Benin: First Review Under the Three-Year Arrangement Under the Extended Credit Facility, Request for a Waiver of Nonobservance of Performance Criterion, Request for Program Extension and Rephasing of Performance Criteria—Informational Annex

Performance under the Extended Credit Facility (ECF) program has been mixed. The revenue slippage was addressed partially with corrective actions. IMF staff supports the authorities' request for a waiver of a missed performance criterion and recommends the completion of the first review. The collapse of a number of unauthorized microfinance institutions has not had a measurable impact on the financial sector. Ex post assessment of performance under the 2005–09 poverty reduction and growth facility program highlighted progress in macroeconomic stabilization but weaknesses in growth performance.

Abstract

Performance under the Extended Credit Facility (ECF) program has been mixed. The revenue slippage was addressed partially with corrective actions. IMF staff supports the authorities' request for a waiver of a missed performance criterion and recommends the completion of the first review. The collapse of a number of unauthorized microfinance institutions has not had a measurable impact on the financial sector. Ex post assessment of performance under the 2005–09 poverty reduction and growth facility program highlighted progress in macroeconomic stabilization but weaknesses in growth performance.

I. Relations with the Fund

(As of December 31, 2010)

I. Membership Status: Joined: July 10, 1963 Article VIII

II. General Resources Account:

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III. SDR Department:

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IV. Outstanding Purchases and Loans:

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V. Latest Financial Arrangements:

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VI. Projected Payments to Fund 2/

(SDR Million; based on existing use of resources and present holdings of SDRs):

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Formerly PRGF.

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.

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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. Implementation of Post-Catastrophe Debt Relief (PCDR): Not Applicable.

X. Safeguards Assessments:

The Central Bank of West African States (BCEAO) is a common central bank of the countries of the West African Economic and Monetary Union (WAEMU). The most recent safeguards assessment of the BCEAO was completed on March 1, 2010. The 2010 update assessment found that the BCEAO continues to have controls in place at the operational level. The overall governance framework should nonetheless be strengthened by the addition of an audit committee to ensure that the Board of Directors exercises appropriate oversight over the control structure, including the audit mechanisms and financial statements. The Institutional Reform of the WAMU and the BCEAO completed after the approval of the safeguards report stipulated creation of the Audit Committee, which should now start working. Efforts to implement fully the International Financial Reporting Standards reporting framework should also be pursued.

XI. 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. 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 WAEMU is free of restrictions on payments and transfers for current international transactions subject to Fund jurisdiction.

XII. Article IV Consultations:

The last Article IV consultation discussions were held in Cotonou during March 10–26, 2010. The staff report (Country Report No. 10/195; 5/27/10) and selected issues paper were discussed by the Executive Board, and the 2010 Article IV consultation concluded, on June 14, 2010.

XIII. 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). In 2009, the World Bank conducted an Accounting and Auditing ROSC, for which the report was published on April 18, 2009.

XIV. Technical Assistance for the Last Five Years:

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XV. Resident Representative:

On November 12, 2010, the authorities accepted the appointment of Mr. Sarr as Resident Representative.

II. Joint World Bank-IMF Work Program, 2010–11

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III. Statistical Issues

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Benin: Table of Common Indicators Required for Surveillance

(As of January 31, 2011)

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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).

Benin: First Review Under the Three-Year Arrangement Under the Extended Credit Facility, Request for Waiver of Nonobservance of Performance Criterion, Request for Program Extension and Rephasing of Performance Criteria — Staff Report; Press Release; and Statement by the Executive Director for Benin
Author: International Monetary Fund