 |
0.2 |
||
|
Nominal effective exchange rate (minus = depreciation) |
n.a. |
n.a. |
… |
… |
… |
… |
… |
… |
… |
||
|
Real effective exchange rate (minus = depreciation) |
n.a. |
n.a. |
… |
… |
… |
… |
… |
… |
… |
||
|
(Change in percent of beginning-of-period broad money) |
|||||||||||
|
Money and credit |
|||||||||||
|
Net domestic assets |
8.7 |
-17.5 |
11.4 |
1.4 |
… |
… |
… |
… |
… |
||
|
Domestic credit |
0.7 |
-19.0 |
13.7 |
1.4 |
… |
… |
… |
… |
… |
||
|
Net claims on central government |
1.7 |
5.2 |
5.1 |
0.8 |
… |
… |
… |
… |
… |
||
|
Credit to the nongovernment sector |
-1.0 |
-24.2 |
8.6 |
0.5 |
… |
… |
… |
… |
… |
||
|
Broad money (M2) |
16.7 |
-10.4 |
0.3 |
7.8 |
… |
… |
… |
… |
… |
||
|
(Percent of GDP, unless otherwise indicated) |
|||||||||||
|
National accounts |
|||||||||||
|
Gross investment |
28.6 |
25.6 |
24.6 |
28.6 |
28.3 |
26.3 |
26.9 |
27.5 |
24.2 |
||
|
Government investment |
5.2 |
7.7 |
5.9 |
9.3 |
8.6 |
6.3 |
5.9 |
5.5 |
5.3 |
||
|
Nongovernment investment 1 |
23.4 |
17.9 |
18.7 |
19.2 |
19.7 |
20.1 |
21.0 |
22.0 |
18.9 |
||
|
Gross domestic saving |
13.4 |
13.4 |
12.8 |
15.0 |
15.7 |
14.6 |
15.5 |
16.6 |
13.9 |
||
|
Government saving |
2.0 |
-0.5 |
-0.7 |
1.8 |
2.5 |
2.6 |
3.6 |
4.4 |
5.1 |
||
|
Non-government saving |
11.4 |
13.9 |
13.5 |
13.2 |
13.2 |
12.0 |
11.8 |
12.2 |
8.7 |
||
|
Gross national saving |
20.0 |
17.4 |
17.2 |
19.4 |
20.1 |
19.4 |
20.4 |
21.2 |
18.5 |
||
|
Consumption |
86.6 |
86.6 |
87.2 |
85.0 |
84.3 |
85.4 |
84.5 |
83.4 |
86.1 |
||
|
Government consumption |
12.5 |
15.0 |
12.6 |
11.4 |
11.1 |
10.8 |
10.7 |
10.7 |
10.6 |
||
|
Non-government consumption |
74.2 |
71.6 |
74.6 |
73.6 |
73.2 |
74.6 |
73.9 |
72.7 |
75.5 |
||
|
Central government finance |
|||||||||||
|
Total revenue |
16.3 |
16.7 |
14.7 |
16.8 |
17.5 |
17.4 |
18.0 |
18.5 |
18.9 |
||
|
Expenditure and net lending |
19.1 |
25.3 |
21.4 |
24.4 |
23.6 |
21.0 |
20.2 |
19.5 |
19.0 |
||
|
Primary balance 2 |
-2.4 |
-7.9 |
-5.5 |
-5.5 |
-3.8 |
-1.3 |
-0.1 |
0.9 |
1.5 |
||
|
Basic primary balance 3 |
0.0 |
-4.2 |
-3.0 |
-2.4 |
0.1 |
2.4 |
3.1 |
3.5 |
4.3 |
||
|
Overall fiscal deficit (commitment basis, excl. grants) |
-2.8 |
-8.6 |
-6.7 |
-7.5 |
-6.1 |
-3.6 |
-2.3 |
-1.0 |
-0.2 |
||
|
Overall fiscal deficit (commitment basis, incl. grants) |
-1.9 |
-8.0 |
-6.0 |
-6.1 |
-4.5 |
-1.8 |
-0.6 |
0.0 |
0.8 |
||
|
Debt service (percent of revenue) |
6.0 |
8.2 |
12.0 |
16.1 |
17.2 |
17.8 |
15.9 |
13.9 |
12.0 |
||
|
Total government debt |
30.5 |
42.4 |
49.5 |
55.5 |
56.0 |
53.3 |
48.7 |
44.4 |
40.5 |
||
|
External sector |
|||||||||||
|
Balance of goods and services |
-15.2 |
-12.2 |
-11.7 |
-13.6 |
-12.6 |
-11.7 |
-11.5 |
-10.9 |
-10.4 |
||
|
Current account balance (incl. grants) |
-8.6 |
-8.2 |
-7.4 |
-9.1 |
-8.2 |
-6.9 |
-6.5 |
-6.3 |
-5.7 |
||
|
Current account balance (excl. grants) |
-8.8 |
-8.2 |
-7.5 |
-9.4 |
-8.7 |
-7.7 |
-7.2 |
-6.9 |
-6.3 |
||
|
Overall balance of payments |
0.9 |
2.3 |
-6.4 |
1.6 |
3.8 |
6.7 |
6.5 |
6.5 |
6.7 |
||
|
Debt service-to-exports ratio |
5.1 |
5.3 |
4.7 |
5.9 |
6.4 |
5.8 |
6.1 |
5.5 |
5.2 |
||
|
Nominal GDP (billions of CFA francs) |
4,800 |
4,904 |
5,084 |
5,390 |
5,844 |
6,378 |
6,992 |
7,693 |
8,375 |
||
|
Nominal GDP (millions of US$) |
9,722.9 |
8,295.3 |
8,577.1 |
9,268.7 |
10,481.3 |
11,490.6 |
12,595.9 |
13,859.1 |
15,087.6 |
||
|
CFA francs per U.S. dollar (period average) |
493.6 |
591.2 |
592.7 |
… |
… |
… |
… |
… |
… |
||
|
Total non-financial public sector debt (percent of GDP) 4 |
… |
49.7 |
55.6 |
56.2 |
53.3 |
48.9 |
44.6 |
40.6 |
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|
Population (millions) |
10.3 |
10.6 |
10.8 |
11.1 |
11.4 |
11.7 |
12.0 |
12.3 |
12.6 |
||
|
Nominal GDP per capita (U.S. dollars) |
946 |
786 |
792 |
833 |
918 |
980 |
1047 |
1124 |
1193 |
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|
Sources: Beninese authorities; IMF staff estimates and projections. |
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1 Including off-budget investment implemented by non-financial public enterprises. |
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2 Total revenue minus current primary expenditure, capital expenditure, and net lending. |
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|
3 Total revenue minus current primary expenditure and capital expenditure financed by domestic resources. |
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4 Data include projected central government debt and new non-financial public sector borrowing for infrastructure from 2016 onward as well as the nominal amount of government guarantees. |
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[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. Staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
[2] 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.
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