The staff team from the International Monetary Fund (IMF) led by Norbert Toe, Mission Chief for Benin and government authorities have agreed that there is need to prioritizing public expenditures to foster inclusive growth.
- Discussions covered the policies needed to foster inclusive growth, preserve fiscal and debt sustainability, increase the efficiency of public spending, and promote financial stability and inclusion.
- The fiscal consolidation path foresees a significant reduction of the deficit to 1.9% of GDP in 2019, well below the West African Economic and Monetary Union convergence criterion of 3% of GDP.
- Despite the favorable economic outlook, the IMF team and the authorities agreed that there are challenges that need to be addressed going forward.
A staff team from the International Monetary Fund (IMF) led by Norbert Toé, Mission Chief for Benin, visited Cotonou from September 13 to 27, 2017 to conduct discussions on the 2017 Article IV consultation and the first review under the Extended Credit Facility (ECF) arrangement with the Republic of Benin approved by the IMF Executive Board in April 2017.
The discussions covered economic and financial developments in 2016 and 2017 and policies needed to foster inclusive growth, preserve fiscal and debt sustainability, increase the efficiency of public spending, and promote financial stability and inclusion.
At the end of the visit, Mr. Toé issued the following statement:
“In 2016, Benin’s economy weathered negative spillovers stemming from a difficult external environment and grew by 4 percent with an acceleration expected in 2017. Economic growth was driven by strong agricultural production, an increase in public investment, and a buoyant tertiary sector. Inflation remained negative in 2016 and through end-August 2017 but is forecasted to average 0.6 percent in 2017.
“The revised budget approved by parliament in July 2016 was instrumental in reducing the budget deficit (including grants) to 6 percent of gross domestic product (GDP) from 8.0 percent in 2015. For 2017, better-than-programmed domestic revenue performance and a rigorous spending management are expected to lead to a smaller than programmed budget deficit. Nonetheless, the rising burden of domestic debt service requires attention. The fiscal consolidation path foresees a significant reduction of the deficit to 1.9 percent of GDP in 2019, well below the West African Economic and Monetary Union convergence criterion of 3 percent of GDP. The medium-term outlook continues to be favorable with high economic growth and low inflation, which would be facilitated by an efficient implementation of the Government’s Action Program, 2016–21 and the recovery of the Nigerian economy.
“Despite the favorable economic outlook, the team and the authorities agreed that there are challenges that need to be addressed going forward. These include prioritizing public expenditures to foster inclusive growth and to reduce poverty; accelerating the tax and customs administration reforms to mobilize more domestic resources; making public investment more efficient to sustain the expected growth over the medium term, and strengthening debt management to preserve public debt sustainability. Implementation of the ECF-supported program remains broadly satisfactory. Based on the data and information provided to the mission, all program monitoring indicators (both quantitative and structural) agreed with the authorities under the arrangement are met. The mission encouraged authorities to continue to allocate more resources to priority social programs to protect the most vulnerable segments of the population. “The IMF will continue to support the authorities’ reform agenda and in this regard, and the staff team reached understandings on the main objectives of the economic program for 2018.
“The team met with President Patrice Talon, and held discussions with Romuald Wadagni, Minister of Economy and Finance; Abdoulaye Bio Tchané, Senior Minister of State of Planning and Development; Alain Komaclo, National Director of the regional central bank (BCEAO), other senior government officials, and representatives of the diplomatic community, development partners, and stakeholders.
“The IMF Executive Board is expected to consider the staff report for the 2017 Article IV consultation as well as the first review under the ECF arrangement in late November/early December 2017. “The team thanks the Benin authorities for the fruitful discussions and their hospitality.