An International Monetary Fund (IMF) team, led by Constant Lonkeng, visited Cotonou, capital of Republic of Benin, on October 17–26 to hold discussions on the Third Review of the country’s economic program under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements and a new program supported by the Resilience and Sustainability Facility (RSF).
At the end of the mission, Mr. Lonkeng issued the following statement: “I am pleased to announce that the IMF has reached a staff level agreement with Benin on a new program under the Resilience and Sustainability Fund (RSF) and on policies to complete the Third Review of Benin’s 42-month blended EFF/ECF. The RSF seeks to support the authorities’ ambitious climate agenda, thereby complementing the EFF/ECF in enhancing socio-economic resilience. The staff level agreement is subject to IMF Management and Executive Board approval. The EFF/ECF review’s completion would allow the disbursement of SDR 101.59 million (about $134 million) or 82 percent of Benin’s quota.
“After strong momentum going into the second half of the year, Benin faces headwinds from Niger border closure amidst regional sanctions on that country and post-electoral policy shifts in Nigeria. Economic activity is now expected to expand by 5.6 percent this year (down from 6 percent earlier), reflecting ongoing shocks. The outlook is subject to downside risks, including a prolonged Niger border closure, tightening financing conditions and weather-related events.
“Program performance has been robust—all quantitative targets for end-June 2023 were met, with fiscal consolidation underway. The authorities have mobilized additional concessional budget support, which allows for a slightly larger fiscal deficit this year, a flexibility built into the program at inception. The budget law for 2024 submitted to Parliament is in line with the authorities’ objective to converge to the West African Economic and Monetary Union (WAEMU) overall fiscal deficit norm of 3 percent of GDP. Beyond withdrawal of crisis-related measures, medium-term fiscal consolidation will rely on revenue collection, informed by the recently developed medium-term revenue mobilization strategy (MTRS).
“The structural reform agenda is advancing. The mission underscored the need for the authorities to move swiftly to the consultation with the civil society on their action plan for implementing recommendations from the IMF governance diagnostic—while some of the diagnostic’s recommendations are already being implemented, the consultation has been delayed. Program conditionality is being augmented to support the authorities ongoing effort to strengthen the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) framework, transparency, and the business climate.
“The new 24-month RSF builds on Benin’s strong legal and institutional foundations for climate action, diagnostic reports by the IMF and the World Bank, as well as inputs from the Global Center on Adaptation (GCA). Reform measures under the RSF are centered on four main pillars: 1) mainstreaming climate considerations in policymaking; 2) enhancing adaptation to climate change, including resilience building at the community level and climate-proof social safety nets; 3) mitigating transition risks, notably through a comprehensive energy subsidy reform; and 4) mobilizing private climate finance via the development of a climate financial information architecture. RSF reviews will be aligned with the EFF/ECF’s.
“The authorities should remain vigilant vis-à-vis the socio-economic fallout from Niger border closure and policy shifts in Nigeria, as well as implications for the financial sector.
“The team met with Senior Minister of Economy and Finance Wadagni, Senior Minister of Development and Coordination of the Governmental Action Bio Tchané, Special Advisor to the President Dagnon, Minister of Justice and Legislation Detchenou, National Director of the BCEAO (the regional central bank) Assilamehoo, Director of the Military Cabinet of the President General Bada, other senior government officials, the civil society, the opposition, labor unions, university students, the donor community, multilateral and regional development banks, the banking association, and other private sector representatives.
“The IMF team would like to thank the Beninese authorities and various stakeholders for their cooperation and candid discussions during the mission.”
Source: IMF
