Journal Issue
Share
Article

Benin

Author(s):
International Monetary Fund
Published Date:
August 2009
Share
  • ShareShare
Show Summary Details

I. Executive Summary and Staff Appraisal

Performance in 2008 was strong, notwithstanding some slippages. Real GDP growth is estimated at 5 percent. Inflation averaged 8 percent, reflecting the full pass-through of higher international food and fuel prices since July 2008. The authorities met the basic primary fiscal target under the program with a strong domestic tax effort and a tight control on spending in the second half of 2008. The performance criterion on net domestic financing, however, was missed as the government provided lending to the state-owned electricity company in financial distress. Most structural benchmarks have been completed, some with delay.

The macroeconomic outlook is weaker for 2009–10 reflecting the impact of the crisis. Real GDP growth is expected to slow down to about 3-4 percent in 2009–10. The external current account deficit (excluding grants) is projected to widen to over 10 percent of GDP in 2009, reflecting weak demand for exports and lower transfers. Prudent policies and lower commodity prices should bring inflation down below 3 percent by 2010.

The authorities’ policy response of allowing automatic fiscal stabilizers to work is appropriate. For 2009, the overall spending envelope agreed under the program will be maintained, except for higher outlays on social safety nets. As a result, the basic primary balance will deteriorate to a deficit of 0.8 percent of GDP in line with revenue shortfalls. This is expected to produce a financing gap of CFAF 44.3 billion (1.4 percent of GDP) in 2009, which is expected to be covered by additional financing from the Fund, the European Union (EU), the World Bank, and other multilateral and bilateral donors.

The implementation of structural reforms needs to be accelerated to enhance the competitiveness of Benin’s economy and increase its resilience to exogenous shocks. The adoption of a comprehensive strategy for the cotton sector and the implementation of the public finance management (PFM) action plan are welcome steps. The authorities intend to privatize Benin Telecom, restructure the electricity company, streamline procedures and improve capacity at the Port, and strengthen the judicial system, land tenure, and financial services.

Staff supports the authorities’ request for: (i) the completion of the sixth PRGF review, (ii) the waiver for the nonobservance of the quantitative performance criterion, and (iii) the augmentation of access by 15 percent of the quota. The nonobservance of the quantitative performance criterion at end-December 2008 reflected the slippage already waived by the Executive Board at end-June 2008, a reduction of the float, and unforeseen net lending to the electricity company in response to high oil prices. The authorities have taken remedial actions by increasing electricity tariffs and undertaking a financial audit of the electricity company. The global economic crisis is putting pressure on treasury resources; the augmentation of access would cover part of the financing gap pending the mobilization of additional external concessional financing. A successor PRGF arrangement would support the authorities’ efforts to mitigate the impact of the global economic crisis in the short run, while accelerating structural reforms to reach higher sustainable growth over the medium term.

II. Recent Economic Developments

Benin remains one of the fastest growing economies in the WAEMU
Real GDP Growth
2005200620072008
Benin2.93.84.65.0
Burkina Faso7.15.53.65.0
Côte d’Ivoire1.90.71.62.3
Guinea-Bissau3.50.62.73.3
Mali6.15.34.35.0
Niger8.45.83.39.5
Senegal5.62.44.72.5
Togo1.23.91.91.1
WAEMU average4.53.23.33.9
Sources: Country authorities and IMF staff estimates and projections.
Inflation was above the WAEMU convergence criterion of 3 percent
CPI Inflation
2005200620072008
Benin5.43.81.38.0
Burkina Faso6.42.4-0.210.7
Côte d’Ivoire3.92.51.96.3
Guinea-Bissau5.6-0.14.610.4
Mali6.41.51.59.1
Niger7.80.10.111.3
Senegal1.72.15.95.8
Togo6.82.21.08.4
WAEMU average4.82.22.07.9
Sources: Country authorities and IMF staff estimates and projections.
The level of gross official reserves remains the highest in the WAEMU region.
WAEMU: Gross Reserves 1/
2005200620072008
Benin7.36.27.37.8
Burkina Faso3.64.06.05.7
Cote d’Ivoire2.22.63.34.1
Guinea-Bissau6.55.85.97.1
Mali4.84.64.35.0
Niger2.83.53.94.0
Senegal3.53.03.13.9
Togo2.84.54.46.0
WAEMU average3.33.54.04.7
Sources: Country authorities and IMF staff estimates and projections.

1. Growth continued to strengthen in 2008. Buoyant activity in the Port of Cotonou, high demand from neighboring Nigeria, and the revived momentum for reforms helped raise real GDP growth in 2008 to 5 percent, the highest level since 2005 (Figure 1).

Figure 1.Benin: Macroeconomic Performance, 2005–08

‖supported by continued fiscal consolidation and a narrowing of the current account deficit.

Notwithstanding higher inflation, prompted by higher international food and fuel prices, real GDP growth reached the highest level since 2005‖
Notwithstanding higher inflation, prompted by higher international food and fuel prices, real GDP growth reached the highest level since 2005‖
Notwithstanding higher inflation, prompted by higher international food and fuel prices, real GDP growth reached the highest level since 2005‖
Notwithstanding higher inflation, prompted by higher international food and fuel prices, real GDP growth reached the highest level since 2005‖

Sources: Beninese authorities and Fund staff estimates.

2. The decline in commodity prices helped ease inflationary pressures (Figure 2). The authorities’ decision in July to allow a full-pass-through of international food and fuel prices led to an initial increase in inflation, but also eased inflationary pressures when these prices started to decline after August. As a result, annual average inflation (8 percent) remained below the program target.

Figure 2.Benin: Price Developments, 2005–08

Recent reversals of international food and fuel prices have not yet been reflected in domestic prices‖

‖leading to higher overall inflation in 2008, while money supply expanded rapidly, fueled by higher net credit to the government and the private sector.

(January 2000 = 100)
(January 2000 = 100)
(January 2000 = 100)
(January 2000 = 100)

Sources: Beninese authorities and Fund staff estimates.

3. Buoyant transit trade and higher cotton exports helped narrow the external current account deficit (excluding grants) to 9.2 percent of GDP (Figure 3). Donor assistance and FDI inflows helped finance the current account deficit. Cross-currency movements helped reverse part of the real exchange rate appreciation in the first half of 2008, limiting the annual appreciation to 4.2 percent.

Figure 3.Benin: Selected Competitiveness Indicators, 2005–08

‖reflecting higher cotton prices and volumes, while the REER depreciated in the second half of 2008.

An improvement in the terms of trade led to a narrower current account deficit ‖
An improvement in the terms of trade led to a narrower current account deficit ‖
An improvement in the terms of trade led to a narrower current account deficit ‖
An improvement in the terms of trade led to a narrower current account deficit ‖

Sources: Beninese authorities and Fund staff estimates.

The overall balance worsened more strongly than the WAEMU average, owing to a larger decline in revenue and an increase in expenditure.
WAEMU: Basic primary balance, (in percent of GDP) 1/
2005200620072008
Benin-1.40.43.10.7
Burkina Faso-2.9-4.0-5.4-4.7
Cote d’Ivoire0.40.11.10.2
Guinea-Bissau-6.9-7.3-10.4-5.9
Mali-0.60.1-0.8-0.9
Niger-1.0-0.80.12.1
Senegal-0.1-3.5-1.6-1.5
Togo-1.0-1.9-0.6-1.3
WAEMU average-0.6-1.2-0.5-0.9
Sources: Country authorities and IMF staff estimates and projections.
Broad money grew at the fastest rate in the WAEMU.
WAEMU: Broad money growth
2005200620072008
Benin21.816.517.729.3
Burkina Faso-3.810.222.912.0
Cote d’Ivoire7.410.323.67.4
Guinea-Biss au20.65.325.520.7
Mali11.78.89.30.4
Niger6.616.223.012.7
Senegal7.412.712.71.7
Togo1.422.118.215.9
WAEMU average7.512.018.68.7
Sources: Country authorities and IMF staff estimates and projections.

4. The primary surplus narrowed but remained positive. Strong domestic revenue collections partly offset the decline in nontax revenue from the exceptionally high level in 2007 (Figure 4). Expenditure and net lending increased by about 1 percent of GDP, prompted by a 28 percent increase in the wage bill, and large advances to the electricity company. Investment spending declined, reflecting lower external financing.

Figure 4.Benin: Selected Fiscal Indicators, 2005–08

‖ Government spending continued to increase in 2008, driven by higher spending on wages and domestically-financed infrastructure investment‖

‖ leading to a smaller basic primary surplus and larger overall deficit.

Notwithstanding continued revenue improvements‖
Notwithstanding continued revenue improvements‖
Notwithstanding continued revenue improvements‖

Sources: Beninese authorities and Fund staff estimates.

5. Strong growth in private sector credit and net claims on the government contributed to a large monetary expansion. Broad money grew by 29.3 percent in 2008. At the same time, the quality of commercial banks’ portfolios worsened somewhat, reflecting a rapid expansion of credit to consumers and the cotton sector: the share of nonperforming loans rose to 9.6 percent at end-2008, from 8.9 percent at end-2007.

