Statement by Mr. Sembene, Executive Director for Benin and Mr. Nguema-Affane, Senior Advisor to the Executive Director April 7, 2017

Significant fiscal slippages in late 2015 and early 2016, compounded by negative spillovers from Nigeria, led to a deterioration of the macroeconomic situation. The election in March 2016 of a new president who campaigned for a clear break with past policies offers an opportunity to implement sensible policies to promote inclusive and sustainable growth and reduce poverty. The authorities have launched an ambitious reform agenda and reaffirmed their commitment to preserving macroeconomic stability and medium-term debt sustainability.


Significant fiscal slippages in late 2015 and early 2016, compounded by negative spillovers from Nigeria, led to a deterioration of the macroeconomic situation. The election in March 2016 of a new president who campaigned for a clear break with past policies offers an opportunity to implement sensible policies to promote inclusive and sustainable growth and reduce poverty. The authorities have launched an ambitious reform agenda and reaffirmed their commitment to preserving macroeconomic stability and medium-term debt sustainability.

Our Beninese authorities are thankful to Management and staff for the constructive policy dialogue that paved the way for their current request for an ECF arrangement.

Following the 2016 presidential elections, the authorities promptly took a series of urgent measures aimed at addressing growing macroeconomic imbalances facing the country, including a significant increase in the fiscal deficit and public debt. In the context of the Government’s Action Program (GAP) for 2016–21, a comprehensive strategy was developed to promote structural transformation through the consolidation of democracy, the rule of law, and good governance; launch the structural transformation of the economy; and improve living standards. The focus of the GAP is in line with the 2030 Agenda for Sustainable Development and the 2015 Paris Climate Conference (COP21).

With the aim at implementing successfully the GAP, the authorities are seeking a three-year arrangement under the Extended Credit Facility (ECF). This arrangement will serve as an anchor for the government’s macroeconomic policies and as a catalyst for financial assistance from Benin’s technical and financial partners.

Recent Economic Developments

Macroeconomic developments have been broadly positive in 2016. Despite the negative effects of the recession of the Nigerian economy on Benin’s industrial and trade sectors, the rate of economic growth almost doubled, increasing from 2.1 percent in 2015 to 4 percent in 2016 driven by a solid performance of the agricultural sector. Inflation remained below the West African Economic and Monetary Union (WAEMU) convergence threshold of 3 percent. The current account deficit declined due to continued strong export performance.

Because of the difficult economic situation in the neighboring trading partner, the revenue targets set forth in the revised budget were missed with large margins. Yet, the overall fiscal deficit was significantly reduced in 2016 owing to the authorities’ efforts to contain expenditure in line with the revised 2016 budget.

Advancing the Structural Reform Agenda

The implementation of the structural reform agenda accelerated markedly since June 2016, consistent with the authorities’ commitment to create fiscal space for higher public investment, improving governance and improving the business climate. On the fiscal front, reform efforts to increase domestic revenue mobilization translated into improvements in the coordination of the tax and customs administrations, and risk management procedures and controls in the customs administration. In addition, a Strategic Plan for the Tax Administration (POSAF) for 2017–2021 was adopted in February 2017 to turn the tax administration into a modern, effective institution. In parallel, an action plan to improve the management of public spending (PAAGFP) has been completed earlier this year. To ensure the effectiveness of public investment, an institutional framework for the monitoring and coordination of the GAP has been adopted. An Office of Analysis and Investigation (BAI) has been created in June 2016 for the implementation and monitoring of the GAP flagship projects.

To strengthen cash flow management, an inventory of all public accounts was launched. This initiative aims ultimately to ensure compliance with the regional directives requiring that all public funds be managed through a Treasury Single Account (TSA) opened with the regional central bank (BCEAO). In addition, a framework for the preparation and monitoring of the government’s cash flow plan was established. At the same time, an audit of domestic payment arrears is underway. Upon the completion of this audit, it is expected that an arrears clearance strategy will be developed.

Significant progress has been made in strengthening debt management. The responsibilities of the Treasury and the debt management agency (CAA) which oversee public debt management have now been clearly delineated. The availability of information on public debt has also improved with the creation of a website1, the publication of a quarterly statistical bulletin, the preparation of an annual report on public debt management; and the attachment of a medium-term debt management strategy document to the 2017 Budget.

To further improve fiscal governance and transparency, procurement procedures have been modernized with the implementation of the Integrated Public Procurement Management System (SIGMap) and the introduction of a public procurement web portal.2 This has already contributed to streamlining the procurement process. Going forward, it is the authorities’ intention to further strengthen the transparency of the public procurement system through the adoption of the Open Contracting Data Standard (OCDS) initiative.

