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IMF Country Report No. 21/14
BENIN
REQUESTS FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY AND PURCHASE UNDER THE RAPID FINANCING INSTRUMENT —PRESS RELEASE; AND STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR BENIN
January 2021
In the context of the Requests for Disbursement Under the Rapid Credit Facility and Purchase Under the Rapid Financing Instrument, the following documents have been released and are included in this package:
A Press Release including a statement by the Chair of the Executive Board.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on December 21, 2020, following discussions that ended on November 25, 2020, with the officials of Benin on economic developments and policies underpinning the IMF arrangement under the Extended Credit Facility. Based on information available at the time of these discussions, the staff report was completed on December 10, 2020.
A Debt Sustainability Analysis prepared by the staffs of the IMF and the Internal Development Association.
A Statement by the Executive Director, Alternate Executive Director, and Advisor for Benin.
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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BENIN
REQUESTS FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY AND PURCHASE UNDER THE RAPID FINANCING INSTRUMENT
December 10, 2020
Executive Summary
Context. The COVID-19 pandemic has severely affected Benin. The authorities’ early and decisive action has helped stave off the spread of the virus, and a sizeable fiscal response has kept a recession at bay. Nevertheless, the economy has suffered a substantial downgrade in its economic outlook, with growth slowing down from 6.9 percent in 2019 to 2 percent in 2020, against an initial projection of 7 percent before the pandemic. Large financing needs, opened by the authorities’ fiscal response to the crisis, have given rise to an urgent balance of payments need.
Request for Fund support. In the attached letter of intent, the authorities request support under the RCF/RFI equivalent to 100 percent of quota (SDR 123.8 million, US$ 176 million, FCFA 95.6 billion), including a disbursement under the RCF under the “exogenous shock” window (SDR 41.263 million, 33.33 percent of quota) and a purchase under the RFI under the standard window (SDR 82.537 million, 66.67 percent of quota). The disbursement, which amounts to about 1.1 percent of GDP, would provide timely support to address the urgent fiscal and BOP needs emerging from efforts to tackle the impact of the pandemic. These needs, if left unaddressed, would result in immediate and severe economic disruption and derail the COVID-19 pandemic response implementation. The urgency, together with the heightened uncertainty of the outlook and the practical difficulties of holding comprehensive policy discussions in the current conditions, precludes the design and implementation of a UCT-quality program. The disbursement would be used as a direct budget support, contributing to the identified financing gap and complementing already large external financing from bilateral and multilateral donors and domestic financing. Benin’s capacity to repay the Fund is adequate. Staff supports the request.
Macroeconomic policies. The authorities acted swiftly to control the spread of the virus, including by introducing a partial lockdown (cordon sanitaire) and a compulsory quarantine of all people coming to Benin by air, in addition to significantly limiting the transit of people across land borders. To contain the economic impact of the health crisis, they have boosted health care spending, expanded assistance to vulnerable households, and provided support to impacted business. As a result of these measures, fiscal deficit is expected to widen to 5.1 percent of GDP. The authorities are committed to returning to the WAEMU convergence criterion of 3 percent of GDP by 2022.
Approved By
Catriona Purfield (AFR) and Maria Gonzalez (SPR)
Discussions on the Request for Disbursement Under the Rapid Credit Facility and Purchase Under the Rapid Financing Instrument (RCF) Arrangement were held by video conference from Washington D.C. on November 23–25, 2020. The mission team comprised Ms. Amina Lahreche (head), Messrs. Goran Amidzic, Alexandre Nguyen-Duong and Alex Pouhe, and Messes. Vanessa Arellano Banoni and Saanya Jain (all AFR), Mr. Anthony Ramarozatovo (FAD), and Mr. Younes Zouhar (Resident Representative). Mr. Aivo Andrianarivelo (Executive Director) and Ms. Esso Boukpessi (OED) also participated in the mission. The mission met with Mr. Romuald Wadagni, Minister of Economy and Finance and officials in the Ministry of Finance. Ms. Christelle Ndome-Yandun provided editorial assistance for the preparation of this report.
Contents
RECENT ECONOMIC DEVELOPMENTS, OUTLOOK AND RISKS
A. Recent Economic Developments
B. Outlook and Risks
POLICY DISCUSSIONS
A. Fiscal Policy
B. Debt Sustainability
C. Governance Safeguards
ACCESS AND CAPACITY TO REPAY
A. Access Level and Modalities
B. Capacity to Repay and Safeguards Assessment
STAFF APPRAISAL
BOXES
1. Social Impact of the Pandemic
2. The Two Pillars of the COVID-19 Response Plan
FIGURES
1. Recent Developments, 2012–20
2. Fiscal Developments and Projections, 2012–20
3. Real and External Sector Developments, 2012–20
TABLES
1. Selected Economic and Financial Indicators, 2018–25
2. Consolidated Central Government Operations, 2018–25 (CFAF billion)
3. Consolidated Central Government Operations, 2018–25 (Percent of GDP)
4. Balance of Payments, 2018–25
5. Monetary Survey, 2018–20
6. Indicators of Capacity to Repay the Fund, 2020–34
7. Financial Soundness Indicators, 2012–19
ANNEX
I. Policy Response of the BCEAO to the COVID-19 crisis
APPENDIX
I. Letter of Intent
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BENIN
REQUESTS FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY AND PURCHASE UNDER THE RAPID FINANCING INSTRUMENT—DEBT SUSTAINABILITY ANALYSIS
December 10, 2020
Approved By
Catriona Purfield, Maria Gonzalez (IMF), and Marcello Estevão (IDA)
Prepared by the staffs of the International Monetary Fund (IMF) and the International Development Association (IDA).
Benin: Joint Bank-Fund Debt Sustainability Analysis
Benin: Joint Bank-Fund Debt Sustainability Analysis
| Risk of external debt distress | Moderate |
| Overall risk of debt distress | Moderate |
| Granularity in the risk rating | Limited space to absorb shock |
| Application of judgement | Yes |
Benin: Joint Bank-Fund Debt Sustainability Analysis
| Risk of external debt distress | Moderate |
| Overall risk of debt distress | Moderate |
| Granularity in the risk rating | Limited space to absorb shock |
| Application of judgement | Yes |
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