III. Performance Under the Program

6. All quantitative performance criteria under the program at end-2008 were met, except one. A shortfall in donor assistance, the authorities’ efforts to reduce the float, and their decision to provide emergency financial assistance to the electricity company, led to a breach of the end-December 2008 quantitative performance criterion on net domestic financing by CFAF 113.8 billion (3.8 percent of GDP). This led to a corresponding reduction in government deposits with the banking system. As remedial actions, the authorities will be increasing electricity tariffs by an average of 13 percent in June 2009, and are undertaking a financial audit to inform future reforms (MEFP ¶ 34). The continuous performance criteria on the nonaccumulation of external arrears continue to be met. The indicative target on the wage bill was missed, as the authorities provided higher wages and bonuses to civil servants, partly in response to the food and fuel crisis

7. The structural reform agenda is moving forward with some delays. Three out of six structural reform benchmarks have now been completed, including the completion of a cotton reform strategy (MEFP ¶ 12-18). The strategy to reform the civil service pension system has been delayed by the completion of the audit of the pension system in April 2009. The authorities are in the process of extending the ASYCUDA system to regional customs offices and adopt a strategic information system at the income tax department. The authorities expect to complete these benchmarks by end-2009 at the latest.

8. During the last four years of the PRGF arrangement, performance has been relatively satisfactory (Box 1). On the macroeconomic side, the authorities have successfully increased GDP growth to 5 percent, supported by continued fiscal consolidation. On the structural side, however, there have been significant slippages, mainly arising from the authorities’ difficulty to muster the necessary domestic political consensus.

Box 1.Performance Under the Current PRGF Arrangement

Supported by prudent fiscal policies, Benin has experienced moderate inflation and a pick-up in economic growth under the current PRGF arrangement, thus reversing the declining trend in growth in the first half of this decade. Benin continued, under the PRGF–supported program, to make significant progress in macroeconomic stabilization (Text Table 1). The authorities implemented sound macroeconomic policies, including a strong fiscal consolidation, aided by debt relief received under the enhanced HIPC Initiative and MDRI (Text Table 2). As a result, growth accelerated steadily since 2006. The implementation of the reform agenda, however, has been mixed, notwithstanding an acceleration in the second half of 2008. The main reforms that remain to be implemented concern: (i) the restructuring of public utilities (especially electricity and telecommunications), in order to expand service capacity, reduce production costs, and improve competitiveness; (ii) the implementation of the new medium-term strategy of public financial management, in order to strengthen administrative capacity and effectively use the available fiscal space to sustain growth and alleviate poverty; and (iii) a comprehensive reform of the civil service, in order to improve the functioning of public services, contain the public wage bill, and preserve the financial viability of the civil service pension fund.

Table 1.Benin: Macroeconomic Performance Under the Program, 2005–08
2005200620072008
Prog.ActualProg.ActualProg.ActualProg.Actual
Annual change in percent, unless otherwise indicated
National income
GDP at constant prices3.92.94.53.84.54.65.35.0
Consumer price index (average)2.55.43.03.82.51.32.98.0
In percent of GDP, unless otherwise indicated
Central government finance
Revenue17.416.516.515.317.216.818.417.1
Expenditure and net lending22.619.621.519.521.722.022.822.9
Basic balance (narrowly defined)-0.90.10.90.40.03.10.50.8
Overall fiscal deficit (payment order basis, excl. grants)-5.3-3.1-5.0-2.7-4.5-1.4-4.4-3.4
Overall fiscal deficit (cash basis, excluding grants)-6.1-3.8-5.2-2.3-6.1-0.8-5.1-6.4
External sector
Trade balance-11.3-10.4-9.7-10.4-9.8-13.4-11.4-12.9
Current account balance (including grants)-8.7-6.9-7.0-5.7-6.3-9.9-6.9-8.3
Current account balance (excluding grants)-8.2-7.4-7.0-6.4-6.1-10.6-7.5-9.1
Overall balance of payments-1.73.0-1.34.7-0.63.20.71.6
Debt-service to exports ratio6.16.15.45.74.94.48.25.1
Debt-to-GDP (post MDRI)34.137.012.711.511.012.513.412.6
Table 2.Benin: Performance Under the Program, 2005–09
Board Approval of

Arrangement
First

Review
Second

Review
Third

Review
Fourth

Review
Fifth

Review
Sixth

Review
Prior Actions
Program432nonenonenonenone
Observed432nonenonenonenone
Quantitative Performance Criteria
Programnone666666
Observednone466645
Quantitative Indicative Targets
Programnone222222
Observednonenone22211
Structural Performance Criteria
Programnone321nonenonenone
Observednonenonenonenonenonenonenone
Structural Benchmarks
Programnone571416
Observednone2nonenone213
Sources: Country authorities and IMF staff estimates and projections

IV. Policy Discussions

9. The policy challenges for Benin are to:

  • Minimize the adverse impact of the global economic crisis over the next two years; and

  • Accelerate structural reforms to lay the foundation for higher growth in the medium term.

A. Impact of the Global Economic Crisis

10. The crisis has already reached Benin.1 Between September 2008 and March 2009, international prices of Benin’s main export, cotton, fell by 32 percent in dollar terms (Figure 5). Banks reported that workers’ remittances were down 30 percent in the first quarter of 2009. During the same period, customs revenue collections were 18.4 percent lower than programmed, reflecting the slowdown of activity in Nigeria and the depreciation of the naira in late 2008. As a result, the government was forced to reduce its deposits at commercial banks by CFAF 60 billion (1.9 percent of GDP), further straining liquidity in the banking system. In turn, commercial banks continued to make significant use of the weekly liquidity window at the regional central bank. Lack of liquidity could potentially compromise the government’s capacity to issue domestic debt on the regional debt market at nonconcessional terms.

Figure 5.International Cotton Prices, 1/08 - 3/09

(Cents per pound)

Source: Bloomberg.

11. Growth and fiscal revenue will continue to come under pressure (Figure 6). Real GDP growth is projected to drop to 3.8 and 3.0 percent in 2009 and 2010, respectively, as global demand for Benin’s exports declines, trade relations with Nigeria weaken, and inflows of workers’ remittances and foreign direct investment fall, widening the external current account deficit. Lower food and commodity prices will reduce customs revenue, while the slowdown in economic activity will reduce direct and indirect taxation.

Figure 6.Benin: Impact of the Crisis and Medium -Term Outlook

Cotton prices and exports of goods and services, 2008-14

Workers’ remittances and FDI, 2008-14 (in billions of CFAF)

‖ thus widening the current account deficit, and slowing down growth‖

‖which will reduce government revenue, and lead to large financing gaps.

Customs revenue and current account deficit, 2007-14 (in percent of GDP)

Financing gap, in percent of GDP

In 2009-10, the global crisis will weaken export demand and cotton prices, reduce inflows of remittances and FDI‖
In 2009-10, the global crisis will weaken export demand and cotton prices, reduce inflows of remittances and FDI‖
In 2009-10, the global crisis will weaken export demand and cotton prices, reduce inflows of remittances and FDI‖
In 2009-10, the global crisis will weaken export demand and cotton prices, reduce inflows of remittances and FDI‖
In 2009-10, the global crisis will weaken export demand and cotton prices, reduce inflows of remittances and FDI‖
In 2009-10, the global crisis will weaken export demand and cotton prices, reduce inflows of remittances and FDI‖

Sources: Beninese authorities and Fund staff estimates and projections.

12. The impact of the crisis is expected to be temporary. With the expected recovery in the global economy in the second half of 2010, and prompted by continued structural reforms to improve competitiveness, investments in infrastructure, and a more efficient public administration, real GDP growth could recover to its potential of 6 percent by 2012. Inflation would remain below 3 percent, and the current account deficit (excluding grants) would narrow to 7.1 percent of GDP by 2014, reflecting increasing exports and remittances. Ongoing inflows of public and private capital would help keep reserves above 5 months of imports of goods and services.

B. Policy Response

13. The authorities intend to tackle the crisis by allowing automatic fiscal stabilizers to work and increasing social safety nets (MEFP ¶ 22–26). For 2009, this implies keeping to the overall spending envelope agreed under the program, except for additional discretionary outlays on social safety nets amounting to 0.7 percent of GDP. These outlays would: (i) provide access to basic health services for targeted segments of the population, (ii) increase resources for labor intensive public projects, and (iii) give transfers to small farmers to transition from cotton to more profitable crops.2 Additional fiscal easing would be applied in 2010. Given the expected shortfall in revenues, the basic primary balance would turn into deficit in 2009 and 2010, and the overall fiscal deficit (excluding grants) would widen to 5.9 percent of GDP in 2009 and 6.1 percent of GDP in 2010 (Figure 7). With limited absorptive and administrative capacity, a larger fiscal expansion could compromise macroeconomic stability and fiscal and debt sustainability, with only limited benefits for growth.

Figure 7.Benin: Basic Primary Fiscal Balance and Overall Fiscal Deficit, 2008–14

(Percent of GDP)

Sources: Beninese authorities and Fund staff estimates and projections.

14. The fiscal expansion would generate a financing gap of CFAF 44.3 billion (1.4 percent of GDP) in 2009. The authorities are confident that they will be able to mobilize the additional external assistance from the Fund, the EU, the World Bank, and other donors to close the financing gap. Pending availability of additional financing and to reduce the risk that the tight treasury situation might force the re-emergence of domestic payments arrears, the authorities are delaying 2–3 percent of GDP in nonpriority spending to the second half of 2009. If the additional external financing falls short of the estimated financing gap, the authorities would be forced to cancel or postpone outlays.

15. Although the risk of debt distress remains moderate, the authorities should continue to pursue a prudent borrowing policy. According to the updated Joint IMF-World Bank DSA, all debt indicators remain below the indicative policy-dependent thresholds under the baseline scenario. Benin, however, remains vulnerable to adverse economic developments and external shocks. In particular, lower growth over the medium-to long-term could jeopardize debt sustainability. The authorities therefore intend to accelerate structural reforms and contract new external financing only in the form of grants and highly concessional loans (MEFP ¶ 32).

