Sixth Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility and Request for Waiver of Nonobservance of Performance Criterion and Augmentation of Access
Author: International Monetary Fund
Publication Date:
14 Aug 2009
eISBN:
9781451803600
Language:
English
Keywords:
ISCR; CR; staff advice; fertilizer subsidy; deficit; debt; policy intervention rate; ratio; financial asset; SDR equivalent; CFA franc; liability position vis-à-vis nonresident; government finance statistics yearbook; Government finance statistics; Currencies; Balance of payments statistics; Debt relief; West Africa
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This paper discusses key findings of the Sixth Review under Poverty Reduction and Growth Facility (PRGF) for Benin. 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 authorities’ policy response of allowing automatic fiscal stabilizers to work is appropriate. The implementation of structural reforms needs to be accelerated to enhance the competitiveness of Benin’s economy and increase its resilience to exogenous shocks.

Abstract

This paper discusses key findings of the Sixth Review under Poverty Reduction and Growth Facility (PRGF) for Benin. 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 authorities’ policy response of allowing automatic fiscal stabilizers to work is appropriate. The implementation of structural reforms needs to be accelerated to enhance the competitiveness of Benin’s economy and increase its resilience to exogenous shocks.

I. Relations with the Fund

(As of April 30, 2009)

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V. Latest Financial Arrangements:

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When a member has overdue financial obligations outstanding for more than three months; the amount of such arrears will be shown in this section.

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Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts can not be added.

Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

VIII. Implementation of Multilateral Debt Relief Initiative (MDRI):

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II. Debt Relief by Facility (SDR Million)

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The MDRI provides 100 percent debt relief to eligible member countries that qualified for the assistance. Grant assistance from the MDRI Trust and HIPC resources provide debt relief to cover the full stock of debt owed to the Fund as of end-2004 that remains outstanding at the time the member qualifies for such debt relief.

Decision point - point at which the IMF and the World Bank determine whether a country qualifies for assistance under the HIPC Initiative and decide on the amount of assistance to be committed.

Interim assistance - amount disbursed to a country during the period between decision and completion points, up to 20 percent annually and 60 percent in total of the assistance committed at the decision point (or 25 percent and 75 percent, respectively, in exceptional circumstances).

Completion point - point at which a country receives the remaining balance of its assistance committed at the decision point, together with an additional disbursement of interest income as defined in footnote 2 above. The timing of the completion point is linked to the implementation of pre-agreed key structural reforms (i.e., floating completion point).

IX. Safeguards Assessments:

The Central Bank of West African States (BCEAO) is the common central bank of the countries of the West African Economic and Monetary Union, which includes Benin. The most recent safeguards assessment of the BCEAO was completed on November 4, 2005. The assessment indicated progress has been made in strengthening the bank’s safeguards framework since the 2002 assessment and identified some areas where further steps would help solidify it.

The BCEAO now publishes a full set of audited financial statements and improvements have been made to move financial reporting closer to International Financial Reporting Standards (IFRS). Furthermore, an internal audit charter has been put in place, mechanisms for improving risk management have been established, and follow-up on internal and external audit recommendations has been strengthened.

The results of continuous safeguards monitoring indicate that while certain vulnerabilities remain in internal control systems and legal structure, there has been some progress in other areas, including through: (i) improving the external audit process by adopting a multi-year audit program; (ii) establishing an audit committee; (iii) expanding disclosures on financial positions of WAEMU countries with the Fund in the notes to the annual financial statements; and (iv) further strengthening of the effectiveness of the internal audit function.

X. Exchange Arrangement:

Benin is a member of the West African Economic and Monetary Union (WAEMU) and has no separate legal tender. The union’s common currency, the CFA franc, is pegged to the Euro at a rate of CFAF 655.957 = EUR 1, consistent with the official conversions rate of the French franc to the Euro and the previous fixed rate of the CFA franc to the French franc of CFAF 100= F 1. On April 28, 2006, the rate of the CFA franc in terms of SDR was CFAF 769.68 = SDR 1.0. Effective January 1, 2007, the exchange arrangement of the WAEMU countries has been reclassified to the category of conventional pegged arrangement from the category of exchange arrangement with no separate legal tender. The new classification is based on the behavior of the common currency, whereas the previous classification was based on the lack of a separate legal tender. The new classification thus only reflects a definitional change, and is not based on a judgment that there has been a substantive change in the exchange regime or other policies of the currency union or its members. The exchange system common to all member countries of the WAMU is free of restrictions on payments and transfers for current international transactions subject to Fund jurisdiction.

XI. Article IV Consultations:

The last Article IV consultation discussions were held in Cotonou during March 3–17, 2008. The staff report (Country Report No. 08/230; 5/30/08) and selected issues paper were discussed by the Executive Board, and the 2008 Article IV consultation concluded, on June 16, 2008.

XII. ROSC Assessment:

An FAD mission conducted the fiscal module of a Report on Observance of Standards and Codes (ROSC) in May 2001. The mission recommended the adoption of a three-year action plan containing measures to improve expenditure management. The mission also identified a list of actions to be taken quickly to ensure that the authorities were able to monitor budget execution. The ROSC fiscal transparency module for Benin was circulated to the Board on June 6, 2002 (Country Report No. 02/217).

