July 22, 2024

IMF Executive Board Completes the Second Review and Approves US$68 Million Disbursement under Blended Fund Facility for Benin

Managing Director Kristalina Georgieva, First Vice President of Spain and IMFC Chair Nadia Calvino, Secretary-General of the Organization for Economic Co-operation and Development (OECD) Mathias Cormann, President of the World Bank Group David Malpass, President for the 2021 COP26 conference Alok Sharma, and Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC) Simon Stiell participate in the Getting to Net Zero with IFIs and Multilateral Partnerships Seminar during the 2022 Annual Meetings at the International Monetary Fund. IMF Photo/Alison Shelley 12 October 2022 Washington, DC, United States Photo ref: AS221012153.cr3

The Executive Board of the International Monetary Fund (IMF) has given its approval for the disbursement of US$68 million to Benin, marking the successful completion of the Second Review of the country’s Fund-supported program. The 42-month blended Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangement, initially endorsed on July 8, 2022, aims to address Benin’s urgent financing needs, bolster its National Development Plan focused on achieving the Sustainable Development Goals (SDGs), and mobilize additional donor support. With this recent disbursement, Benin has now received a total of approximately US$360 million under the program.

Despite confronting numerous external shocks and obstacles, Benin’s economy has displayed resilience. Notably, the country’s economic activity expanded by a solid 6.3 percent in 2022, propelled by robust construction projects and a successful harvest season. Looking ahead, the economic outlook remains positive, buoyed by ongoing developments in the special economic zone and the modernization initiatives at the Port of Cotonou. However, the prolonged war in Ukraine and the challenging regional security situation pose significant risks to external accounts and food security within Benin.

Mr. Okamura, Deputy Managing Director and Acting Chair, highlighted the commendable policy response of Benin’s authorities to external shocks, underscoring the vital role played by the frontloaded financing provided through the EFF/ECF arrangement. This response has enabled Benin to effectively address unforeseen expenditure requirements arising from the war in Ukraine and regional security risks while maintaining macroeconomic stability.

Furthermore, Mr. Okamura praised the ongoing fiscal consolidation efforts in Benin, which are grounded in a revenue-based approach. This consolidation follows three years of necessary policy adjustments in the face of repeated and severe external shocks. The fiscal strategy aligns with the objectives of the West African Economic and Monetary Union and the program itself, with the aim of achieving an overall fiscal deficit of 3 percent of GDP by 2025, while ensuring debt sustainability.

To create additional fiscal space and safeguard the country’s substantial development needs, Benin is in the process of finalizing a Medium-Term Revenue Mobilization Strategy (MTRS). This strategy aims to expand the tax base and enhance the overall efficiency of the tax system, which will be crucial for accommodating Benin’s future requirements.

Another significant step taken by the authorities is the establishment of a social registry, designed to provide timely support to vulnerable households in an increasingly uncertain global landscape. The full operationalization of this social registry is essential in order to enhance the targeting and effectiveness of expanding social programs.

Benin’s structural reform agenda has also progressed favorably. Noteworthy achievements include the completion and publication of the IMF governance diagnostic report, the adoption of a comprehensive financial inclusion strategy, the digitization of land title requests, and the submission of a draft law to ensure the long-term viability of the authorities’ flagship school feeding program.

Mr. Okamura acknowledged the unwavering commitment of Benin’s authorities to reform, which serves as a mitigating factor in light of heightened global uncertainty, regional security risks, and the mounting vulnerabilities resulting from climate change.

The successful completion of the Second Review demonstrates the solid partnership between Benin and the IMF in effectively addressing the country’s economic challenges, promoting sustainable development, and paving the way for a more resilient and prosperous future.

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