16. A more accommodating monetary policy and stronger banking supervision could help mitigate the crisis. While monetary policy is conducted at the regional level, staff raised the option of easing the reserve requirements for Benin, which at 15 percent are the highest in the region. The financial sector also needs to be strengthened by improving adherence to prudential regulations and more effective banking supervision (MEFP ¶ 27–30), especially as the economic crisis is likely to worsen the quality of the loan portfolio. Staff encouraged the authorities to undertake a national FSAP.

C. Structural Reforms

17. Accelerating structural reforms will be essential to limit the impact of the crisis and speed up the recovery. The authorities intend to implement: (i) further improvements in tax administration (MEFP ¶ 23–25) and expenditure management (MEFP ¶ 26, 33), and (ii) a comprehensive reform of the civil service. This will be critical to increase revenue, contain further increases in the wage bill, improve the provision of public services, and ensure the financial sustainability of the pension system. State-owned utilities (electricity, telecommunications) and the port will also be restructured and divested in order to improve the delivery of service and enhance their financial viability (MEFP ¶ 34–35). Other reforms will improve land tenure, judicial systems, and access to higher quality financial services.

D. Augmentation of Access and New PRGF

18. The authorities are requesting an augmentation of access for SDR 9.29 million (15 percent of the quota) to help alleviate the current financing shortfall.3 The augmentation is justified by the adverse impact of the global economic crisis, which is putting pressure on public finances and could result in a protracted balance of payments need. The augmentation would cover 17 percent of the total financing gap of CFAF 44.3 billion in 2009. There are indications that the remainder could be covered by additional financial assistance from a new PRGF arrangement in the second half of 2009, the World Bank, the European Union, and multilateral and bilateral donors.

19. Benin’s capacity to repay the Fund is sound. Under the proposed augmented access, debt service to the Fund would rise to SDR 5.08 million in 2015, equivalent to 0.5 percent of exports of goods and services and 0.3 percent of annual government revenue.

20. The authorities have reiterated their intention to request a new PRGF arrangement in the second half of 2009, in support of their efforts to mitigate the fallout of the global financial crisis and lay the foundations for higher sustainable growth. The arrangement, that would cover the period 2009-12, would aim at a recovery of growth to 6 percent by the end of the arrangement, limit inflation below 3 percent, maintain fiscal and debt sustainability, and implement structural reforms to enhance competitiveness. The program is also expected to facilitate the mobilization of concessional external financing, which would help mitigate the impact of the crisis.

E. Risks to the Program

21. Risks to the program are moderate and mainly stem from the global economic crisis. A stronger or more prolonged global downturn, or adverse economic developments in Nigeria, could result in lower growth and additional strains on public finances. A slowdown in structural reform implementation could also postpone the recovery. Delays or shortfalls in the provision of external concessional assistance from donors could also hurt investment and growth, and result in the re-emergence of domestic arrears. The relatively good performance under the current PRGF arrangement confirms the authorities’ commitment to prudent macroeconomic policies. The run-up the 2011 general elections will challenge government perseverance of this policy stance.