XIII. Technical Assistance for the last five years

A. Headquarters

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B. AFRITAC West

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XIV. Resident Representative:

Mr. Yao has been the Resident Representative since September 26, 2005.

II. Joint World Bank-IMF Work Program, 2009–10

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III. Statistical Issues

1. Data provision has some shortcomings, but is broadly adequate for surveillance. Weaknesses exist in the areas of national accounts, public finance, monetary statistics, and balance of payments. Benin has participated in the General Data Dissemination System (GDDS) since 2001.

Real sector statistics

2. Inadequate resources and weaknesses in methodology hamper the accuracy and reliability of the national accounts. Efforts to address these shortcomings are ongoing. Benin participates in WAEMU’s harmonization of statistical methodologies and in the GDDS project for AFRITAC West countries to implement the 1993 SNA. A statistical register and an industrial production index are being developed, but implementation is not advancing as expected and the August 2008 West AFRITAC mission discussed with the authorities the necessary steps to accelerate the compilation of the revised accounts and disseminate them by end-2008.

3. Consumer price data, measured using the WAEMU harmonized consumer price index, are adequate for surveillance.

Government finance statistics

4. The quality of fiscal data is broadly adequate for surveillance, but their institutional coverage is inadequate. Data provided for publication in the 2006, 2007, and 2008 (forthcoming) issues of the Government Finance Statistics Yearbook are limited to the “Budgetary Central Government,” covering only the principal ministries and some of the other units of central government. Data on general government is not available.

Monetary and financial statistics

5. Monetary and financial statistics, compiled and disseminated by the regional Central Bank of West African States (BCEAO), are broadly adequate and their institutional coverage is comprehensive. Accuracy is somewhat hampered by the use of 1990 sorting coefficients to estimate cross border amounts of banknotes among BCEAO countries, which in turn, are used to estimate currency in circulation and to adjust the net foreign assets of each member country. Standardized Report Forms (in line to Monetary and Financial Statistical Manual (MFSM)) are still not regularly used to report monetary data to STA.

Balance of payments

6. External statistics are still affected by shortcomings that prevent an accurate and timely assessment of current account transactions and capital and financial flows. Recent improvements in applying the guidelines of the Balance of Payments Manual, Fifth Edition have not solved the problem. In November 2004, a STA technical assistance mission noted that the human resources devoted to balance of payments statistics by the national agency of the BCEAO were inadequate, and highlighted a series of methodological problems including the use of untested hypotheses and reference bases, the limited coverage of direct investment, and shortcomings in the compilation of net external assets and international investment position. Balance of payments statistics are also disseminated with a lag of more than one year and the international investment position data with a lag of 18-month. Some progress has recently been achieved in the reconciliation of regional trade data with those of regional partners, and the compilation of trade statistics has been enhanced by the installation of the ASYCUDA customs computer system in all main border customs houses and of ASYCUDA ++ in the port, airport, and some regional offices. Further improvements will require the interconnection between the computer systems of the main customs departments and their integration with the other revenue agencies. Progress is also needed in improving contacts with reporting bodies, enhancing human and technical resources. Financial account data can be improved by extending the coverage of foreign assets of the private non banking sector, expanding the surveys of residents’ foreign assets, and using other data source such as BIS statistics. The organization of an annual survey of foreign direct investment transactions is still at a very preliminary stage. The BCEAO has recently updated the compilation of commercial bank data on payments involving nonresidents; however these data are not used to produce annual balance of payments estimates.

7. External debt data are broadly adequate for surveillance. Data are collected by the Caisse Autonome d’Amortissements (CAA), which is responsible for signing international loan agreements and servicing the government’s external debt obligations. The CAA’s database is fairly comprehensive and up-to-date, and contains accurate stock data, and produces projected debt-service flows on a loan-by-loan basis, but regular statements are not received from all creditors.

Poverty data

8. Major methodological weaknesses remain regarding poverty data. In particular, the methodology used in household surveys raises concerns about the treatment of the nonfood expenditure share in the calculation of the poverty line, the division of the country into 12 agro-ecological zones, and the comparability of poverty statistics across urban and rural areas and across time. The authorities are implementing an action plan to address these methodological issues. The authorities have completed a modular survey of household living conditions to update the poverty profile in the context of the preparation of the second PRSP.

Benin: Table of Common Indicators Required for Surveillance

(As of May 18, 2009)

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Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign domestic bank and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability position vis-à-vis nonresidents.

Daily (D); Weekly (W); Monthly (M); Quarterly (Q); Annually (A); Irregular (I); Not Available (NA).

Other IMF Content

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Cover IMF Staff Country Reports
Benin: Sixth Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility and Request for Waiver of Nonobservance of Performance Criterion and Augmentation of Access: Staff Report; Staff Supplement; Staff Statement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Benin
Author: International Monetary Fund
Volume/Issue:
Volume 2009: Issue 252
Publisher:
International Monetary Fund
ISBN:
9781451803600
ISSN:
1934-7685
Pages:
66
DOI:
https://doi.org/10.5089/9781451803600.002