Press Release No. 22/370

IMF Staff Reaches Staff-Level Agreement with Benin on the First Review under the Extended Fund Facility and Extended Credit Facility Arrangements

November 3, 2022

• The IMF team reached a staff-level agreement with the Beninese authorities on the policies to underpin the completion of the First Review under Benin’s IMF-supported EFF/ECF Arrangements—the program is off to a strong start.
• After three years of warranted policy accommodation amid large and repeated shocks, the authorities have submitted a draft budget law to Parliament resuming the consolidation of public finances in 2023 to preserve debt sustainability.
• Operationalizing the recently established social registry to identify poor and extreme poor will provide the necessary infrastructure to roll out various social assistance programs in times of hardship, including the human capital insurance scheme (ARCH).

Cotonou: An International Monetary Fund (IMF) team, led by Constant Lonkeng, visited Cotonou from October 25–November 3 to assess recent economic developments and progress on commitments under Benin’s Fund-supported program. The IMF Executive Board approved, on July 8, 2022, a blended arrangement under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) for Benin under the High Combined Credit Exposure (HCCE) policy in the amount of US$638 million, equivalent of 391 percent of quota (see Press Release No 22/252 ), to help address pressing financing needs and support the country’s progress towards Sustainable Development Goals (see IMF Country Focus ).

At the end of the mission, Mr. Lonkeng issued the following statement:

“The EFF/ECF is off to a strong start—all quantitative performance criteria and indicative targets at end-June 2022 were met with margins, and the structural reform agenda is advancing. Heavily frontloaded Fund financial support is providing much-needed room for maneuver at a time of heightened global and domestic uncertainty.

“The IMF team reached a staff-level agreement with the Beninese authorities on the policies to underpin the completion of the First Review of the program. The agreement is subject to approval by the IMF Executive Board in the coming weeks. Upon completion of the review, Benin will have access to about US$ 140 million (SDR 108 million), bringing cumulative disbursements under the program to around US$280 million over the first six months of the 42-month arrangement.

“The economy is gaining strength, notwithstanding stubbornly elevated uncertainty worldwide—economic activity is projected to expand by 6 percent in 2022, buoyed by agroindustry, construction, and port-related activities. Inflation has remained distinctly subdued, reflecting a robust harvest season as well as price subsidies on some imported products, including fuels, fertilizers, and foodstuffs.

“The program is calibrated flexibly to cushion shocks in 2022, with the supplementary budget—adopted by Parliament yesterday—relaxing the original budget by about 1 percentage point of GDP. The authorities have also submitted to Parliament a draft budget law resuming the consolidation of public finances in 2023, after three years of warranted policy accommodation amid large and repeated shocks. The draft budget is in line with the program; it emphasizes revenue-based fiscal consolidation and spending prioritization to release much-needed space for spending aimed at enhancing state presence in communities at risk, consistent with the authorities’ civilian approach to mitigating security risks.

“The structural reform agenda is advancing, supported by extensive and frontloaded technical support by the IMF and Benin’s other development partners, and remains anchored in a well-articulated homegrown plan. The mission acknowledged progress in strengthening the Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) framework and encouraged the authorities to maintain the steadfast implementation of their action plan in this regard.

“Operationalizing the recently established social registry to identify poor and extreme poor will provide the necessary infrastructure to roll out various social assistance programs in times of hardship, including the human capital insurance scheme (ARCH). The team welcomed the authorities’ intention to enhance the social registry with a module identifying those vulnerable to climate-related shocks as part of a strategy to mitigate food security risks.

“The team met with Senior Minister of Economy and Finance Wadagni, Senior Minister of Development and Coordination of the Governmental Action Bio Tchané, the Special Advisor to the President Dagnon, Minister of Health Hounkpatin, Minister of industry and Trade Assouman, National Director of the BCEAO (the regional central bank) Assilamehoo, Director of the Military Cabinet of the President General Bada, other senior government officials, the civil society, the banking association and other private sector representatives, university students and the donor community.

“The IMF team would like to thank the Beninese authorities and various stakeholders for their hospitality and candid discussions.”