The Executive Board of the International Monetary Fund (IMF) has approved a three-year arrangement under the Extended Credit Facility (ECF)1 for Benin for an amount equivalent to SDR111.42 million (about US$ 151.03 million, or 90 percent of Benin’s quota) to support the country’s economic and financial reform program.
This new program aims to address Benin’s protracted balance of payments needs and alleviate the impediments to inclusive growth, and poverty reduction by creating fiscal space for infrastructure investment and priority social spending. It is also aimed at helping to catalyze official and private financing and build resilience to future economic shocks.
The Executive Board’s decision will enable an immediate disbursement of SDR 15.917 million (about US$ 21.58 million). The remaining amounts will be phased over the duration of the program, subject to semi-annual reviews.
At the conclusion of the Board meeting, Mr. Tao Zhang, Deputy Managing Director and Acting Chair said “Despite negative spillovers from neighboring countries, Benin’s economy rebounded in 2016 and its outlook is favorable. Inflation remained subdued and the fiscal deficit narrowed, reflecting the authorities’ efforts to contain expenditure in the face of continued weak revenue performance. Nonetheless, reducing poverty and infrastructure gaps will take time.”
He noted that against this backdrop, the authorities’ new economic program under the Extended Credit Facility focuses on raising living standards through a structural transformation of the economy while preserving macroeconomic stability.
He said the program is expected to catalyze official and private financing and is consistent with achieving the West African Economic and Monetary Union convergence criteria by 2019.
“The authorities’ goal is to strengthen domestic revenue mobilization and improve the quality of spending to create fiscal space for infrastructure and priority social spending while preserving debt sustainability. To this end, implementing the reforms underway to modernize the Tax and Customs Administrations will be critical, including enhancing their efficiency and strengthening their coordination to ensure a durable improvement in revenue collection.
“The authorities’ measures to enhance financial intermediation—including operationalizing the credit bureau—and their efforts to promote financial inclusion will help sustain healthy credit expansion and support private sector-led economic growth. Implementing the new harmonized regional resolution framework and strengthening the supervisory body for microfinance institutions will be critical to strengthen financial sector supervision.
“Further improvements to the business environment are essential, particularly by removing bottlenecks to private-sector development and levelling the playing field for all investors.
The authorities’ continued efforts to fight corruption and improve accountability in public administration and competitive procurement for government contracts will support private investment. In addition, improving the quality, coverage, and timeliness of economic statistics will help achieve better policy making.”