Table 1.Benin: Selected Economic and Financial Indicators, 2006–14
200620072008200920102011201220132014
Est.Prog.Prel. Est.Prog.Rev. Proj.Projections
(Annual changes in percent, unless otherwise indicated)
National income
GDP at current prices7.07.412.312.510.67.16.28.78.88.88.8
GDP at constant prices3.84.65.15.05.73.83.05.76.06.06.0
GDP deflator3.12.66.97.24.63.23.02.82.72.72.7
Consumer price index (average)3.81.38.88.06.54.02.82.82.82.82.8
Consumer price index (end of period)5.30.313.19.93.73.53.32.82.82.82.8
Production of cotton (in ’000 of tons) 1/240.6268.6237.9244.6268.3268.3302.6335.2371.4411.4455.8
Central government finance
Revenue8.731.45.56.113.66.96.713.612.511.69.5
Expenditure and net lending-1.121.019.317.013.618.57.49.59.69.29.2
Money and credit
Net domestic assets 2/-4.1-0.917.826.115.410.17.89.57.97.37.0
Domestic credit 2/-2.6-3.417.826.515.410.17.89.57.97.37.0
Net claims on central government 2/-7.3-16.4-0.511.40.11.10.6-0.4-0.8-0.8-0.7
Credit to the nongovernment sector 2/4.613.018.315.115.39.07.29.98.78.17.7
Broad money16.517.714.129.312.07.16.28.78.88.88.8
Velocity (GDP relative to average M2)3.33.02.92.92.93.03.03.03.03.03.0
External sector (in terms of CFA francs)
Exports, f.o.b.-18.373.019.1-1.87.6-1.66.611.110.610.811.1
Imports, f.o.b.6.850.832.24.41.64.92.76.56.47.57.4
Export volume6.910.69.513.76.6-6.28.28.18.18.18.1
Import volume4.412.85.25.16.34.24.18.38.58.58.5
Terms of trade (minus = deterioration)-7.8-29.7-13.511.65.51.14.54.84.53.73.2
Nominal effective exchange rate (minus = depreciation)-0.32.61.6
Real effective exchange rate (minus = depreciation)1.10.94.7
(In percent of GDP, unless otherwise indicated)
Basic ratios
Gross investment18.121.423.120.823.924.524.925.425.726.026.3
Government investment4.67.58.25.88.89.49.59.910.210.510.7
Private sector investment13.613.915.014.915.115.115.415.615.515.515.6
Gross domestic saving6.86.18.07.210.610.511.813.113.914.615.4
Government saving2.44.85.83.45.86.37.89.17.96.46.7
Nongovernment saving4.41.32.33.84.84.24.04.06.08.28.7
Gross national saving12.411.513.512.615.814.815.817.318.319.119.7
Central government finance
Revenue16.820.619.319.419.819.419.520.421.121.621.7
Expenditure and net lending19.522.023.322.924.025.325.625.826.026.126.2
Primary balance 3/-2.3-1.2-3.6-3.1-3.8-5.5-5.8-5.1-4.6-4.2-4.1
Basic primary balance 4/0.43.10.70.70.6-0.8-1.1-0.40.10.50.6
Overall fiscal deficit (payment order basis, excl. grants)-2.7-1.4-4.0-3.5-4.1-5.9-6.1-5.5-5.0-4.5-4.5
Overall fiscal deficit (cash basis, excluding grants)-2.3-2.0-5.4-7.3-5.1-6.7-6.8-6.0-5.2-4.9-4.7
Debt service (after debt relief) in percent of revenue 5/3.60.93.12.32.72.62.42.72.82.73.0
External sector
Trade balance-10.4-13.4-14.3-13.0-12.8-13.2-12.5-11.9-11.4-11.0-10.6
Current account balance (including grants)-5.7-9.9-9.6-8.2-8.2-9.7-9.1-8.2-7.5-6.9-6.6
Current account balance (excluding grants)-6.4-10.6-10.4-9.2-8.8-10.3-9.7-8.8-8.0-7.5-7.1
Overall balance of payments4.73.6-1.21.6-1.3-2.5-2.2-1.00.00.50.7
Debt-service to exports ratio 5/5.41.45.13.44.74.64.34.74.94.84.7
Debt-to-GDP (post MDRI)11.513.212.614.613.617.820.421.522.222.923.4
Gross reserves in months of imports 6/6.57.57.97.97.27.26.56.05.85.75.5
Nominal GDP (in billions of CFA francs)2,475.82,658.12,991.42,991.53,309.23,204.73,401.83,696.54,022.14,376.74,763.8
CFA francs per U.S. dollar (period average)522.4478.6445.7
Population (midyear, in millions)7.67.98.18.18.48.48.68.99.29.59.8
Sources: Beninese authorities; and IMF staff estimates and projections.
Table 2.Benin: Consolidated Central Government Operations, 2006–14
200620072008200920102011201220132014
Est.Prog.Prel. Est.Prog.Rev. Proj.Projections
(In billions of CFA francs)
Total revenue416.9548.0578.0581.3656.7621.5662.8752.7847.1945.61,035.6
Tax revenue378.8446.7511.0512.2578.6538.0579.1665.0752.7843.9926.0
Tax on international trade207.4250.1287.7278.9328.0265.8284.6329.3382.0434.6474.0
Direct and indirect taxes171.4196.6223.3233.3250.7272.2294.6335.7370.6409.2451.9
Nontax revenue38.1101.367.069.178.083.483.787.694.4101.7109.6
Total expenditure and net lending483.8585.3698.1684.7793.2811.3871.4954.51,046.51,143.11,248.6
Current expenditures369.2386.7453.8465.1501.7511.4546.8589.7635.5684.9737.2
Current primary expenditures359.2381.6441.9454.8490.1498.9535.9577.0621.7670.0720.4
Wages135.0143.1171.7182.4190.2193.4208.1220.6233.8247.8262.7
Pensions and scholarships29.334.340.236.047.346.650.555.059.965.369.3
Transfers and current expenditures194.9204.3230.0236.4252.6258.9277.4301.4327.9356.8388.4
Current transfers102.2106.1116.2119.3121.8122.4129.9141.2153.6167.2181.9
Other current expenditure92.798.1113.7117.0130.8136.5147.4160.2174.3189.7206.5
Interest10.15.111.910.311.612.510.912.713.914.916.8
Internal debt0.20.05.65.65.65.64.73.93.12.32.3
External debt9.95.06.44.86.06.96.18.810.712.614.5
Capital expenditures and net lending114.6198.6244.3219.5291.5299.9324.6364.8411.0458.2511.3
Investment113.4198.4244.3174.7291.5299.9324.6364.8411.0458.2511.3
Financed by domestic resources48.685.2114.3105.3147.7149.0164.5190.8221.7252.3287.1
Financed by external resources64.8113.2130.069.4143.8150.8160.1173.9189.3206.0224.2
Net lending (minus = reimbursement)1.20.20.044.80.00.00.00.00.00.00.0
Overall balance (payment order basis, excl. grants)-66.9-37.3-120.1-103.4-136.6-189.8-208.6-201.8-199.5-197.5-212.9
Basic primary balance 1/9.281.121.821.218.9-26.5-37.7-15.13.623.328.1
Primary balance-56.8-32.2-108.2-93.1-124.9-177.3-197.8-189.1-185.6-182.7-196.1
Change in arrears-15.0-30.9-15.0-16.4-15.0-20.0-15.0-15.0-15.0-15.0-15.0
External debt0.00.00.00.00.00.00.00.00.00.00.0
Domestic debt (net)-15.0-30.9-15.0-16.4-15.0-20.0-15.0-15.0-15.0-15.0-15.0
Payments during complementary period/float 2/25.815.0-27.2-99.0-15.9-3.6-6.6-3.94.7-2.72.4
Overall balance (cash basis, excl. grants)-56.1-53.2-162.3-218.8-167.5-213.4-230.2-220.7-209.8-215.2-225.5
Financing56.161.9162.3218.8160.0169.1175.8194.0193.1211.8225.4
Domestic financing-48.4-95.8-12.3109.4-7.6-8.6-5.2-2.9-20.5-20.3-26.3
Bank financing-50.1-131.7-5.1128.10.613.97.5-5.1-12.8-16.1-22.1
Nonbank financing1.735.9-7.2-18.7-8.2-22.4-12.72.3-7.7-4.2-4.2
Privatization0.04.10.04.710.35.35.020.010.00.00.0
Restructuring-5.70.7-6.0-11.7-5.0-10.00.00.00.00.00.0
Other7.531.1-1.2-11.8-13.5-17.7-17.7-17.7-17.7-4.2-4.2
External financing104.5157.8174.6109.3167.6177.7181.1196.9213.6232.1251.7
Project financing64.8113.2130.069.4143.8150.8160.1173.9189.3206.0224.2
Grants37.660.668.121.675.380.685.693.0101.2110.1119.8
Loans27.252.662.047.768.670.274.581.088.195.9104.3
Amortization due-548.50.0-11.7-8.3-11.8-9.0-9.9-10.0-8.6-6.7-5.4
Program aid18.144.656.248.335.635.930.932.932.932.932.9
Grants18.118.322.830.422.620.920.922.922.922.922.9
Loans0.026.333.417.913.015.010.010.010.010.010.0
Debt relief obtained0.00.00.00.00.00.00.00.00.00.00.0
MDRI grants570.20.00.00.00.00.00.00.00.00.00.0
Financing gap0.0-8.70.00.07.544.354.426.716.73.40.1
Memorandum items:(In percent of GDP, unless otherwise indicated)
Total grants and revenue19.123.622.421.222.822.622.623.524.124.624.7
Grants2.23.03.01.73.03.23.13.13.13.03.0
Revenue16.820.619.319.419.819.419.520.421.121.621.7
Total expenditure19.522.023.322.924.025.325.625.826.026.126.2
Of which: wage bill5.55.45.76.15.76.06.16.05.85.75.5
Of which: Capital expenditure4.67.58.25.88.89.49.59.910.210.510.7
Overall balance (payment order basis, excl. grants)-2.7-1.4-4.0-3.5-4.1-5.9-6.1-5.5-5.0-4.5-4.5
Overall balance (payment order basis, incl. grants)-0.51.6-1.0-1.7-1.2-2.8-3.0-2.3-1.9-1.5-1.5
Primary balance-2.3-1.2-3.6-3.1-3.8-5.5-5.8-5.1-4.6-4.2-4.1
Basic primary balance 1/0.43.10.70.70.6-0.8-1.1-0.40.10.50.6
Current balance1.96.14.23.94.73.43.44.45.36.06.3
GDP (in billions of CFA francs)2,475.82,658.12,991.42,991.53,309.23,204.73,401.83,696.54,022.14,376.74,763.8
Sources: Beninese authorities; and IMF staff estimates and projections.
Table 3Benin: Consolidated Central Government Operations, 2006–14(Percent of GDP)
200620072008200920102011201220132014
Est.Prog.Prel. Est.Prog.Rev. Proj.Projections
Total revenue16.820.619.319.419.819.419.520.421.121.621.7
Tax revenue15.316.817.117.117.516.817.018.018.719.319.4
Tax on international trade8.49.49.69.39.98.38.48.99.59.910.0
Direct and indirect taxes6.97.47.57.87.68.58.79.19.29.39.5
Nontax revenue1.53.82.22.32.42.62.52.42.32.32.3
Total expenditure and net lending19.522.023.322.924.025.325.625.826.026.126.2
Current expenditures14.914.515.215.515.216.016.116.015.815.615.5
Current primary expenditures14.514.414.815.214.815.615.815.615.515.315.1
Wages5.55.45.76.15.76.06.16.05.85.75.5
Pensions and scholarships1.21.31.31.21.41.51.51.51.51.51.5
Transfers and current expenditures7.97.77.77.97.68.18.28.28.28.28.2
Current transfers4.14.03.94.03.73.83.83.83.83.83.8
Other current expenditure3.73.73.83.94.04.34.34.34.34.34.3
Interest0.40.20.40.30.40.40.30.30.30.30.4
Internal debt0.00.00.20.20.20.20.10.10.10.10.0
External debt0.40.20.20.20.20.20.20.20.30.30.3
Capital expenditures and net lending4.67.58.27.38.89.49.59.910.210.510.7
Investment4.67.58.25.88.89.49.59.910.210.510.7
Financed by domestic resources2.03.23.83.54.54.74.85.25.55.86.0
Financed by external resources2.64.34.32.34.34.74.74.74.74.74.7
Net lending (minus = reimbursement)0.00.00.01.50.00.00.00.00.00.00.0
Overall balance (payment order basis, excl. grants)-2.7-1.4-4.0-3.5-4.1-5.9-6.1-5.5-5.0-4.5-4.5
Basic primary balance 1/0.43.10.70.70.6-0.8-1.1-0.40.10.50.6
Primary balance-2.3-1.2-3.6-3.1-3.8-5.5-5.8-5.1-4.6-4.2-4.1
Change in arrears-0.6-1.2-0.5-0.5-0.5-0.6-0.4-0.4-0.4-0.3-0.3
External debt0.00.00.00.00.00.00.00.00.00.00.0
Domestic debt (net)-0.6-1.2-0.5-0.5-0.5-0.6-0.4-0.4-0.4-0.3-0.3
Payments during complementary period/float 2/1.00.6-0.9-3.3-0.5-0.1-0.2-0.10.1-0.10.1
Overall balance (cash basis, excl. grants)-2.3-2.0-5.4-7.3-5.1-6.7-6.8-6.0-5.2-4.9-4.7
