On June 21, 2019, the Executive Board of the International Monetary Fund (IMF) completed the 4th review of the three-year arrangement with Benin under the Extended Credit Facility (ECF).
The Board's decision enables a disbursement of SDR15.917 million (about US$22.1 million) immediately to Benin, bringing total disbursements under the arrangement to SDR 79.585 million (about US$110.4 million). In completing the review, the Board also approved Benin's request for modification of the performance criteria on the basic primary balance, net domestic financing, and new external debt contracted or guaranteed by the government.
Benin's three-year arrangement for SDR111.42 million (about US$154.6 million or 90 percent of the country's quota at the time of approval of the arrangement) was approved on April 7, 2017 (see Press Release No.17/124). 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, First Deputy Managing Director and Acting Chair, Mr. David Lipton, made the following statement:
"Benin's macroeconomic and fiscal performance under the Fund-supported program continues to be strong. All Quantitative Performance Criteria at end-2018 and all Structural Benchmarks were met. The macroeconomic and structural policies outlined by the authorities are adequate to achieve the program's objectives and risks to program implementation are deemed manageable.
"Keeping the fiscal deficit below 3 percent of GDP in 2019 and beyond is key for debt sustainability. The authorities are implementing an ambitious tax package primarily focused on reducing tax expenditures. It is expected to lower the deficit from 4.0 percent of GDP in 2018 to 3.0 percent of GDP in 2019. Revenue mobilization should continue after 2019, notably by exploiting the full potential of the value added tax and excises. Further revenue efforts will create budgetary space for social spending and prevent additional cuts to public investment. They will also support the regional strategy to foster external stability at the WAEMU level.
"Prudent fiscal policy will help maintain the debt ratio on a firm downward path. Debt, as a share of GDP, is projected to decline in 2019 after five years of continuous increase. The March 2019 Eurobond issuance will not raise debt, since the authorities have decided to scale back domestic borrowing by the same amount. The Eurobond paves the way for greater access to non-concessional external financing in the future; it will help diversify the financing mix and create opportunities to lengthen debt maturity. Nonetheless, it may also generate new vulnerabilities that will need to be monitored and mitigated carefully through an enhanced debt management strategy.
"Continued efforts to improve the business environment, diversify the economy, and invest in human capital will be important to promote strong and inclusive growth."