On December 6, 2018, the Executive Board of the International Monetary Fund (IMF) completed the third review of the three-year arrangement with Benin under the Extended Credit Facility (ECF).
The Board’s decision enables a disbursement of US$22.0 million immediately to Benin, bringing total disbursements under the arrangement to US$88.1 million.
In completing the review, the Board also approved Benin’s request to set program conditionality for 2019, and granted a waiver pertaining to the nonobservance of the continuous performance criterion on the non-accumulation of new domestic arrears.
Benin’s three-year arrangement for US$154.2million or 90 percent of the country’s quota at the time of approval of the arrangement), was approved on April 7, 2017. It aims at supporting the country’s economic and financial reform program and focuses on raising living standards and preserving macroeconomic stability.
Following the Executive Board discussion, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, said Benin’s performance under the ECF-supported program remains strong.
He also said that the fiscal position has improved significantly, mainly as a result of expenditure restraint. That the growth momentum continues, and the medium-term economic outlook is favorable, driven by a stronger demand from Nigeria and a better environment for private investment.
“Maintaining the fiscal deficit below 3 percent of GDP in 2019 and beyond is key for debt sustainability. The 2019 draft budget, which complies with the WAEMU deficit criterion, foresees an ambitious effort to mobilize tax revenues. This will contribute to enhance the revenue strategy, by reducing the reliance on one-off nontax revenues and prioritizing durable base-broadening tax measures,” he said, adding that enhanced public debt management is also key for fiscal sustainability.
“The authorities should pursue their efforts to lengthen the average debt maturity and reduce interest costs. The recent debt reprofiling operation is a step in the right direction.
“Sustaining high growth will require greater involvement of the private sector in the next years. Benin’s economic growth has recovered since 2016, partly because of the scaling-up of public investment. With fiscal consolidation under way, the private sector will have to step in as the main growth driver. This calls for continued improvement in the business environment, further reforms that facilitate access to electricity and finance, and a stronger anti-corruption framework.”