The International Monetary Fund (IMF), yesterday, approved the release of about $68 million to the Republic of Benin, to support the country’s developmental efforts.
The IMF explained that the facility “seeks to help Benin address pressing financing needs, support the country’s National Development Plan centred on achieving the Sustainable Development Goals (SDGs), and catalyse donor support.”
This follows the completion of the IMF Executive Board’s Second Review of Benin’s Fund-supported program — a 42-month blended Extended Fund Facility and the Extended Credit Facility Arrangements (EFF/ECF), approved on July 8 last year, according to a statement.
The Fund noted that this review completion allows for the immediate disbursement of SDR 50.82 million (about $68 million) toward budget support, bringing total disbursements under the program so far to SDR 267.42 million (about $360 million).
It added that “the Beninese economy is gaining strength despite multiple exogenous shocks and challenges. Economic activity is estimated to have expanded by 6.3% in 2022, buoyed by construction and a good harvest season.
“While the outlook is favourable, supported by the expansion of the new special economic zone and the modernization of the Port of Cotonou, the protracted war in Ukraine and the challenging regional security situation pose important risks to external accounts and food security.”
The facility seeks to help Benin address pressing financing needs, support the country’s National Development Plan centred on achieving the Sustainable Development Goals (SDGs), and catalyse donor support.
Balanced policy response
Explaining the rationale for the Executive Board’s decision, Deputy Managing Director and Acting Chair, Kenji Okamura, said: “The authorities’ balanced policy response to external shocks, supported by frontloaded financing under the EFF/ECF, has allowed Benin to meet unanticipated spending needs related to the protracted war in Ukraine and spill-overs from regional security risks while preserving macroeconomic stability.
“Revenue-based fiscal consolidation is underway, after three years of warranted policy accommodation amidst repeated and severe exogenous shocks. The fiscal strategy, with convergence to an overall fiscal deficit of 3% of GDP by 2025, is consistent with the West African Economic and Monetary Union-wide stance and the program’s debt sustainability objectives.
“The pending Medium-Term Revenue Mobilization Strategy (MTRS), aimed at expanding the tax base and enhancing the overall efficiency of the tax system, will create fiscal space for Benin’s large development needs over time and help preserve debt sustainability.
“The recently established social registry is much-needed to channel timely support to vulnerable households in a world more prone to shocks. Its swift full operationalization is critical to improve the targeting and efficiency of social programs as their coverage expands.
“The structural reform agenda is advancing, including with the completion and publication of the IMF governance diagnostic, the adoption of a financial inclusion strategy, the digitalization of land title requests, and the submission to Parliament of a draft law to ensure the sustainability of the authorities’ flagship school feeding program.
“Going forward, the authorities’ demonstrated commitment to reform is a mitigating factor vis-à-vis heightened global uncertainty, regional security risks and longstanding and intensifying climate change vulnerabilities.”