Financing2.32.35.47.34.85.35.25.24.84.84.7
Domestic financing-2.0-3.6-0.43.7-0.2-0.3-0.2-0.1-0.5-0.5-0.6
Bank financing-2.0-5.0-0.24.30.00.40.2-0.1-0.3-0.4-0.5
Nonbank financing0.11.3-0.2-0.6-0.2-0.7-0.40.1-0.2-0.1-0.1
Privatization0.00.20.00.20.30.20.10.50.20.00.0
Restructuring-0.20.0-0.2-0.4-0.2-0.30.00.00.00.00.0
Other0.31.20.0-0.4-0.4-0.6-0.5-0.5-0.4-0.1-0.1
External financing4.25.95.83.75.15.55.35.35.35.35.3
Project financing2.64.34.32.34.34.74.74.74.74.74.7
Grants1.52.32.30.72.32.52.52.52.52.52.5
Loans1.12.02.11.62.12.22.22.22.22.22.2
Amortization due-22.20.0-0.4-0.3-0.4-0.3-0.3-0.3-0.2-0.2-0.1
Program aid0.71.71.91.61.11.10.90.90.80.80.7
Grants0.70.70.81.00.70.70.60.60.60.50.5
Loans0.01.01.10.60.40.50.30.30.20.20.2
Debt relief obtained0.00.00.00.00.00.00.00.00.00.00.0
MDRI grants23.00.00.00.00.00.00.00.00.00.00.0
Financing gap0.0-0.30.00.00.21.41.60.70.40.10.0
Sources: Beninese authorities; and IMF staff estimates and projections.
Table 4.Benin: Balance of Payments, 2006–14
200620072008200920102011201220132014
Prel.Prog.Prel. Est.Prog.Rev. Proj.Projections
(In billions of CFA francs)
Trade balance 1/-257.3-357.1-328.9-388.0-348.9-422.4-424.5-440.6-457.0-481.0-504.0
Exports, f.o.b.139.8241.8187.5237.4212.8233.7249.2276.8306.3339.3377.0
Cotton and textiles56.166.272.376.388.667.275.484.689.398.0108.2
Other 2/83.7175.6115.2161.1124.2166.5173.7192.2217.0241.3268.8
Imports, f.o.b.-397.1-598.9-516.4-625.4-561.7-656.1-673.7-717.4-763.3-820.3-881.0
Of which: petroleum products-69.1-108.0-154.4-116.9-158.6-58.4-57.1-60.0-63.5-67.2-71.2
Services (net)-23.5-50.2-24.0-19.2-16.6-27.8-22.5-16.6-19.7-17.0-21.1
Credit141.3189.6170.2218.7183.1201.5214.8235.3247.4265.9278.6
Debit-164.8-239.8-194.1-237.9-198.7-229.3-237.3-251.9-267.1-282.9-299.7
Income (net)-15.4-4.3-14.6-5.4-16.4-11.5-14.9-17.9-20.4-23.7-28.9
Of which: interest due on government debt-9.9-5.0-6.0-4.8-6.2-6.9-6.1-8.8-10.7-12.6-14.5
Current transfers (net)154.9148.7167.3166.8179.7151.0151.8172.0195.1216.9236.2
Unrequited private transfers79.273.587.474.494.965.462.671.885.494.9102.9
Public current transfers75.775.279.892.484.885.689.2100.2109.8122.0133.3
Of which: program grants18.118.315.930.422.620.920.922.922.922.922.9
Current account balance-141.3-262.9-200.2-245.9-202.3-310.7-310.1-303.1-302.0-304.8-317.8
Current account balance (excl. program grants)-159.3-281.2-216.1-276.3-224.9-331.6-331.0-326.0-324.9-327.7-340.7
Capital account balance607.860.668.821.676.180.685.693.0101.2110.1119.8
Official project grants 3/37.660.668.821.676.180.685.693.0101.2110.1119.8
Financial account (net)-350.7297.0151.4270.8146.2148.6148.7170.9198.1216.1229.3
Medium- and long-term public capital-517.482.982.466.470.680.278.685.093.5103.1113.0
Disbursements31.182.994.974.783.389.288.595.0102.1109.9118.3
Loans31.156.670.256.870.374.278.585.092.199.9108.3
Of which: Central gvt project loans27.252.661.147.766.370.274.581.088.195.9104.3
Program loans0.026.324.717.913.015.010.010.010.010.010.0
Amortization due-548.50.0-12.5-8.3-12.7-9.0-9.9-10.0-8.6-6.7-5.4
Foreign direct investment125.377.850.246.960.476.582.182.3
Medium- and long-term private capital68.431.668.948.775.528.223.225.528.130.934.0
Deposit money banks26.5-63.60.016.90.00.00.00.00.00.00.0
Short-term capital26.650.80.090.60.0-9.90.00.00.00.00.0
Errors and omissions45.170.00.0-29.50.00.00.00.00.00.00.0
Overall balance115.894.720.046.520.0-81.5-75.8-39.1-2.721.431.3
Financing-115.8-86.0-20.0-46.5-20.036.621.412.4-14.0-24.8-31.4
Chge in net foreign assets (- = increase)-115.8-86.0-20.0-46.5-20.036.621.412.3-14.3-25.2-33.5
Debt relief obtained0.00.00.00.00.00.00.00.00.00.00.0
Financing gap0.0-8.70.00.00.044.354.426.716.73.40.1
Memorandum items:(In percent of GDP, unless otherwise indicated)
Net reexports4.64.34.74.44.74.34.34.14.03.93.8
Reexports10.09.810.29.310.29.29.28.98.68.38.1
Imports for reexports-5.3-5.5-5.5-4.9-5.4-4.9-4.9-4.8-4.6-4.5-4.3
Current account balance (incl. program grants)-5.7-9.9-6.9-8.2-6.5-9.7-9.1-8.2-7.5-7.0-6.7
Current account balance (excl. program grants)-6.4-10.6-7.5-9.2-7.2-10.3-9.7-8.8-8.1-7.5-7.2
Trade balance-10.4-13.4-11.4-13.0-11.2-13.2-12.5-11.9-11.4-11.0-10.6
Exports5.69.16.57.96.87.37.37.57.67.87.9
Imports-16.0-22.5-17.9-20.9-18.0-20.5-19.8-19.4-19.0-18.7-18.5
Services and income (net)-1.6-2.1-1.3-0.8-1.1-1.2-1.1-0.9-1.0-0.9-1.0
Current transfers (net)6.35.65.85.65.84.74.54.74.95.05.0
Capital account balance24.52.32.40.72.42.52.52.52.52.52.5
Financial account balance-14.211.25.39.14.74.64.44.64.94.94.8
Overall balance4.73.60.71.60.6-2.5-2.2-1.1-0.10.50.7
Gross reserves in months of imports 4/6.57.57.97.97.27.26.56.05.75.65.4
GDP (in billions of CFA francs)2,475.82,658.12,880.72,991.53,124.83,204.73,401.83,696.54,022.14,376.74,763.8
Sources: Beninese authorities; and IMF staff estimates and projections.
Table 5.Benin: Monetary Survey, 2006–09
2006200720082009
Dec.Dec.JuneDecemberProg.Rev. Proj.
Prel.Prel.Prog.Prel. Est.
(In billions of CFA francs)
Net foreign assets529.0678.6736.8696.7708.2607.1671.6
Central Bank of West African States (BCEAO)443.8529.7545.4547.9576.2458.3539.6
Banks85.2148.8191.3148.8132.0148.8132.0
Net domestic assets276.1268.9327.1332.1516.6603.4640.5
Domestic credit337.8310.4383.7371.7561.1644.8685.0
Net claims on central government-70.9-202.6-162.9-205.2-95.0-207.1-81.1
Credit to the nongovernment sector408.7512.9546.5576.9656.1851.9766.1
Other items (net)-61.8-41.5-56.6-39.6-44.5-41.5-44.5
Broad money (M2)805.1947.41,063.91,028.81,224.81,210.51,312.1
Currency254.2238.9286.4258.4361.6296.8387.3
Bank deposits541.7700.9768.5760.3854.3906.1915.9
Deposits with postal checking accounts9.27.69.010.18.97.68.9
(Change in percent of beginning-of-period broad money, unless otherwise indicated)
Net foreign assets20.618.66.12.13.1-3.4-3.0
Net domestic assets-4.1-0.96.16.226.115.410.1
Domestic credit-2.6-3.47.76.226.515.410.1
Net claims on government-7.3-16.44.2-0.511.40.11.1
Credit to nongovernment sector4.613.03.56.715.115.39.0
Broad money16.517.712.38.329.312.07.1
Credit to the nongovernment sector
(annual change in percent: year-on-year)8.525.521.812.527.924.116.8
Memorandum items
Velocity of broad money3.33.03.02.92.92.92.9
Broad money as share of GDP32.535.635.635.740.936.640.9
Nominal GDP (in billions of CFA francs)2,475.82,658.12,991.52,880.72,991.53,309.23,204.7
Nominal GDP growth (annual change in percent)7.07.412.58.112.510.67.1
Sources: BCEAO; and IMF staff estimates and projections.
Table 6.Benin: Proposed Schedule of Disbursements Under the PRGF Arrangement, 2005–2009
AmountDisbursement DateConditions Necessary For Disbursement 1/
SDR 0.88 millionAugust 12, 2005Executive Board approval of the three-year Arrangement.
SDR 0.88 millionDecember 12, 2006Observance of performance criteria for September 30, 2005, completion of the first review under the arrangement.
SDR 0.88 millionJune 29, 2007Observance of performance criteria for December 31, 2006, completion of the second review under the arrangement.
SDR 0.88 millionJanuary 22, 2008Observance of performance criteria for June 30, 2007, completion of the third review under the arrangement.
SDR 10.17 millionJune 3, 2008Observance of performance criteria for December 31, 2007, completion of the fourth review under the arrangement.
SDR 0.88 millionDecember 15, 2008Observance of performance criteria for June 30, 2008, completion of the fifth review under the arrangement.
SDR 10.2 millionJune 24, 2009Observance of performance criteria for December 31, 2008, completion of the sixth review under the arrangement.
Source: International Monetary Fund.
Table 7.Benin: Indicators of Capacity to Repay the Fund, 2009–19 1/
20092010201120122013201420152016201720182019
Fund obligations based on existing credit
(in millions of SDRs)
Principal0.00.00.20.40.62.92.92.72.52.30.0
Charges and interest0.10.10.10.10.10.10.10.10.10.00.0
Fund obligations based on existing and prospective drawings
(in millions of SDRs)
Principal0.00.00.20.40.63.95.04.84.54.31.0
Charges and interest0.10.20.20.20.20.20.10.10.10.10.0
Total obligations based on existing and prospective credit
In millions of SDRs0.10.20.30.60.84.15.14.94.64.41.1
In billions of CFA francs0.10.10.30.40.63.03.73.63.43.30.8
In percent of government revenue0.00.00.00.10.10.30.30.30.20.20.0
In percent of exports of goods and services0.00.00.00.10.10.50.50.40.40.30.1
In percent of debt service 2/0.10.10.30.40.52.52.82.52.11.90.4
In percent of GDP0.00.00.00.00.00.10.10.10.10.00.0
In percent of quota0.20.30.51.01.36.68.27.97.47.11.7
Outstanding Fund credit 2/
In millions of SDRs24.824.824.624.223.519.614.79.95.41.00.0
In billions of CFA francs17.418.418.117.817.314.410.87.34.00.80.0
In percent of government revenue2.82.82.42.11.81.40.90.60.30.00.0
In percent of exports of goods and services4.04.03.53.22.92.21.50.90.40.10.0
In percent of debt service 2/21.221.119.117.215.411.88.15.02.50.40.0
In percent of GDP0.50.50.50.40.40.30.20.10.10.00.0
In percent of quota40.040.039.739.038.031.723.715.98.71.60.0
Net use of Fund credit (millions of SDRs)16.412.412.211.9-0.6-3.9-5.0-4.8-4.5-4.3-1.0
Disbursements16.412.412.412.40.00.00.00.00.00.00.0
Repayments and Repurchases0.00.00.20.40.63.95.04.84.54.31.0
Memorandum items:
Nominal GDP (in billions of CFA francs)3,204.73,401.83,696.54,022.14,376.74,763.85,201.15,678.66,199.96,769.07,390.4
Exports of goods and services (in billions of CFA francs)436.2465.1513.3555.0606.7657.2727.2804.7890.6985.71,091.1
Government revenue (in billions of CFA francs)621.5662.8752.7847.1945.61,035.61,201.71,312.01,432.41,563.91,707.5
Debt service (in billions of CFA francs) 2/82.387.394.9103.3112.4122.3133.5145.8159.2173.8189.8
CFA francs/SDR (period average)704.2742.5737.8736.2736.0736.7738.2739.7741.3742.9744.6
Sources: IMF staff estimates and projections.
Appendix I—Letter of Intent

