IMF concludes 2024 Article consultation with Benin
Washington, DC, USA (PANA) - The Executive Board of the International Monetary Fund (IMF) has concluded the 2024 Article IV consultation with Benin.
It has also completed the Fourth Review under the 42-month blended Extended Fund Facility (EFF) and the Extended Credit Facility (ECF) arrangements, and the First Review under the Resilience and Sustainability Facility (RSF) arrangement.
The EFF/ECF was approved by the IMF Executive Board in July 2022 and completion of the reviews allows for immediate disbursement of US$ 41 million, bringing total disbursements under the programme
According to the IMF, the Beninese economy has proven remarkably resilient to recent shocks, supported by continued reform drive and a robust government response made possible by policy space created pre-pandemic.
The economy has proven remarkably resilient to shocks, leveraging buffers wisely created pre-pandemic and supported by the government’s continued reform efforts, with economic activity estimated to have expanded by 6.4 percent in 2023.
Growth is expected to remain strong in the coming years, supported by the government infrastructure drive and by private investment, including through the Special Economic Zone. The ongoing reform of education will help prepare the labour force to a transforming economy.
This could help harness the demographic dividend and translate the current growth momentum into sustained job-rich growth over the medium-and-long term. However, regional headwinds could compound global uncertainty and disrupt trade. Benin also remains vulnerable to extreme climate events.
Following the Executive Board discussion on Benin, IMF Deputy Managing Director and acting chair, Mr. Kenji Okamura remarked that Benin’s strong reform drive and sound macroeconomic management over the past several years provided policy space to navigate repeated shocks since the pandemic.
He said that after a period of warranted policy accommodation, the authorities frontloaded fiscal consolidation last year to start rebuilding policy buffers. Their home-grown reform programme is gaining traction with support from international development partners and investors.
“Sound public finances have helped improve overall access to basic public services over time with poverty also declining at the national level, although inequality has persisted across regions and income groups. An important challenge going forward is to continue anchoring Benin’s growth and development in policies that will leave no region nor socio-economic group behind. In this context, a swift full operationalization of the social registry will facilitate the coordination of various social assistance programs and improve their targeting to the poor and vulnerable households across regions,” Mr. Okamura said.
He pointed out that Benin’s large development needs in both core social sectors (education, health and social protection) and non-traditional areas (such as digitalization and climate change) put an extra premium on domestic revenue mobilisation.
He emphasised that maintaining the tax collection momentum—anchored in the Medium-Term Revenue Strategy (MTRS)—will support convergence to the West-African Economic and Monetary Union-wide fiscal deficit norm of 3 percent of GDP by 2025, while helping meet the country’s development needs in a sustainable manner.
“Contingency planning remains paramount, considering global uncertainty and regional geo-economic and security headwinds. In this context, the authorities should maintain flexibility in budget execution and stand ready to reprioritize public investment in case shocks materialize,” the IMF deputy chief advised.
“The authorities should press ahead with ongoing reforms to the rule of law and the anti-corruption and AML/CFT frameworks to lay the foundations for private sector-led inclusive growth. Remaining vigilant vis-à-vis public and non-public financial sector risks will preserve macroeconomic stability and limit contingent liability risks.
“Steadfast implementation of the climate change agenda under the Resilience and Sustainability Facility (RSF) will complement the EFF/ECF in supporting overall socio-economic resilience in Benin. Initiatives underway to catalyse private climate finance are welcome developments in this regard. Reforming fuel subsidies in a way that accounts for the specificities of Benin’s local fuel market and protect vulnerable groups remains a policy priority,” he added.
-0- PANA AR/MA 28June2024
