Press Release No. 24/146

Benin: IMF Reaches Staff-Level Agreement on Fourth Review of Extended Fund and Extended Credit Facilities, the First Review of Resilience and Sustainability Facility, and Concludes 2024 Article IV Consultation

May 8, 2024

• IMF staff has reached staff-level agreement on the Fourth Review of Benin’s EFF/ECF and the First Review of the Resilience and Sustainability Facility (RSF), and completed the 2024 Article IV consultation.
• The Beninese economy, supported by public and private investment—including related to the special economic zone—has shown remarkable resilience in the face of multiple shocks.
• The authorities started rebuilding policy buffers last year; they are pursuing fiscal consolidation to converge to West African Economic and Monetary Union’s (WAEMU) overall fiscal deficit norm of 3 percent of GDP by 2025.

Washington, DC: An International Monetary Fund (IMF) team, led by Constant Lonkeng, visited Cotonou during April 25–May 8, 2024 to hold discussions on the Fourth Review of Benin’s economic program under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) and the First Review of the Resilience and Sustainability Facility (RSF) arrangement, and to conduct the 2024 Article IV consultation.

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

“I am pleased to announce that IMF staff and Beninese authorities have reached a staff level agreement on policies to complete the Fourth Review of Benin’s 42-month blended EFF/ECF and the First review of the RSF. Subject to approval by the IMF Executive Board, Benin will receive a disbursement of SDR 31.2 million (about $42 million) under the ECF and EFF arrangements and SDR 19.8 million (about $26 million) under the RSF arrangement, bringing total disbursement under the EFF/ECF to SDR 420.8 million (about $555 million).

“The Beninese economy has shown remarkable resilience in the face of multiple shocks, with economic activity estimated to have expanded by 6.4 percent in 2023, above expectations, driven by public and private investment. Growth is expected to remain strong in the coming years, as activities in the special economic zone expand and the economy diversifies. The government has launched a reform of education to prepare the labor force to a transforming economy and foster sustained inclusive growth.

“Program performance has been robust—all quantitative targets at end-December 2023 were met, some with wide margins. The authorities have started rebuilding policy buffers last year, after warranted fiscal accommodation in recent years. They are committed to pursuing revenue-based fiscal consolidation to converge to the regional overall deficit norm of 3 percent of GDP by 2025. Steadfast implementation of the government’s reform agenda has helped secure additional financing from development partners and international financial markets, complementing frontloaded financing under the EFF/ECF.

“The structural reform agenda, integrating climate considerations, is advancing. The mission acknowledged progress in the draft decrees operationalizing the anti-corruption agency and encouraged the authorities to finalize this important legislation, in line with the Government’s Action Program. The authorities re-iterated their commitment to the reform of fossil fuel subsidies, taking into account the specificities of Benin’s local fuel market.

“While strong macroeconomic performance in recent years has led to a reduction in poverty, the mission recommends that the government strengthens measures aiming at alleviating inequality that has persisted across regions and income groups. In this regard, an updated of the social registry would help improve the targeting of expanding social assistance programs. Moreover, with a median age of 18, continued increase in budget allocations to education and expansion of digitalization could help harness the demographic dividend.

“The mission took note of legislative and regulatory measures to contain tax and non-tax incentives in the special economic zone and stressed the need to continue rationalizing tax expenditures. Moreover, the mission encourages the government to gradually reduce its footprint in the economy to level the playing field among all market participants and foster private sector led inclusive growth. It recommended increased vigilance vis-à-vis the expansion of the public financial sector in recent years, notwithstanding sound financial indicators.

“The team met with his Excellency President Talon, Senior Minister of Economy and Finance Wadagni, Senior Minister of Development and Coordination of the Governmental Action Bio Tchané , Minister of Justice and Legislation Detchenou, Minister of Environment and Sustainable Development Tonato, Minister of Agriculture, Livestock and Fisheries Dossouhoui, Minister of Social Affairs and Micro-Finance Tognifodé, Minister of Energy, Water and Mines Adambi, National Director of the BCEAO (the regional central bank) Assilamehoo, other senior government officials, the civil society, women entrepreneurs, farmers, university students, the donor community, multilateral and regional development banks, the banking association, and other private sector representatives.

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