Cotonou, June 8, 2009

Mr. Dominique Strauss-Kahn

Managing Director

International Monetary Fund

Washington, D.C. 20431

Dear Mr. Strauss-Kahn:

1. I am pleased to inform you that, during the second half of 2008, tangible progress has been made in implementing the macroeconomic policies and structural reforms under the program supported by the IMF through the Poverty Reduction and Growth Facility (PRGF), despite the shocks related to the rise in food, fuel, and construction material prices. During this period, all end-December 2008 quantitative performance criteria were met with the exception of domestic financing of the government, which was breached owing to the government’s decision to clear outstanding Treasury payment orders accumulated in 2007 and to provide financial assistance to the electricity company (SBEE) to ensure the supply of electricity. To find a solution to the problems of the electricity company, electricity tariffs will be increased by an average 13 percent in June 2009, and the government will perform a financial audit of the electricity company (SBEE) in the fourth quarter of 2009, with the support of development partners. In light of these remedial measures, the government requests a waiver for the nonobservance of this performance criterion and the completion of the sixth review of the program supported by the PRGF arrangement.

2. Among the quantitative indicators, the wage bill exceeded the target, essentially owing to the government’s decision to preserve social peace in the face of union wage demands. It granted various benefits, bonuses, and allowances, and recruited public employees in the key sectors of education and health.

3. Of the structural benchmarks, the audit of electronic public expenditure systems, the strategy for comprehensive reform of the cotton sector, and the action plan for improving the public financial management system were completed.

4. I would also like to present the measures that the government has planned for 2009. The fallout from the international crisis on our economy will result in a marked slowdown in the economic growth achieved during the past three years, with real GDP growth of about 4.0 percent in 2009. The inflation rate, which was 8.0 percent at end-December 2008, should move closer to the 3.0 percent level established within the framework of the multilateral surveillance of the WAEMU. In the interest of stepping up growth and more effectively reducing poverty, the government intends to maintain a prudent macroeconomic policy stance and accelerate implementation of its structural reform program. The government hopes to continue to benefit from financial and technical support from the IMF, including the possibility of a new arrangement following the expiration of the current arrangement in August 2009.

5. Benin will be seriously affected by the international economic crisis over the next two years. Economic growth will weaken as a result of the decline in global demand, falling commodity prices, and diminishing remittances from Beninese migrant workers. This situation has already decreased customs revenue and commercial bank liquidity in the first quarter of 2009. The government is committed to mitigating the adverse effects of the crisis while maintaining the planned level of budgetary expenditure in the 2009 budget. This would increase the level of additional necessary financing for 2009. The financing gap would be CFAF 44 billion according to the latest Fund staff estimates. We are in the process of mobilizing additional budgetary assistance from our development partners to bridge this gap. Given the situation, we wish to request an augmentation of access of SDR 9.29 million (15 percent of our quota) as part of this program review.

6. The government feels certain that the measures and policies described in this memorandum are adequate to achieve the objectives of the program. It is determined to take any further measures that may prove necessary for this purpose. The government will consult with the IMF, either at its own initiative or whenever the Managing Director of the IMF requests such consultation, before adopting any additional measures or changing any of the measures discussed in this memorandum.

7. The government authorizes the IMF to publish its staff report and the attached memorandum on economic and financial policies relating to the sixth review of the program.

Sincerely,

/s/

Soulé Mana LAWANI

Appendix I—Attachment I

Memorandum on Economic and Financial Policies for 2009

I. Introduction

BENIN

1. The strengthening of economic activity continued in 2008. The real GDP growth rate stood at 5.0 percent, against a projection of 5.1 percent. This growth can be attributed to the demand on the Nigerian market, strong food production with the implementation of the Emergency Food Security Program, and the expansion of construction activities. However, the growth rate remained below the minimum required for achieving the Millennium Development Goals.

2. In 2008, the increase in consumer product prices accelerated as international food and fuel prices rose. The average inflation rate trended upwards, driven by food and fuel, rising to 8 percent compared with 1.3 percent in 2007 and accentuating the deterioration in the inflation differential between Benin and its trading partners. As a result, inflation remained above the 3 percent threshold required under the WAEMU convergence pact.

3. The external current account balance improved despite the negative effect of the deterioration in the terms of trade. The external current account deficit excluding grants is estimated at 9.2 percent of GDP in 2008, compared with 10.6 percent in 2007. This improvement can be attributed to increased volumes of cotton exports and the expansion of transit trade; at the same time, the rise in food and fuel prices resulted in a rise in imports. With the improvement in the current account, and in spite of dwindling foreign direct investment and inflows of public capital, official exchange reserves increased to almost 8 months of prospective imports of goods and services.

II. Macroeconomic Policy in 2008

4. Fiscal consolidation continued despite the slippage during the first half year owing to expenditure on major works projects (Table 1). Overall, revenue and expenditure were in line with program objectives. Total revenue stood at CFAF 581.3 billion in 2008, or 19.5 percent of GDP, compared with a projection of CFAF 578.0 billion (19.4 percent of GDP). Customs revenue shortfalls were largely offset by a significant increase in domestic tax revenues.

5. Customs revenues were below the program target, standing at CFAF 278.9 billion in 2008, or 9.3 percent of GDP, a shortfall of 0.3 percent of GDP. This slight shortfall observed despite market-based prices resulted essentially from the decline in import prices in the fourth quarter of 2008. In contrast, compared to 2007, customs revenues increased substantially by about 11.5 percent. This result is attributable to the strong performance of revenues from goods under customs escort; anti-fraud efforts, specifically the simplification of customs clearance procedures; and the increased administrative capacity of the customs services, particularly owing to the expansion of ASYCUDA++ to seven workstations, limiting the shortfall against the target in 2008.

6. Domestic tax revenues were higher than program targets. Domestic revenues totaled CFAF 233.3 billion in 2008, or approximately 7.8 percent of GDP compared with a projected 7.5 percent, an increase of 18.7 percent over the previous year. This performance by the General Directorate of Taxes and Government Property (DGID) is attributable essentially to the domestic tax on industrial and commercial profits (AIB) and the domestic VAT. The strong performance of tax collections reflects the improvement in tax administration, the enhancement of control measures, and sound management of the corporate profit tax (BIC). The authorities thus improved the rational management of staffing levels, strengthened the IT capacity of inspectors, and streamlined the portfolios of the Large Taxpayer Unit (DGE) and the Medium-Sized Enterprise Tax Centers (CIMEs).

7. Efforts to control expenditure undertaken in the second half of 2008 were continued and made it possible to keep expenditure below the target for 2008. Total expenditure stood at CFAF 684.7 billion, or 22.9 percent of GDP, compared with a targeted 23.3 percent of GDP and a realization of 22.0 percent in 2007. However, there were primary expenditure overruns in the use of resources allocated to purchases of goods and services, to transfers, and to the wage bill. These overruns are explained by expenditure in support of: (i) the national power company (SBEE) to ensure the availability of electrical power; and (ii) capital and modernization projects in Cotonou and many other localities in the interior. The wage bill target was also exceeded owing to (i) the increase in the various benefits, bonuses, and allowances paid to workers to maintain social peace; and (ii) the recruitment of public employees in the key sectors of education and health. In contrast, domestically financed capital expenditure remained below target.

8. The overall fiscal deficit (cash basis excluding grants) deepened in 2008, amounting to CFAF 218.8 billion, or 7.3 percent of GDP (1.9 percentage points off target), as outstanding 2007 balances and advances to the SBEE were cleared. This deficit was financed in part from disbursements of budgetary support under the World Bank’s 2007 PRSC IV program (CFAF 17.9 billion) and aid granted by France (CFAF 3.6 billion), Denmark (CFAF 1.7 billion), the European Union (CFAF 16.6 billion), Swiss Cooperation (CFAF 0.6 billion), KFW-Germany (CFAF 1.3 billion), and the Netherlands (CFAF 6.6 billion). The balance was financed by a drawing on government deposits with the banking system of about CFAF 120 billion and a portion of the resources from the privatization of SONAPRA’s industrial tools division (CFAF 4.7 billion). The issuance of Treasury bonds and bills in the amount of CFAF 58.1 billion made it possible to replenish a portion of the government’s deposits. Wage arrears to permanent public employees were cleared by issuing commercial paper (CFAF 54 billion, 20 billion of which was discounted by the local banks).

9. All end-December 2008 quantitative performance criteria were met, with the exception of net domestic financing of the government. Despite measures taken to regulate expenditure during the second half of the year, government deposits were not replenished. They were used to clear outstanding balances accumulated in 2007 and to grant considerable advances to the SBEE to guarantee the supply of electrical power. Among the quantitative indicators, the wage bill was overrun owing to the government’s decision to keep social peace in the face of union wage demands.

