Benin’s Fifth Review under the Poverty Reduction and Growth Facility and request for waiver of Nonobservance of Performance Criteria are discussed. The main challenge ahead is to limit inflation pressures from higher food and fuel prices while sustaining medium-term fiscal consolidation and accelerating structural reforms to increase the sustainable growth rate. The authorities have taken actions to address the food and fuel crisis and accelerate structural reforms. They have allowed the full pass-through of higher international food and fuel prices and tightened fiscal policy while putting in place measures to protect the poor.
This Selected Issues paper and Statistical Appendix analyzes sources of economic growth in Benin. It concludes that the policies implemented since the early 1990s paved the way for higher growth rate by raising total factor productivity as well as capital accumulation. The paper examines the cotton sector reform in Benin and the subsidies by major producing countries. It also analyzes recent trends in Benin’s external competitiveness, and conducts an analysis of the equilibrium exchange rate to assess whether the movements in the real effective exchange rate in Benin were consistent with the underlying macroeconomic fundamentals.
Structural reforms and strong macroeconomic policies of Burkina Faso have promoted economic growth and low inflation over the past decade. Executive Directors welcomed this development, and encouraged the authorities to reduce the fiscal deficit and maintain fiscal and external debt sustainability. They underscored the importance of a sound fiscal policy and a prudent policy framework to improve external competitiveness. They commended tax policy reform and adoption of the new cotton producer price mechanism. In view of this, grant financing is desirable to keep debt sustainable.
Performance under the Poverty Reduction and Growth Facility-supported program has been good. All quantitative performance criteria have been met. The economy has coped well with unfavorable external price developments. A substantial reform of the mechanism for determining cotton producer prices is under way. The proposed new producer price mechanism for cotton is an improvement over the previous system. The maintenance of the fuel pricing mechanism, which ensures full pass-through of changes in world oil prices, and steps to privatize the state-owned telecommunication company are major accomplishments.
Mr. Rabah Arezki, Ms. Catherine A Pattillo, Mr. Marc G Quintyn, and Min Zhu
In the years following the global financial crisis, many low-income countries experienced rapid recovery and strong economic growth. However, many are now facing enormous difficulties because of rapidly rising food and fuel prices, with the threat of millions of people being pushed into poverty around the globe. The risk of continued food price volatility is a systemic challenge, and a failure in one country has been shown to have a profound impact on entire regions. This volume addresses the challenges of commodity price volatility for low-income countries and explores some macroeconomic policy options for responding to commodity price shocks. The book then looks at inclusive growth policies to address inequality in commodity-exporting countries, particularly natural resource rich countries. Perspectives from the Middle East and North Africa, sub-Saharan Africa, emerging Asia, and Mexico are presented and, finally, the role of the international donor community is examined. This volume is a must read for policymakers everywhere, from those in advanced, donor countries to those in countries with the poorest and most vulnerable populations.