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IMF Country Report — Benin

March 3, 2011 Comments off

IMF Country Report — Benin (PDF)
Source: International Monetary Fund

Amid unfavorable economic conditions, performance under the Extended Credit Facility (ECF) program has been mixed. Against the backdrop of a slow global recovery, weak domestic demand, and delays in strengthening governance in revenue collection agencies, revenue fell markedly short of program targets in the first half of the year. The end- June performance criterion on net domestic financing was missed, largely because of an unanticipated settlement of outstanding bills and unplanned net lending to state enterprises.

From mid-year, the revenue slippage was addressed partially with corrective actions. Revenue collection efforts intensified in the second half of the year, and expenditure was contained in line with the reduced availability of resources; nevertheless, several end- September and end-December 2010 targets were missed. Throughout the year, structural reforms proceeded, but with some delays.

In September and October 2010, Benin was hit by the worst flooding in 50 years. Beyond the immediate humanitarian needs, the flooding negatively affected growth in 2010. Preliminary estimates of damages and losses are considerable. The findings are expected to set the stage for future discussions of balance of payments financing needs associated with the reconstruction efforts. Financing of such efforts may crowd out some planned new investments.

In light of the disappointing results of 2010 and adverse shocks, the authorities request less ambitious fiscal objectives for 2011, a less sanguine medium-term macroeconomic framework, and an extension of the program. The 2011 budget incorporates a strong revenue drive. However, the protracted economic downturn, the extent of the shortfall in revenue collection in 2010, and possible structural changes in customs revenue all call for a slower adjustment path and an extension cum rephasing of the program by three months.

Achieving the program objectives will require the prompt implementation of the structural reform agenda. Critical reforms, such as the introduction of a one-stop window at the Port of Cotonou, the generalization of the single taxpayer identification number (TIN), and the reform of the civil service and energy sectors should proceed without further delay.

Staff supports the authorities’ requests for a waiver of a missed performance criterion, and an extension cum rephasing of the program by three months. Staff recommends the completion of the first review, based on corrective action in the second half of 2010 and strong policy commitments for 2011.

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