10. The monetary situation was characterized by a strengthening of foreign assets and sharp growth of domestic credit, which led to a rapid expansion of the money supply by 29.3 percent, a rate that outstripped nominal GDP growth. The government’s net position with the banking system was substantially eroded owing to drawings on government deposits to finance infrastructure projects and the issuance of Treasury bills in June and September 2008. At the same time, the average quality of bank credit declined slightly between December 2007 and December 2008; the rate of nonperforming loans rose from 8.9 percent to 9.6 percent. The BCEAO maintained a required reserve ratio of 15 percent, the highest level in the WAEMU. On August 16, 2008, it also raised its key intervention rates (the repo rate and discount rate) by a half (1/2) percentage point, to 4.75 percent and 6.75 percent, respectively.

11. In the area of microfinance policy in 2008, the Ministry responsible for microfinance and youth employment released more than CFAF 10 billion in microcredits for the very poor (MCPP) and approximately CFAF 6 billion for the National Fund for the Promotion of Youth Employment and Enterprise (FNPEEJ). The latter program created 602 projects in 2008, generating more than 3,000 jobs.

III. Implementation of Structural Reforms in 2008

12. Progress in the implementation of structural reforms was mixed (Table 2). The end-December structural benchmarks for the audit of the information management system of public expenditure and the action plan to improve the public financial management system were met. Progress is being made on the structural benchmark relating to the reform of the civil service pension fund (FNRB). The audit of the electronic public expenditure management systems (SIGFIP, ASTER, and WMONEY) commissioned by the government has been completed. The final report was made available in late December 2008. The medium-term strategy to strengthen public financial management was adopted by the government in March 2009. With respect to the strategy to improve the financial position of the FNRB, a study by external consultants was launched on January 19, 2009 and the consultants submitted their final report in April 2009.

13. The government has engaged with all participants in the cotton sector and the development partners to prepare an overall strategy for reform of the cotton sector. The government has continued to reform the sector by transferring SONAPRA’s industrial tools division to the new semipublic company SODECO, created in September 2008. The cotton sector has thus reached a new stage at which the objectives for its revitalization and effective contribution to Benin’s development require the clarification and redistribution of roles, strengthening of the cotton interprofessional organization, and unequivocal accountability of each stakeholder. Thus the government once again demonstrated its commitment to honor its undertakings regarding the reform of the cotton sector by signing an agreement with the cotton interprofessional organization (AIC) on January 7, 2009.

14. The government intends to protect the efficiency of the system for the supply of agricultural inputs, also as part of the implementation of a policy to promote private sector activity. In this context, a shareholders’ agreement was signed in December 2008 between the government, SOPIDI (company of importers and distributors of agricultural inputs), and local banks. The government’s aim in creating this purchasing pool, in partnership with private operators, is to give Benin the means to provide itself with access to the appropriate quantity of high-quality agricultural inputs in time and at competitive prices, in support of the government’s agricultural diversification and promotion policy.

15. In addition, the Beninese government has withdrawn from Continental Bank-Benin. In September 2008, the government selected Nigeria’s United Bank for Africa (UBA) PLC as the successful bidder for the block of shares held by the Beninese government, SONACOP, and the West African Development Bank (WADB), i.e., 56.4 percent of the share capital of Continental Bank-Benin valued at CFAF 15 billion.

16. In its reform of telecommunications, the government has opted to strategically open up the capital of Benin Telecoms SA to the private sector. The consortium, whose assistance will be sought, will have the task of assisting the government in preparing, organizing and carrying out the operation to open up the share capital of Benin Telecoms SA to the private sector. The process has the support of the World Bank’s Competitiveness and Integrated Growth Opportunity Project (CIGOP). An international call for bids was issued and the Linkstone Capital Consortium was selected.

17. As part of the upgrade of the port facilities to improve the competitiveness of the Port of Cotonou (PAC), the government has planned the construction of two new terminals to accommodate large capacity container ships with financing from the U.S. Millennium Challenge Account (MCA). The International Finance Corporation (IFC) was asked to handle the licensing process. The related contract for services was signed on November 4, 2008.

18. The work to install the Information System for the One-Stop Shop for Foreign Trade (SIGUCE) has made substantial progress with the recruitment of an IT expert to carry out the preliminary study and concept study of the PAC and SIGUCE. Validation of the preliminary study led to the drafting of terms of reference for computerizing the PAC and SIGUCE. The government has also completed the assessment study of the customs system. The conclusions of the study reiterate the importance of quickly installing the one-stop stop at the Port of Cotonou.

IV. Economic and Financial Policies for 2009

A. Macroeconomic Framework

19. The government’s economic policy is aimed at keeping the national economy on a path of strong, sustainable growth focusing on the revitalization of the private sector. This path will require consolidation of the macroeconomic framework and acceleration of the structural reforms in an international context of declining global demand and dwindling migrant remittances. In light of these external constraints, the outlook for the economy is not very promising; indeed the real GDP growth rate is projected to be 3-4 percent in 2009. This lower-than-anticipated level of economic activity reflects the impact of the international financial crisis on exports (including reexports) and tax revenue. Inflation, which was 8 percent in 2008, should come close to the 3-percent level required under the WAEMU convergence criteria in 2009. The drop in inflation reflects declining international food and energy prices, the increase in food production, and prudent management of domestic demand. The slowdown in cotton exports and transit trade, as well as the increase in imports and the decline in migrant remittances, is expected to raise the external current account deficit to a projected 10.3 percent of GDP in 2009, as compared with 9.2 percent in 2008.

20. The market-based pricing policy remains at the heart of the government’s fiscal consolidation policy. The government’s intention is to ease the impact of fluctuations in international prices for mass consumption products by continuing to implement programs that favor the expansion of domestic supply and production of consumer goods, particularly food products. Technical and financial support from the development partners would be essential for this.

21. The uncertainty resulting from the persistence of the financial crisis will create serious risks for the economy in 2009. In the short term, these risks are related to the decline in tax revenue, decreasing external financing (particularly migrants’ remittances and FDI), and slowing domestic demand in Benin’s trading partners, particularly Nigeria, which is feeling the full brunt of the international financial crisis.

B. Fiscal Policy in 2009

22. In 2009, the government’s policy is aimed at consolidating the achievements in macroeconomic stability by strengthening its capacity to regulate and control expenditure in the face of a persistent slowdown in the global economy. Total public revenue and expenditure should reach 19.4 percent and 25.3 percent of GDP, respectively. The basic primary balance should register a deficit of CFAF 26.5 billion, or 0.8 percent of GDP. The overall fiscal balance (payment order basis, excluding grants) should deteriorate from the 2008 level to CFAF 189.8 billion, equivalent to 5.9 percent of GDP. This is explained by the downside risks for customs revenue posed by to declining demand in Nigeria, Benin’s main trading partner. The government will continue to build basic infrastructure and improve living conditions for the very poor without jeopardizing its fiscal consolidation efforts. The deficit will be financed with the proceeds of the sale of the government’s shares in Continental Bank and expected budgetary support from the European Union (EU), World Bank (WB), African Development Bank (AfDB), France, the Netherlands, Denmark, and other bilateral partners. Domestically financed expenditure on public investment should continue to rise, from 3.5 percent of GDP in 2008 to 4.7 percent in 2009.

23. Fiscal revenue should recover to CFAF 621.5 billion and the tax burden should amount to 16.8 percent of GDP, compared with 17.1 percent in 2008. This result reflects: (i) the government’s decision to reduce some tax rates4; (ii) weaker economic growth as a result of the international crisis; and (iii) the declining profitability of businesses. The negative impact of the crisis will be mitigated by the improved performance of the tax agencies, particularly through continuing efforts to combat fraud, measures to expand the domestic tax base, and gradual implementation of the single tax identification number (TIN). On the taxation side, the government intends to increase revenues by: (i) strengthening the partnership between the private sector and the government; and (ii) creating new Small and Medium-sized Enterprise Tax Centers (CIPEs and CIMEs). On the customs side, the authorities have continued to: (i) simplify and expedite customs declaration and clearance procedures; and (ii) expand ASYCUDA++ to twelve additional workstations in the regional customs directorates.

24. The collection of nontax revenue should increase significantly owing to the inventory and centralization of revenue collected by various nonfinancial structures within the government, the payment of the mobile telephone license fees, and the tracking of revenues from the loading tax.

25. Enhancement of the IT systems of the financial agencies will continue in an effort to improve their performance. In this context, the government will have the DGID’s IT system audited and prepare an IT master plan during the fourth quarter of 2009, including the creation of an IT directorate and a communications unit. Furthermore, to improve anti-fraud efforts, the interface between ASYCUDA++ and other software will be pursued; the computerized customs warehouse will begin to operate; and all the regional customs directorates will be computerized in 2009.

26. Total expenditure and net lending should reach CFAF 811.3 billion in 2009, an increase of 2.4 percent of GDP. This reflects the government’s commitment to increasing growth and improving the living standards of the population. The wage bill should stand at CFAF 193.4 billion, or 6.0 percent of GDP, in line with human resource needs. The fiscal contribution to investment should reach 4.7 percent of GDP in 2009. Overall, capital expenditure should continue to rise to CFAF 299.9 billion, or about 9.4 percent of GDP. In addition, control of public expenditure should be improved by (i) streamlining compliance controls on expenditure commitments; (ii) continuing the reform of the public procurement system; and (iii) emphasizing a program approach to budget execution by the ministries.

