Press Release No. 18/269

IMF Executive Board Completes Second Review Under the Extended Credit Facility Arrangement and Approves US$22.4Million Disbursement for Benin

June 29, 2018

• The outlook is positive, although challenges remain to achieve high and inclusive growth.
• Policy implementation has been satisfactory and the program is on track.
• Economic activity is expanding, with growth estimated at 5.6 percent in 2017 and projected at 6.0 percent in 2018.

On June 29, 2018, the Executive Board of the International Monetary Fund (IMF) completed the second review of the three-year arrangement with Benin under the Extended Credit Facility (ECF). The Board’s decision, which was taken on a lapse-of-time basis, [1] makes available SDR 15.917 million (about US$22.4 million) immediately to Benin.

Economic activity expanded and inflation stayed low in 2017. Growth is estimated at 5.6 percent, buoyed by record cotton production, and the recovery of the Nigerian economy. Inflation turned positive for the year and averaged 0.1 percent, driven by food and petroleum prices. The current account deficit is estimated to have widened in 2017, due to an increase in goods imports, reflecting a scaling-up of investment and higher food imports. Budget execution in 2017 was better than initially programmed and the overall fiscal deficit (excluding grants) was limited to 7.0 percentage points of GDP, due mostly to a stronger domestic revenue performance. Public spending was contained to the programmed level. As a result, public debt accumulation was slower than programmed.

Performance under the program continues to be satisfactory. All continuous and end-December 2017 quantitative performance criteria have been met as were all the structural benchmarks (SBs). Under-execution of social spending at end-June 2017 was reversed by September and the indicative target (IT) for end-December 2017 was exceeded.

The medium-term outlook remains favorable. It assumes an acceleration of real GDP growth in 2019–22, driven by policy-induced increase in agricultural production and rising private investment. Inflation is forecast to remain below the WAEMU convergence rate of 3 percent over the medium term. The programmed fiscal consolidation path is expected to bring the budget deficit (including grants) down to below the WAEMU convergence criterion of 3 percent of GDP by 2019. Strong export growth would drive an improvement in the external current account position while sustained capital inflows driven by foreign direct and portfolio investments would enable Benin to contribute modestly to the build-up of WAEMU's international reserves.