The law on public-private partnerships was passed in October 2016, with a view to promoting private sector participation in public investment. Nevertheless, scope still exists for further improving the PPP framework and in this regard, technical assistance from the World Bank and the Fund will be helpful. The tools developed by the IMF and the World Bank to assess and minimize fiscal risks from PPPs would be of great value.

Other major legislations adopted recently that aimed at improving the business climate include the amendments to legislations on commercial courts in September 2016, and the promulgation of the law on credit bureaus in January 2017, consistent with regional regulations.

The staff report rightly underscores the importance of reforming SOEs to fiscal risks associated with their management. in this connection, an entity tasked with overseeing State holdings has been established in June 2016 with the aim at monitoring the financial situation of SOEs more effectively. In particular, the governance framework of the national power company (SBEE) has been strengthened, notably with the recruitment of a new management team through a competitive hiring process, the appointment of a new board of directors, the establishment of a performance contract, and an audit of debt and arrears, together with a restructuring plan. The authorities intend to adopt a similar approach for other SOEs.

Implementing the Medium-Term Policy and Reform Agenda

The priorities of the economic program for 2017–19 are consistent with the strategic directions of the GAP. Policies envisaged over the medium term aimed at bringing about an in-depth transformation of Benin’s economy through sustainable and inclusive growth, while maintaining macroeconomic stability and the sustainability of public debt. The emphasis of the proposed ECF-supported program will be put on: (a) the creation of fiscal space through increased mobilization of domestic resources and more effective public spending; (b) strengthening of capacity to prepare for and implement effective public investments; and (c) measures aimed at improving the business climate, and promoting private sector development.

The medium-term macroeconomic framework is focused on an acceleration of economic growth. Inflation should remain below regional convergence threshold of 3 percent. The medium-term fiscal program targets a fiscal deficit of 4.6 percent of GDP on average during the three years covered by the program. While public spending will be redirected to investment, the authorities will pursue efforts aimed at protecting most vulnerable segments of the population through improved social protection and universal access to basic social services, as envisaged in the GAP. In addition, the government will provide support for income-generating activities through ongoing training, entrepreneurship, and microcredit for the financing of specific projects. While implementing their public investment program, the authorities are committed to ensuring the sustainability of public debt.

Policies and Reforms for 2017

The success of the ECF-supported program will hinge largely on the progress that will be made toward achieving fiscal targets. On this front, efforts will be made to boost revenue mobilization, while rationalizing public spending. Fiscal revenues are projected to increase to reach about 15.4 percent of GDP in 2017. To mobilize more revenues, a package of measures will be implemented, including the introduction of several new taxes in the 2017 Budget, the continued modernization of the tax and customs administrations in the context of the POSAF, and the acceleration of tax policy reforms. Based on the recommendations of a recent Fund TA mission, a strategy to recover tax arrears will be developed. Due consideration will also be given to tax policy measures recommended by other IMF TA missions and other partners to improve revenues, including the simplification of the personal income tax and updating of the legislation on transfer pricing.

A comprehensive analysis of tax expenditures will be carried out this year, with a view to designing a strategy aimed at containing and streamlining these expenditures. In the meantime, it is the authorities’ intention to eliminate tax expenditures that are no longer justified from an economic and social standpoint, or that do not have a legal basis. As provided in the 2017 Budget, the Minister of Finance will have the sole authority to grant tax expenditures that are not allowed by the existing codes. Furthermore, the 2017 Budget eliminates tax exemptions for power companies.

On the expenditure side, sustained efforts will be made to contain current spending. Thus, current expenditure as a share of GDP is expected this year to decrease by 0.7 percentage point compared to 2016. However, public spending is expected to increase by 3.3 percentage points of GDP to accommodate much-needed capital spending.

To address the significant deficiencies in the audit function in Benin, identified in the 2014 PEFA report, the Office of Analysis and Investigation has been entrusted with reorganizing the internal and external audit structures for the State. The summary reports of audits presented to the Council of Ministers will be made public and cases that call for judicial investigations will be turned over to the relevant judicial authorities.

The authorities believe that the microfinance sector can play a critical role in improving access to the financial system for small businesses. With the aim of maintaining their viability and credibility, the capacities of the supervisory and regulatory authorities of microfinance institutions (MFIs) will be strengthened, notably in rural areas.

The authorities will strive to strengthen the anti-corruption framework by addressing the deficiencies in the asset declaration regime. In this regard, some legislative amendments are envisaged to encourage assets declaration.


The Beninese authorities are requesting a three-year ECF arrangement to support the implementation of their economic program aimed at boosting the mobilization of domestic revenues, improving the quality and effectiveness of public spending, and strengthening governance and institutions. The policies and reform measures envisaged under the Fund-supported program will enable Benin to achieve sustained and inclusive growth with the aim of reducing poverty, while ensuring the sustainability of public finances and debt. In this light, we would appreciate Directors’ favorable consideration of their request for a three-year arrangement under the ECF.