C. Money and Credit

27. The BCEAO’s monetary policy will remain in line with the objective of price stability and maintenance of adequate official exchange reserves for the zone. Broad money should expand by 7.1 percent in 2009 reflecting a significant improvement in the government’s net credit position, which will be partially offset by a slight reduction in net foreign assets. Under these conditions credit to the private sector could rise by almost 9 percent.

28. The BCEAO’s key intervention instrument remains its interest rate policy (repo and discount rates), which will depend on the impact of the financial crisis on the economies of countries in the zone. The BCEAO will closely monitor inflationary trends and the official exchange reserves and will use the reserve ratio to enhance the effectiveness of its monetary policy if necessary.

29. The various inspection missions to the banks by the Banking Commission underscore the need to take a number of corrective measures. Improvements are expected in the areas of corporate governance, information systems, risk management, loan classification, and recording of unrealized loan losses. The authorities intend to enhance banking supervision to improve compliance with prudential ratios and will also endeavor to apply the regulatory framework to the microfinance sector.

30. As part of the government’s microfinance policy in 2009, particular emphasis will be placed on consolidating the sector with support from the Millennium Challenge Account (MCA) by: (i) enhancing supervision and (ii) increasing public awareness of the application of the laws governing the sector. To this end, 19 new officers hired by the Civil Service Ministry will be assigned to the unit that supervises decentralized financial structures to supplement the existing team of seven professionals. This will increase the frequency of on-site supervision of MFIs.

D. Balance of Payments and External Debt

31. The external current account deficit, excluding grants, should increase to 10.3 percent of GDP in 2009, compared with 9.2 percent in 2008, essentially reflecting the decline in the prices and volume of cotton exports (following the poor 2008/09 harvest), the slump in transit trade (associated with slower growth in Nigeria), and the reduction in migrant workers’ remittances. At the same time, imports will continue to increase, propelled by the demand for intermediate and capital goods for public investment projects, despite the fall in food and fuel prices. A reduction in foreign financial flows could lead to a contraction in the financial account surplus and the overall surplus. The BCEAO’s reserves should reach 7.2 months of coverage of imports for the following year.

32. The government applies a prudent borrowing policy. To protect public debt sustainability, the government has adopted the WAEMU borrowing reference framework, which allows it to limit borrowing levels each year based on the debt ceiling defined in the “national debt strategy.”5 The government gives assurances that new external financing will be only in the form of grants or highly concessional loans and that it does not jeopardize debt sustainability.

E. Structural Policies

33. The improvement in public financial management will continue in 2009. An organizational audit of the expenditure chain was started in June and will be completed by end-2009. As part of the strategy to improve the financial position of the civil service pension fund (FNRB), the government will adopt an FNRB reform strategy to ensure the fund’s long-term financial sustainability. The recommendations and action plan from the audit of the SIGFIP, ASTER and WMONEY IT systems will form the basis for improving expenditure management. More specifically, the three systems will be integrated by end-April 2010. The partnership between the private sector and the tax administration will have to be further strengthened to enhance the business climate.

34. As a solution to the energy crisis and to ensure the general competitiveness of the economy, a strategy to reform the energy sector will be implemented with a view to consolidating the SBEE’s financial position, increasing capacity, reducing production costs, and improving service quality. To that end, user rates will be increased in June 2009 by about CFAF 12/Kwh.6 Moreover, the government will proceed to perform a financial audit of the SBEE in the fourth quarter of 2009, with the support of the technical and financial partners. This audit will seek to identify the causes of the financial difficulties that required large advances from the budget in 2008, as well as more appropriate measures to prevent these problems from arising in the future. The new vision for the energy sector will also include the establishment of an asset management company and a privately–owned distribution company. The strategic approaches to make this new vision a reality are being prepared with the commission established by the WAEMU to find long-term solutions to the energy crisis. A consulting firm will assist the government in implementing this reform.

35. Significant progress has been made in privatizing the telecommunications sector. Linkstone Capital, the investment banking firm recruited, should facilitate the process of opening up the capital of Benin Telecoms SA. The competitiveness of the port will be further strengthened with the implementation of the one-stop-shop and the construction of two new terminals. Based on the terms of reference for computerizing the Autonomous Port of Cotonou (APC) and for SIGUCE, and the customs system assessment study, the government will proceed to set up the one-stop-shop by end-December 2009. With respect to the Port, the government has also decided to use the services of the IFC, whose mission will be to: (i) lay out the structure of the licensing process for building the new wharves; and (ii) conduct a strategic review of the commercial activities of the APC to provide the government with recommendations for a suitable level of private sector involvement and the terms of a more appropriate regulatory framework. A notice of prequalification inviting tenders for construction licenses to build the terminals at the Port was issued in March 2009.

F. Poverty Reduction and Growth Strategy Paper (PRGSP 2007–2009)

36. As the PRGSP will expire at the end of 2009, the government plans to prepare a new strategy by the end of the year. The new strategy should build on the achievements of the previous strategies by emphasizing new development concerns and new directions expressed by the grass roots populations and adopted by the government through the various sectoral strategies. To this end, the government intends to strengthen the participatory process through the total and inclusive involvement of all stakeholders in all stages of the process. The new strategy should also address development issues and sectoral and local strategies, which have not been dealt with in depth until now. These issues include the youth and women’s employment policy, the problem of social welfare, and the solidarity that could, if necessary, be targeted in a special program complementary to the strategy. Similarly, the organization of rural areas, agricultural diversification, and issues relating to climate change and trade, in the context of economic partnership agreements, could also be covered by programs.

G. Program Monitoring

37. Program monitoring will be based on quarterly structural and quantitative benchmarks and performance criteria (Tables 1 and 2). The authorities will report the data necessary for program monitoring to the IMF, in accordance with the Technical Memorandum of Understanding of the fifth review of the PRGF-supported program. During the program period, the authorities will not introduce restrictions on payments and transfers for current international transactions or tighten any such restrictions without first consulting the Fund; introduce or modify multiple currency practices; conclude bilateral payments agreements not compatible with Article VIII of the IMF’s Articles of Agreement; or introduce or intensify restrictions on imports for balance of payments purposes.

Table 1.Benin: Quantitative Performance Criteria and Indicative Targets for the Period December 2008–December 2009(In billions of CFA francs)
End-December 2008 performance criteriaEnd March 2009 indicative targetsEnd-June 2009 indicative targetsEnd-September 2009 indicative targetsEnd-December 2009 indicative targets
Prog.Adj. Prog.Est.Prog.Adj. Prog.Prel.Prog.Prog.Prog.
A. Quantitative Performance Criteria and Indicative Targets 1/
(Cumulative since end-December) 1/
Net domestic financing of the government 2/3/-12.3-4.4109.4-3.0-17.7-9.0-8.6
Basic primary balance (excluding grants)14.714.721.242.827.2-10.5-24.6
Accumulation of domestic payments arrears 4/0.00.00.00.00.00.00.0
Memorandum Item: Budgetary assistance56.248.348.32.515.354.780.2
B. Continuous quantitative performance criteria
Accumulation of external payments arrears0.00.00.00.00.00.00.00.00.0
External debt contracted or guaranteed by government
with maturities of 0-1 year0.00.00.00.00.00.00.00.00.0
Nonconcesional external contracted or guaranteed
with maturities of one year or more0.00.00.00.00.00.00.00.00.0
C. Indicative Targets (Cumulative from beginning of calendar year)
(Cumulative since end-December)
Total revenue530.1530.1581.3162.4306.7416.1621.5
Wage bill171.1171.1182.440.683.8134.9193.4
Table 2.Benin: Structural Benchmarks for 2008–09
MeasuresDateRationaleStatus
Completion of a new (global) reform strategy of the cotton sectorEnd-December 2008The government intends to Improve the efficiency of the cotton sector by strengthening the use of targeted subsidies and encouraging diversification to other crops.Completed with delay
Completion of a strategy to improve public finance management.End-December 2008The government intends to strengthen the quality of spending in order to improve its impact on growth and poverty reduction.Completed with delay
Audit of public finance information management systems (SIGFIP, ASTER and WMONEY)End-December 2008The government intends to strengthen public finance management in order to improve the impact of spending on growth and poverty reduction.Completed
Completion of a strategy to reform the civil service pension fund (FNRB)End-December 2008The government intends to reduce the impact of the deficit of the FRNB on public finances by by strengthening its financial sustainability.Delayed
Extension of ASYCUDA ++ to twelve (12) additional posts (regional customs units/offices).End-March 2009The government intends to improve customs collections in order to expand the fiscal space for investment in infrastructure and poverty-reducing measures.Delayed
Adoption of a strategic information system at the DGID1, after an audit in order to operationalize the single taxpayer identification functionEnd-March 2009The government intends to improve income tax collections in order to expand the fiscal space for investment in infrastructure and poverty-reducing measures.Delayed

During the mission, staff presented and discussed with the authorities one paper on the negative impact of the global economic crisis and another on debt management strategies (both are available at http://www-intranet.imf.org/departments/AFR/countries/Benin/default.aspx).

Food production has recently become more profitable than cotton. Accordingly, the mission advised the authorities to shift from implicit subsidies to the cotton sector to a generalized support to agriculture.

PRGF resources in the CFA franc zone are onlent by the regional central bank to national governments to finance the central government budget. The government of Benin cannot use its gross international reserves to finance its financing gap unless it has counterpart deposits in domestic currency at the regional central bank.

The BIC and BNC rates were reduced by about 10 percentage points.

A Public Debt Strategy Paper for 2009 is attached to the 2009 Budget Law.

This represents an increase of between 12.6 and 14.0 percent for households, 13.6 percent for businesses, and 12.3 percent for public entities.

Other Resources Citing This Publication